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Investments in Product-Led Strategy Drove Yelp’s Strong 2023 Results

2023 Net Revenue reached a record high of $1.34 billion

2023 Net Income up 173% to a strong $99 million

2023 Adjusted EBITDA grew 23% to a record $330 million

Expects 2024 Net Revenue in the range of $1.42 billion to $1.44 billion and Adjusted EBITDA¹ in the range of $315 million to $335 million

Board of Directors authorized $500 million increase to share repurchase program

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, 2023 in the Q4 and Full Year 2023 Shareholder Letter available on its Investor Relations website at yelp-ir.com.

“Yelp delivered one of our strongest financial performances ever in 2023,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “We grew net revenue to a new high and nearly tripled our net income year over year. We also rolled out nearly 60 new product features and updates in the last 12 months. Looking ahead, we're increasing our focus on our Services categories in 2024 as we execute on a robust product roadmap to build Yelp into the best place for consumers to connect with trusted service pros and drive more quality leads to advertisers. Our team has repeatedly shown that focusing on our product-led strategy can drive durable growth, and we remain confident in the significant opportunities ahead to drive shareholder value over the long term.”

“Investments in our long-term strategic initiatives have led to multiple records as local advertisers continued to see the value of Yelp’s high-intent audience in 2023,” said David Schwarzbach, Yelp’s chief financial officer. “Net revenue increased by 12% year over year to a record $1.34 billion, while net income grew to $99 million, representing a 7% net income margin. Adjusted EBITDA grew by 23% year over year, representing a 25% adjusted EBITDA margin. As we look ahead to 2024, we're focused on executing against our growth initiatives for 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.

2023 Key Business Highlights

Yelp’s product-led business model drove a number of record results in 2023:

  • Net revenue increased by 12% year over year to a record $1.34 billion, at the high end of the outlook range we provided in November 2023 and approximately $30 million above the high end of the initial outlook range we provided in February 2023.
  • Net income increased by approximately by 173% year over year to $99 million, representing a 7% net income margin.
  • Adjusted EBITDA grew 23% year over year to $330 million, $6 million above the high end of the outlook range we provided in November 2023 and $20 million above the high end of the initial outlook range we provided in February 2023, representing a 25% adjusted EBITDA margin.
  • Total advertising revenue increased by 13% year over year to a record $1.28 billion, driven by strong advertiser demand.
  • Ad clicks for the year returned to year-over-year growth, increasing 5% from 2022. Average CPC for the year increased 9% as a result of robust advertiser demand for Yelp’s valuable, high-intent clicks, demonstrated by record average revenue per paying advertising location.
  • In Services, Yelp demonstrated consistent year-over-year revenue growth throughout 2023, resulting in a record $793 million of advertising revenue from Services businesses for the year, up 14% from 2022. 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 10% year over year to a record $483 million, driven by growth in advertiser demand as reflected in average revenue per location. Average revenue per location grew sequentially in each quarter of 2023 to reach a record level in the fourth quarter.
  • Advertising revenue from Yelp’s most efficient channels, Self-serve and Multi-location, together accounted for approximately 50% of Yelp’s 2023 advertising revenue. Self-serve revenue increased by approximately 20% year over year and Multi-location revenue grew by approximately 15% year over year.
  • On the consumer side of Yelp’s business, Yelp introduced a number of new products to enhance the consumer experience with new discovery, review and Services features. These included an AI-powered search experience, Yelp Guaranteed and a more visual and interactive review-writing experience. While Yelp’s overall traffic levels remained approximately flat in 2023, Yelp users contributed 22 million new reviews in 2023 to reach a total of 287 million cumulative reviews. While app unique devices were down 3% year over year, mobile web traffic increased by 2% year over year.

Outlook

The company expects 2024 Net revenue will be in the range of $1.42 billion to $1.44 billion as our Services initiatives gain traction. The company also expects 2024 Adjusted EBITDA¹ will be in the range of $315 million to $335 million.

