Yelp Inc. Price & Performance (YELP)

In addition, we are subject to a number of risks that may significantly impact please refer to our SEC filings as well as our shareholder letter for a more detailed description of the risk factors that may affect our results. During our call today, we may discuss adjusted EBITDA, adjusted EBITDA margin and free cash flow, which are non GAAP financial measures. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with generally accepted accounting principles. In our shareholder letter release this afternoon and our filings with the SEC, each of which is posted on our Investor Relations website you will find additional disclosures regarding these non GAAP financial measures as well as historical reconciliations of GAAP net income or loss to both adjusted adjusted EBITDA and adjusted EBITDA margin and a historical reconciliation of GAAP cash flows from operating activities to free cash flow. And with that, I will turn the call over to Jeremy.

Thanks, Kate, and welcome everyone. Health delivered record net revenue and strong profitability in 2024 as we executed against our product load strategy. Accelerated our pace of innovation introducing more than 80 new features in Services was the focus of our roadmap and the driver of our business performance. The fourth quarter, we achieved our fifteenth consecutive quarter of double digit year over year revenue growth in these categories. Overall, in 2024, net revenue increased by 6% year over year to $1,410,000,000 With disciplined expense management, we grew net income by 34% year over year $133,000,000 and adjusted EBITDA by 8% year over year to $358,000,000 We also expanded net income margin by two percentage points and adjusted EBITDA margin by one percentage point from 2023. Underlying our top line results, we saw a divergence in performance across [indiscernible] Businesses in our restaurant, retail and other categories faced a challenging operating environment and RRNO revenue declined At the same time, services was consistently strong. With revenue up 11% year over year to a record $879,000,000 The home services category was the standout in 2024 with annual revenue growth of approximately 15% year over year. We launched a number of new product and features to facilitate even better connections between consumers and service pros.

Our new AI chatbot, Yelp Assistant, has particularly resonated with consumers. With project submissions through this feature up by more than 50% from the third to fourth quarter. We also experimented with acquiring services projects off Yelp through paid search and saw strong top of funnel results. As said, we ultimately reduced our spend on this initiative as it did not provide our desired return, reflecting our disciplined approach to investment. Overall engagement with Request a Quote was robust in 2024. Consumer projects increased by approximately 25% year over year, primarily as a result of organic improvements. This includes growth of approximately 30% year over year in the fourth quarter despite minimal spending on paid search during the period. Improved matching and ad formats delivered value to We introduced Smart Selection, an AI powered feature for advertisers that optimizes their ads automatically selecting the best reviews and photos to showcase. These efforts contributed to a 6% year over year increase in ad clicks and flat average CTCs for the year. On the consumer side of our business, we rolled out a number of new features and update to enhance the health experience and drive user engagement. These include AI powered search features, review insights leveraging LLMs and enhanced user generated videos [indiscernible] we also made a number of back end and user experience improvements to our mobile and desktop websites that led to a combined year over year increase in paid views on these platforms.

While our overall traffic levels were relatively flat compared to 2023, continued to grow our large set of trusted review content, Yelp users contributed 21,000,000 new reviews Looking to 2025, we plan to build on our position as a trusted platform for consumer to discover and connect with great local businesses. We achieve this, we plan to invest in three strategic initiatives: lead in services, drive advertiser value and transform the consumer experience. Underlying each investment area, we can accelerate our strategy with AI. Which we believe we are well positioned to leverage based on our high quality, trusted content and deep technical capabilities. Services categories will be the major focus of our product led strategy in 2025. We have historically focused our efforts on the home services category, which has been our largest driver of growth in services for the past decade, we see an additional opportunity to drive growth among other top services categories. In particular, following our acquisition of RepairPal in November, we expect to accelerate growth in the auto services category this year. We also believe that our increased product focus and sales efforts more demand from these advertisers in 2025. Overall, our 2025 services roadmap aims to create a best in class experience for consumers and service pros.

