Net revenue grew 9% year over year to $262 million, reaccelerating from Q2 2019

Fourth quarter Net revenue growth expected to accelerate to 11-13% compared to Q4 2018

$77 million returned to shareholders through share repurchases in Q3 2019

SAN FRANCISCO--(BUSINESS WIRE)-- Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today posted its financial results for the quarter ended September 30, 2019 in the Q3 2019 Shareholder Letter available on its Investor Relations website at www.yelp-ir.com.

“We are pleased to have reaccelerated revenue growth, while at the same time increasing Adjusted EBITDA margin, in the third quarter,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “We expect this momentum to continue in the fourth quarter, with revenue growing double-digits compared to the prior year and margin expanding significantly once again. These strong business fundamentals reinforce our confidence in our ability to achieve our long-term financial targets.”

Third Quarter 2019 Financial Highlights

• Net revenue was $262 million, up 9% from the third quarter of 2018, consistent with the Company’s outlook, driven primarily by growth in Advertising revenue
• Net income, which includes $7 million in fees related to shareholder activism, was $10 million, or $0.14 per diluted share, compared to Net income of $15 million, or $0.17 per diluted share, in the third quarter of 2018
• Adjusted EBITDA1 grew to $58 million, a 16% increase over the third quarter of 2018. Adjusted EBITDA margin increased one percentage point to 22%, also in line with the Company’s outlook
• Cash provided by operating activities was $51 million for the third quarter of 2019, and Yelp ended the third quarter with cash, cash equivalents, and marketable securities of $417 million
• Shares repurchased totaled approximately 2.3 million in the third quarter at an aggregate cost of $77 million, which contributed to a 14% reduction of Yelp’s outstanding shares by since the start of the year
• Yelp expects to accelerate revenue growth and expand Adjusted EBITDA margin again in the fourth quarter of 2019. Specifically, Yelp expects Net revenue to grow 11-13% over the prior year with Adjusted EBITDA margin increasing by 2-3 percentage points over 2018 levels

1 Refer to the accompanying financial tables for further details and a reconciliation of the non-GAAP measures presented to the most directly comparable GAAP measures.

Quarterly Conference Call

Yelp will host a live Q&A session today at 2:00 p.m. Pacific Time to discuss the third quarter 2019 financial results and its Business Outlook for the fourth quarter and full year 2019. 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. (www.yelp.com) connects people with great local businesses. With unmatched local business information, photos, and review content, Yelp provides a one-stop local platform for consumers to discover, connect, and transact with local businesses of all sizes by making it easy to request a quote, join a waitlist, and make a reservation, appointment, or purchase. Yelp was founded in San Francisco in July 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, including expectations of double-digit (11-13%) revenue growth and significant margin expansion (specifically, adjusted EBITDA margin increasing by 2-3 percentage points) in the fourth quarter as compared to the fourth quarter of 2018 and Yelp’s confidence in its potential to achieve its long-term financial targets, that are based on its current expectations, forecasts, and assumptions that involve risks and uncertainties. These statements include the statements regarding Yelp’s expected revenue growth, plans to drive long-term growth, expectation that its second quarter achievements and its continued focus on its 2019 initiatives will accelerate revenue growth in the second half of the year, and the success and timing of Baker’s transition from Yelp.

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, Yelp’s:

• limited operating history in an evolving industry;
• ability to generate sufficient revenue to maintain profitability, particularly in light of its significant ongoing sales and marketing expenses;
• ability to generate and maintain sufficient high-quality content from its users; and
• ability to maintain and expand its base of advertisers, particularly as an increasing portion of advertisers have the ability to cancel their advertising campaigns at any time.

YELP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		September 30, 2019					December 31, 2018
Assets
Current assets:
Cash and cash equivalents		$		123,402			$		332,764
Short-term marketable securities				258,414					423,096
Accounts receivable, net				101,441					87,305
Prepaid expenses and other current assets				16,042					17,104
Total current assets				499,299					860,269
Long-term marketable securities				34,964			—
Property, equipment and software, net				113,935					114,800
Operating lease right-of-use assets				207,852			—
Goodwill				103,459					105,620
Intangibles, net				10,778					13,359
Restricted cash				22,127					22,071
Other non-current assets				36,355					59,444
Total assets		$		1,028,769			$		1,175,563
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$		3,139			$		6,540
Accrued liabilities				71,739					54,522
Operating lease liabilities — current				57,013			—
Deferred revenue				4,222					3,843
Total current liabilities				136,113					64,905
Operating lease liabilities — long-term				186,056			—
Other long-term liabilities				4,036					35,140
Total liabilities				326,205					100,045
Stockholders' equity:
Common stock		—					—
Additional paid-in capital				1,220,048					1,139,462
Accumulated other comprehensive loss				(13,297	)				(11,021	)
Accumulated deficit				(504,187	)				(52,923	)
Total stockholders' equity				702,564					1,075,518
Total liabilities and stockholders' equity		$		1,028,769			$		1,175,563