Quarterly Conference Call

Yelp will host a live webcast today at 2 p.m. Pacific Time to discuss the fourth quarter and full year 2023 financial results and outlook for the first quarter and full year 2024. 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, including its expected financial results for 2024, its plans to focus on its Services categories and execute against its growth initiatives for the long term in 2024, its robust roadmap to build Yelp into the best place for consumers to connect with trusted service pros and drive more quality leads to advertisers, and its ability to drive shareholder value 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, interest rates and supply chain issues, as well as severe weather events and the prevalence of seasonal respiratory illnesses — 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 drive continued growth through its strategic initiatives;
  • 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,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

313,911

 

 

$

306,379

 

Short-term marketable securities

 

127,485

 

 

 

94,244

 

Accounts receivable, net

 

146,147

 

 

 

131,902

 

Prepaid expenses and other current assets

 

36,673

 

 

 

63,467

 

Total current assets

 

624,216

 

 

 

595,992

 

Property, equipment and software, net

 

68,684

 

 

 

77,224

 

Operating lease right-of-use assets

 

48,573

 

 

 

97,392

 

Goodwill

 

103,886

 

 

 

102,328

 

Intangibles, net

 

7,638

 

 

 

8,997

 

Other non-current assets

 

161,726

 

 

 

133,989

 

Total assets

$

1,014,723

 

 

$

1,015,922

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

132,809

 

 

$

137,950

 

Operating lease liabilities — current

 

39,234

 

 

 

39,674

 

Deferred revenue

 

3,821

 

 

 

5,200

 

Total current liabilities

 

175,864

 

 

 

182,824

 

Operating lease liabilities — long-term

 

48,065

 

 

 

86,661

 

Other long-term liabilities

 

41,260

 

 

 

36,113

 

Total liabilities

 

265,189

 

 

 

305,598

 

 

 

 

 

Stockholders’ equity:

 

 

 

Common stock

 

 

 

 

 

Additional paid-in capital

 

1,786,667

 

 

 

1,649,692

 

Treasury stock

 

(282

)

 

 

 

Accumulated other comprehensive loss

 

(12,202

)

 

 

(15,545

)

Accumulated deficit

 

(1,024,649

)

 

 

(923,823

)

Total stockholders’ equity

 

749,534

 

 

 

710,324

 

Total liabilities and stockholders’ equity

$

1,014,723

 

 

$

1,015,922

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net revenue

$

342,376

 

$

309,103

 

$

1,337,062

 

$

1,193,506

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenue(1)

 

29,616

 

 

28,483

 

 

114,229

 

 

105,705

Sales and marketing(1)

 

132,297

 

 

126,357

 

 

556,605

 

 

514,927

Product development(1)

 

78,323

 

 

72,225

 

 

332,570

 

 

305,561

General and administrative(1)

 

66,822

 

 

37,967

 

 

212,431

 

 

164,108

Depreciation and amortization

 

10,303

 

 

10,687

 

 

42,184

 

 

44,852

Total costs and expenses

 

317,361

 

 

275,719

 

 

1,258,019

 

 

1,135,153

Income from operations

 

25,015

 

 

33,384

 

 

79,043

 

 

58,353

Other income, net

 

8,775

 

 

3,478

 

 

26,039

 

 

8,425

Income before income taxes

 

33,790

 

 

36,862

 

 

105,082

 

 

66,778

Provision for income taxes

 

6,384

 

 

16,717

 

 

5,909

 

 

30,431

Net income attributable to common stockholders

$

27,406

 

$

20,145

 

$

99,173

 

$

36,347

 

 

 

 

 

 

 

 

Net income per share attributable to common stockholders

 

 

 

 

 

 

 

Basic

$

0.40

 

$

0.29

 

$

1.43

 

$

0.51

Diluted

$

0.37

 

$

0.28

 

$

1.35

 

$

0.50

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Basic

 

68,790

 

 

70,001

 

 

69,221

 

 

70,867

Diluted

 

73,159

 

 

71,607

 