We're excited by the opportunities ahead as we expand Yelp Assistant and leverage AI more broadly to reduce friction throughout the hiring journey. In addition to raising the bar in services, we have a portfolio of product and marketing initiatives designed to deliver value to both Advert We plan to further develop our advertising technology and product to match consumers and advertisers even more efficiently. This includes providing advertisers with additional AI powered controls and recommendations to help further refine ad targeting. We also plan to continue leveraging AI to transform the consumer experience including creating a more dynamic and personalized home feed as well as an even more seamless search experience. In summary, our focus on services continues to strengthen our business and we are excited by the opportunities ahead to drive profitable growth and shareholder value over the long term. With that, I'll turn it over to David. Thanks for that full year overview, Jeremy. I will now turn to our fourth quarter results.

Net revenue increased by 6% year over year to $362,000,000 $13,000,000 above the midpoint of our outlook range. Driven by our disciplined approach, net income increased 54% year over year to $42,000,000 representing a 12% margin. Adjusted EBITDA increased by 5% year over year to $101,000,000 $15,000,000 above the midpoint of our outlook range representing a 28% margin. As Jeremy mentioned, top line growth was driven by continued strength in services categories throughout the year. Advertising revenue in services increased by 11% year over year in the fourth quarter to $225,000,000 Conversely, restaurants and retailers remain pressured in the quarter resulting in a 3% year over year decline in RRNO revenue. $121,000,000 A decrease in RRNO locations offset growth in services locations in the fourth quarter. This resulted in an overall decline of 4% year over year in paying advertising locations to 521,000. We also focused on driving growth through our most efficient channels. Self serve was strong and grew approximately 15% year over year in the quarter. At the same time, multi location revenue came in approximately flat year over year reflecting continued softness in R and O. Turning to expenses for the year, 2024 was a clear demonstration of our commitment to disciplined expense management.

Excluding RepairPal employees, we ended the year with approximately flat headcount compared to 2023, In addition, when our paid search spend did not meet our desired returns, the subsequent reduction in marketing expense flowed through to our bottom line. Ultimately, we increased net income margin by two percentage points and adjusted EBITDA margin by one percentage point from the prior year. As we look to 2025, we plan to continue our disciplined approach and hold headcount flat once again as we drive growth through our product led strategy. We also remain focused on increasing the quality of adjusted EBITDA. In recent years, have taken significant actions to shift our compensation mix between stock and cash. Including substantially reducing the number of shares granted to employees in 2024. While we expect the full impact of these efforts to stack over time, in 2024 we were able to reduce stock based compensation expense as a percentage of revenue by two percentage points. Coupled with continued share repurchases throughout the year, we decreased our shares outstanding and increased diluted earnings per share by 40% year over year to $1.88 As we look ahead, we continue to expect that stock based compensation expense will be reduced to less than 8% of revenue by the end of the year.

In addition, we now plan to reduce stock based compensation to less than 6% of revenue by the end of twenty twenty seven. Our capital allocation strategy consists of three main elements: First, maintaining a healthy cash balance to fund our operations Second, retaining capacity for potential acquisitions and third, returning excess capital to shareholders through share repurchases. In 2024, we acquired auto services platform RepairPal for approximately $80,000,000 in cash demonstrating our ability to deploy balance sheet capital in support of our business strategy. We also repurchased $251,000,000 worth of shares an average purchase price of $37.52 per share including $62,500,000 worth of shares repurchased in the fourth quarter. As of 12/31/2024, we had $331,000,000 remaining under our existing repurchase [indiscernible] We plan to continue repurchasing shares in 2025 subject to market and economic conditions. Turning to our outlook, We continue to believe in the significant long term growth opportunities ahead as we focus our investments on high return areas that we believe will drive increased profitability. As we look to 2025 we expect the category trends that characterize 2024 to persist. Specifically, we expect services will continue to drive our business performance and our R and O will remain pressured.