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		Three Months Ended September 30,										Nine Months Ended September 30,
		2019					2018					2019					2018
Net revenue		$		262,474			$		241,096			$		745,371			$		699,033
Costs and expenses:
Cost of revenue (1)				16,514					14,177					45,754					43,618
Sales and marketing (1)				127,655					121,759					374,016					362,054
Product development (1)				56,661					53,764					169,302					158,046
General and administrative (1)				39,703					30,302					101,927					90,892
Depreciation and amortization				12,391					10,713					36,507					31,250
Total costs and expenses				252,924					230,715					727,506					685,860
Income from operations				9,550					10,381					17,865					13,173
Other income, net				3,063					3,921					11,645					9,950
Income before income taxes				12,613					14,302					29,510					23,123
(Provision for) benefit from income taxes				(2,552	)				684					(5,781	)				281
Net income attributable to common stockholders		$		10,061			$		14,986			$		23,729			$		23,404
Net income per share attributable to common stockholders
Basic		$		0.14			$		0.18			$		0.31			$		0.28
Diluted		$		0.14			$		0.17			$		0.30			$		0.26
Weighted-average shares used to compute net income per share attributable to common stockholders
Basic				70,773					84,008					75,975					83,865
Diluted				73,712					88,724					79,315					89,271
(1) Includes stock-based compensation expense as follows:
		Three Months Ended September 30,										Nine Months Ended September 30,
		2019					2018					2019					2018
Cost of revenue		$		1,054			$		1,162			$		3,415			$		3,345
Sales and marketing				7,683					7,941					23,143					23,514
Product development				15,250					14,536					46,572					41,878
General and administrative				5,249					5,555					17,876					16,995
Total stock-based compensation		$		29,236			$		29,194			$		91,006			$		85,732

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		Nine Months Ended September 30,
		2019					2018
Operating Activities
Net income attributable to common stockholders		$		23,729			$		23,404
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization				36,507					31,250
Provision for doubtful accounts				15,259					19,285
Stock-based compensation				91,006					85,732
Noncash lease cost				31,379			—
Deferred income taxes				(673	)		—
Other adjustments				(2,559	)				(2,793	)
Changes in operating assets and liabilities:
Accounts receivable				(29,395	)				(24,956	)
Prepaid expenses and other assets				(2,312	)				(2,085	)
Operating lease liabilities				(31,002	)		—
Accounts payable, accrued liabilities and other liabilities				17,329					(13,722	)
Net cash provided by operating activities				149,268					116,115
Investing Activities
Purchases of marketable securities				(396,648	)				(572,788	)
Maturities of marketable securities				530,597					460,800
Release of escrow deposit				28,750			—
Purchases of property, equipment and software				(29,950	)				(33,937	)
Other investing activities				383					64
Net cash provided by (used in) investing activities				133,132					(145,861	)
Financing Activities
Proceeds from issuance of common stock for employee stock-based plans				15,813					21,835
Repurchases of common stock				(474,993	)				(71,993	)
Taxes paid related to the net share settlement of equity awards				(32,784	)				(41,081	)
Net cash used in financing activities				(491,964	)				(91,239	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash				258					197
Change in cash, cash equivalents and restricted cash				(209,306	)				(120,788	)
Cash, cash equivalents and restricted cash — Beginning of period				354,835					566,404
Cash, cash equivalents and restricted cash — End of period		$		145,529			$		445,616

Non-GAAP Financial Measures

This press release may include information relating to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, each of which the Securities and Exchange Commission has defined as a "non-GAAP financial measure."

We define EBITDA as net income, adjusted to exclude: provision for (benefit from) income taxes; other income, net; and depreciation and amortization.

We define Adjusted EBITDA as net income, 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. For the third quarter of 2019, these other income and expense items consisted of fees related to shareholder activism. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net revenue.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are key measures used by Yelp management and the board of directors to understand and evaluate core operating performance and trends, to prepare and approve Yelp’s annual budget and to develop short- and long-term operational plans. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP").

EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, EBITDA and adjusted EBITDA should not be viewed as substitutes for, or superior to, net income 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 EBITDA and adjusted EBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
• adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
• EBITDA and adjusted EBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;
• adjusted EBITDA does not take into account any costs that management determines are not indicative of ongoing operating performance, such as restructuring and integration costs in 2017 and fees related to shareholder activism in 2019; and
• other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider EBITDA and adjusted EBITDA alongside other financial performance measures, including net income and our other GAAP results. The tables below present reconciliations of net income — the most directly comparable GAAP financial measure in each case — to EBITDA and adjusted EBITDA for each of the periods indicated.

The following is a reconciliation of net income to EBITDA and adjusted EBITDA (in thousands):

		Three Months Ended September 30,										Nine Months Ended September 30,
		2019					2018					2019					2018
Reconciliation of net income to EBITDA and adjusted EBITDA:
Net income		$		10,061			$		14,986			$		23,729			$		23,404
Provision for (benefit from) income taxes				2,552					(684	)				5,781					(281	)
Other income, net				(3,063	)				(3,921	)				(11,645	)				(9,950	)
Depreciation and amortization				12,391					10,713					36,507					31,250
EBITDA				21,941					21,094					54,372					44,423
Stock-based compensation				29,236					29,194					91,006					85,732
Fees related to shareholder activism (1)				7,116			—							7,116			—
Adjusted EBITDA		$		58,293			$		50,288			$		152,494			$		130,155
Net revenue		$		262,474			$		241,096			$		745,371			$		699,033
Adjusted EBITDA margin				22	%				21	%				20	%				19	%

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20191107005349/en/

Investor Relations Contact

Kate Krieger

415-266-3513

[email protected]

Source: Yelp Inc.

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