As a result, for the first quarter of twenty twenty five, we expect net revenue will be in the range of $350,000,000 to $355,000,000 reflecting typical seasonality. For the full year, we expect net revenue will be in the range of $1,470,000,000 to $1,485,000,000 Turning to margin. Expect expenses to increase seasonally from the fourth quarter of twenty twenty four to the first quarter of twenty twenty five primarily driven by payroll taxes and benefits, As a result, we expect first quarter adjusted EBITDA will be in the range of $65,000,000 to $70,000,000 For the full year, we anticipate expenses will increase modestly primarily as a result of higher cost of revenue, driven in part by our RepairPal acquisition. We also expect our efforts to reduce stock based compensation to adjusted EBITDA but will not impact net income. As a result, we expect adjusted EBITDA for the full year be in the range of $345,000,000 to $360,000,000 In closing, Yelp's 2024 results reflect the underlying profitability of our business. Continue to believe in the opportunities ahead to create shareholder value over the long term. As we focus our investments in areas that we believe will drive business performance. With that operator, please open up the line. [indiscernible] We'll go first to Eric Sheridan, Goldman Sachs.

Thank you so much for taking the questions. Maybe two if I could. Just in terms of R and O, how much are there abilities for you as a company to sort of invest behind end demand generation and maybe take advantage of competition or taking market share in local as opposed to the broader macro environment and some tougher comps generally being sort of a driver of what might happen to that business when you look out over the next to twelve months? And then just to put a finer point on your prepared remarks, I wonder if you could just sort of dovetail with what you see as the key investment areas needed to produce similar or better levels of growth in the services side of the business? As you look out to not only just 2025 but beyond? Thanks so much.

Hi, Eric. This is Jed. I can take the first part of the question regarding R and O. Obviously, the last year or so has been we've seen some headwinds with R and O. O inflationary pressures on both the consumer as well as the operators' input costs, labor costs. And in terms of being able to drive demand, we do continue to invest in the business. And when you look at relationships that we continue with on the multi location side, the product investment, products like You Spotlight Showcase, we are there for when this market turns. In terms of kind of driving demand that doesn't exist in the marketplace, I think our focus is really on services and we've aligned the go to market team around that. And certainly, we've aligned the product roadmap around that. We're really bullish on the prospects moving forward. So when the market turns, we will be prepared to capture that opportunity in our R and O, but really the focus right now is on services.

I'll hop in here for the second half of your question there. Services in 2024, obviously a great story there, up 11% year over year home services even faster 15% year over year. So coming into twenty twenty twenty five with great momentum. And another thing we mentioned may have noticed in Q4, we saw really great performance out of Request to Quote projects were up 30%. Year over year, overall for the year, it was 25%. So that gives us some confidence of what we're doing in services really working. We intend to lean in there We know that there's a multi location services opportunity Last year, we put out there a leads API to make it a lot easier for these larger advertisers to tap into Request a Quote. Something that a lot of them haven't been doing and that's where a lot of our value has been flowing. So excited to see that play out.

And then beyond home services, we've also got obviously other categories that we're starting to really lean in to that's exciting for me personally, the RepurPal acquisition being the most obvious example, auto moving from our number three category to our number two category. So that's one that's top of mind as we do the integrations, pick some of the low hanging fruit there. And then of course, there's other categories like local, professional services and the list goes on in terms of opportunity for us. So pretty excited to see how it unfolds in 2025 and beyond. Thank you. Next up, we'll take a question from Jason Krier, Craig Hallum. Great. Thank you guys. So maybe picking up where that left off, just on the multi location, you were talking about the leads API. And this is in services specifically, by the way. But can you talk about other investments you can make there? And then with that representing 20% of that business today, where do you think that can go over time? Hi, Craig. This is Jed. I can take that that question. As you know, we've as a company been focused on services for the last few years and really not until the beginning of the last year did we start putting the resourcing towards the services opportunity to better service these multi location businesses An area where as you alluded to, we are under penetrated and believe there's a lot of headroom.

There's work being done on both the product and go to market sides. Jeremy mentioned some of the work we've been doing on the leads API. We've also revamped our internal BOA for our business owners account for those customers that don't have a homegrown business owner's account, and so that they can manage leads in a more efficient way. And we're still in the relatively early stage of adoption [indiscernible] It is a longer sales cycle. And not only a longer sales cycle, but you have to oftentimes really get into the processes that these folks have for managing leads. And so it takes a little bit of change management in order to get that done. And we're also pushing really hard on on the quality of responses from these Multilocation Pros. It does represent a different way of handling leads in a lot of cases. But we've been very encouraged thus far with the feedback that we've gotten and believe that opportunity is a big one for us going forward. And I wanted to follow-up with a question just on AI. You've launched a bunch of new solutions and features there. If you look back at these updates over the past year, in what ways do those benefits manifest in the business?

Like are these driving cost efficiencies or are you driving more like consumer frequency? Just any more details on the benefits would be great.

Thanks for the question. This is Jeremy. I'll hop in here. We see benefits all across the business. Obviously, it's there on the consumer product.

Making it easier for users to digest all the incredible trusted information that we have I would say from a functionality standpoint, the most impactful one that we could point to would be Yelp Assistant, which is a conversational [indiscernible] that allows you to talk about what is your service need, you've got a leaky faucet or what have you, it walks you through that process. It asks you the relevant questions and it's spits it all back to you says, is this what we're talking about in the end and then goes on to connect you with pros. And we have seen a lift in terms of projects submitted as people started using that flow the previous flow obviously was less efficient. Request a quote used to be a series of menus that you would have to work through. Now it's an easy conversation. So that's really great to see. And this functionality, of course, can be extended both to more places throughout the app as well as to other categories. I'm not sure that there is any category on Yelp that wouldn't be a fit And so it's just a matter of time and execution to work this into Yelp to really transform consumer experience.

And I think quite a profound way On the back end, there's also a lot of opportunity. We've seen wins directly coming from AI, so improved ad matching. There's operational things like handing AI, LLMs play a big role now in writing software, making engineers more efficient. On the user operations side, you can moderate content. So there's just so many facets of our business that are touched by AI. And it still feels like we're in the early innings here. So really an exciting technology and something that we're thinking about every day and incorporating into our business everywhere we can.

From KeyBanc, Sergio Segura has the next question.

Great. Thanks for taking the questions. Maybe first to start off with a high level one.

We'd love to hear just updated thoughts on views of Yelp's positioning in the current environment just given the rapid changes we are seeing across the broader search and AI landscape? So that's number one. And then the second question, I guess, maybe if you could just give more color on the drivers of outperformance this quarter versus the expectations within your guidance? And I guess the full year guide has revenue decelerating from this year's exit rates. Maybe just dive into the details there. Why you have full year guide decelerating? Is that just some conservatism or anything else we should think about with this lower growth rate within the guide for 2025? Hi, Sergio. This is Jeremy. I'll take the first half there. With respect to Yelp Yelp, [indiscernible] AI powered search. I think it's a really exciting opportunity to reinvent the search experience. You have a lot of new players, some of which are already tapping into Yelp's content. Having trusted human written Yelp content millions hundreds of millions of reviews I think is a really important ingredient in a successful for a successful search engine. You've got to handle local queries, local intent, at least for Google, is something like half of their queries.

So that means you need a solution and if you're not Google competing directly with us, you're probably having a conversation with Yelp at some point. So I think that's a great starting point. And then there's the question of what are we doing with the Yelp Yelp? And I was just previously talking about Yelp Assistant and how we're using that to begin a transfer have something more conversational We're in the very early innings of that transformation, but I think it's a powerful one. It should allow us to create a very unique experience especially within local. And then of course, we can take take that as rapid in an API and provide that to any other agent AI agent out there that might want to tap into useful local content. Or send through a request a quote, working with our Yelp assistant technology whether it's a search engine, an AI agent, or just another web or app property that wants to tap into local information. I think there will be opportunities that didn't exist before. So it's a really exciting time for Yield. It's okay, Dior. Just in terms of turning to the full year guide, On Q4, we were broadly better.

We were pleased with that. What we had said on the Q3 call when we gave guidance for Q4 was we did not expect to see the typical seasonal increase in some of the spend in R and O We did actually see some of that occur. So that's a key element as well. So business broadly better plus some seasonal think it's worth pointing out that as we outperformed on revenue, we were able to flow all of that through to adjusted EBITDA EBITDA margin at 28%, dollars 101,000,000 to match Q3, we thought was really strong. And again, just underscores our continued to In terms of the guidance for 2025, I'd just point out from a Q1 perspective, obviously, we have the best visibility on Q1 and we did 6% in the fourth quarter, the midpoint of our guide for Q1 is 6%. In terms of the full year, would just underscore it is definitely reflecting risks and uncertainties As we have come into the year, in particular this week, as we saw with both the CPI print and the PPI print, inflation has ticked up a bit more and there's broadly a range of uncertainties with regard to just policies that may be enacted.

So we're reflecting that in the guidance since it's very early in the year. But overall, as we came out of 'twenty four and came into 'twenty five, we're really pleased with the momentum in the business, particularly in the services side of the business. Of course, that grew 11% in the fourth quarter and 11% for all of 2024 that fourth quarter growth performance was the fifteenth quarter of double digit growth in services and so we're really pleased with the way that we came into 2025. We're going to execute against the product roadmap. And obviously, as we go through the year, we'll look forward to providing more updates.

We'll take the next question today from Shweta Kajuria, Wolfe Research. Thank you for taking my questions. I have two, please. The first one is what is baked into your guide what is repair piles contribution that's baked into your guide Q1 and for full year revenue, And then the second one is in your Q1 guide, are you could you please give us a little bit more color in terms of the impact of LA fires if you [indiscernible] and Leap Day Thanks a lot. Hi, Sweta. So I'll answer your second question first and then The first question is second. In terms of LA buyers and [indiscernible] Obviously, the leap day one is going to bear out in the numbers. Directly on the year on year comp basis. But on the LA buyers, we actually saw minimal impact [indiscernible] [indiscernible] in terms of both budget and revenue performance in January. So overall that hasn't been a factor. In terms of repair pal going forward, we do not plan to separately break out repair pal. As we report. Obviously, we're pleased with the acquisition, the team landed They're performing well. They're getting on board. And we believe that there's a significant opportunity for us broadly in auto I think this is really the theme for us for 2025.

We've obviously a long period of time. We're really pleased with the progress that we've made there. And now with auto as our second largest category with repair pal on board, there are things that we think that we can do to help accelerate their business. And there are things that come from a Peripel that we think that will have positive impact on the auto category on Yelp itself. So overall, that's meeting our expectations as they stand very early. But beyond that, there is more for us to do across additional categories in services. Whether it's local services or professional services, we see significant opportunity And we just think that with our product led growth strategy, we can continue to really deliver our ambition is to deliver the best experience in services and we're doing a lot of work there to continue to drive that, including as Jeremy already mentioned, looking for ways to continue to include the open system to deliver value to consumers and pros alike. Okay. Thanks, David. The next question today is Kashanth Patel, Raymond James. Hi there. I'm slotting in for Josh Beck.

Could you provide some color on traffic driven by Perplexity whether you're seeing search results ranking notably different than on Google Search?

And also, how would you characterize the conversations with other Gen AI search platforms facing more activity on that front, whether in terms of data licensing deals or driving traffic to Yelp?

Hi, Kashan. This is Jeremy. I'll hop in here. [indiscernible] Perplexity, it's a startup, it's still very early. [indiscernible] nothing material to report there. You can find Yelp content and links as you peruse the Perplexity experience. But this is a new space And so everything is changing fast. The interface that they have one day is different. The next day. So it's kind of a space to watch is how I would describe it. As far as other folks interested in the content, Yes, I would say there's absolutely lots of folks having conversations with us both directly in the AI category as well as lots of other categories do, because we have such great content, hundreds of millions of reviews, human written, trusted, and that's really important. For a variety of reasons, but especially if you're trying to steer people to local businesses as part of your search or answer experience.

So obviously nothing to report out today, but we're always talking to people and we're excited about this area in general.

And then I guess you have a second part of your question, have we seen anything new and different on the Google side? And I would say nothing to report there. Certainly, search traffic traditional SEO is a portion of of our engagement, but haven't seen any serious volatility, anything out of the ordinary. Given the moderation in paid search during second half, how do you think about your ad budgets and priority setting it to 25?

So on just overall on marketing, I would just underscore again this David, The our approach is very, very disciplined from an return on ad spend [indiscernible] And so as we went through the year and we're not seeing the return that we expected on paid search, we dialed that down. That doesn't mean that there aren't other opportunities across marketing for us. It also doesn't mean that we won't spend anything on paid consumer project acquisition. [indiscernible] overall, we continue to experiment We continue to spend in areas that are productive for us on the marketing front. And we think that we are spending very efficiently even as we explore new ways to [indiscernible] cash to drive engagement on Yelp Yelp I think equally important to acquire businesses to advertise on Yelp. Thank you very much. Next up is Nitin Bansal, Bank of America. Thank you for taking my question. I have two.

Firstly, on repair path, how should we think about the growth of this business over the next two to three years?

Also, can you share some insights on like the profitability of this business and how would that impact your bottom line in 2025?

And secondly, like the Google ramping AI overviews, how that is impacting your web traffic? Thank you. [indiscernible] hit your first part of the question here. RepairPal, Obviously, there's a focus going into the year on services and auto is one of was one of our top three categories is now top two.

I think first order of business is obviously, integrate the employees, get everyone rolling in the right direction. Bring some of the special skills that Yelp has acquired over its twenty year life to repair pal to to accelerate growth as well as take the experts that they have in auto and bring them over to help us with experiences like Request a Quote, Yelp Assistant as it pertains. To the auto repair category. So I think some our expectation is there definitely will be some synergies there. We're excited to see that play out. We do anticipate that that will grow and of course that's baked into our our guidance for the year. And then we'll see how that plays out over a multiyear period. But we're very excited in general about services and the auto category as a growth driver.

This is David. Just answer your question around profitability what we shared when we made the acquisition was RepairPal was about breakeven. And from our perspective, the first step is obviously, as Jeremy said, to onboard them We really want to nurture the business here. We see a significant growth opportunity And so margin driving margin performance is secondary to driving top line opportunity for us. And as Germany said, we've obviously reflected in the guidance on both revenue adjusted EBITDA of the expected [indiscernible] And I think the last part of your question was around have we seen any Google impact on web traffic There's always fluctuations, but as I said to the, I think, previous person, we haven't seen any material or unusual shifts We'll go next to Colin Sebastian Baird. Great. Thanks. Good afternoon. I guess stepping back, mean, given a lot of the success that you've shown in the services segment, I'm just wondering how you think about kind of sustainable longer term growth there? Is category growing at 5% or some other number and then you're going to add share gains to that on top of that sustainably or Or do you think about it differently?

Hey, Collin, it's David. 15 quarters of double digit growth gives us confidence that we can continue to drive we see continued opportunity in home services, but If you think back to what we said when we came into 2024, it was really going to be a focus on home services. And we did a lot with the product to continue to enhance the experience in home services Now we have the opportunity to broaden out and do even more across more categories. And I think that's the crucial point here. Is Yelp has terrific content, it's trusted, we're applying AI in a lot of different ways that we think are driving a quality experience for consumers and enabling us to deliver more value to advertisers. So you combine those things, we think that we are very well positioned to continue to drive performance and services.

Okay. Thank you. And then maybe on the restaurant or retail side, any I guess any Any additional color on the competitive landscape that point of view of the food delivery platforms and other players and if you see that changing as you look into 2025? Thank you.

Yes, this is Jed. I can take that question. Largely, when we look at the headwinds that we saw in Ref retail and other over the course of 2024, We believe it's largely a macro story, certainly at the margins there is some the retail media networks and the delivery platforms are a factor, but not the one that we believe is driving the performance overall in the category. Consumers are feeling this pinch and the frequency has gone down in terms of number of times, for instance, that they go out to dinner And then the operators who are actually writing the checks on the marketing side are also feeling the pinch due to the inputs into the business. And so so we do believe that this will turn eventually and that we're very well positioned to take advantage when R and O does turn the corner. And so [indiscernible] Overall, we don't believe it's a the competitive factor is the large factor. It's overall macro story.

Okay. Thanks a lot guys.

And at this time, there are no further questions. That does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.