 

73,596

 

 

73,402

 

 

 

 

 

 

 

 

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

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Cost of revenue

$

1,248

 

$

1,060

 

$

5,274

 

$

4,761

Sales and marketing

 

8,266

 

 

8,160

 

 

35,187

 

 

33,621

Product development

 

22,627

 

 

20,090

 

 

97,515

 

 

86,871

General and administrative

 

8,006

 

 

7,027

 

 

35,475

 

 

30,837

Total stock-based compensation

$

40,147

 

$

36,337

 

$

173,451

 

$

156,090

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Year Ended December 31,

 

 

2023

 

 

 

2022

 

Operating Activities

 

 

 

Net income

$

99,173

 

 

$

36,347

 

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

 

 

 

Depreciation and amortization

 

42,184

 

 

 

44,852

 

Provision for doubtful accounts

 

40,702

 

 

 

25,006

 

Stock-based compensation

 

173,451

 

 

 

156,090

 

Amortization of right-of-use assets

 

28,084

 

 

 

32,810

 

Deferred income taxes

 

(22,150

)

 

 

(56,621

)

Amortization of deferred contract cost

 

24,035

 

 

 

18,827

 

Asset impairment

 

23,563

 

 

 

10,464

 

Other adjustments, net

 

(410

)

 

 

1,036

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(54,947

)

 

 

(49,555

)

Prepaid expenses and other assets

 

(5,123

)

 

 

(36,032

)

Operating lease liabilities

 

(39,734

)

 

 

(40,057

)

Accounts payable, accrued liabilities and other liabilities

 

(2,548

)

 

 

49,142

 

Net cash provided by operating activities

 

306,280

 

 

 

192,309

 

 

 

 

 

Investing Activities

 

 

 

Purchases of marketable securities — available-for-sale

 

(148,448

)

 

 

(127,080

)

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

 

117,916

 

 

 

32,821

 

Maturities of other investments

 

2,500

 

 

 

 

Purchases of property, equipment and software

 

(26,847

)

 

 

(31,979

)

Other investing activities

 

195

 

 

 

94

 

Net cash used in investing activities

 

(54,684

)

 

 

(126,144

)

 

 

 

 

Financing Activities

 

 

 

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

 

39,510

 

 

 

23,497

 

Taxes paid related to the net share settlement of equity awards

 

(85,180

)

 

 

(61,023

)

Repurchases of common stock

 

(199,999

)

 

 

(200,006

)

Payment of issuance costs for credit facility

 

(1,109

)

 

 

 

Net cash used in financing activities

 

(246,778

)

 

 

(237,532

)

 

 

 

 

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

 

2,046

 

 

 

(2,136

)

 

 

 

 

Change in cash, cash equivalents and restricted cash

 

6,864

 

 

 

(173,503

)

Cash, cash equivalents and restricted cash — Beginning of period

 

307,138

 

 

 

480,641

 

Cash, cash equivalents and restricted cash — End of period

$

314,002

 

 

$

307,138

 

Non-GAAP Financial Measures

This press release and statements made during the above referenced webcast may include information relating to Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow, 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 material litigation settlements, impairment charges and fees related to shareholder activism that we deem not to be indicative of our ongoing operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net revenue. We define Free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.

Adjusted EBITDA and Free cash flow, which are not prepared under any comprehensive set of accounting rules or principles, have limitations as analytical tools and you should not consider them in isolation or as substitutes 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 and Free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures 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 material litigation settlements, impairment charges and fees related to shareholder activism;
  • Free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and
  • other companies, including those in Yelp’s industry, may calculate Adjusted EBITDA and Free cash flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities 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,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Reconciliation of Net Income to Adjusted EBITDA:

 

 

 

 

 

 

 

Net income

$

27,406

 

 

$

20,145

 

 

$

99,173

 

 

$

36,347

 

Provision for income taxes

 

6,384

 

 

 

16,717

 

 

 

5,909

 

 

 

30,431

 

Other income, net

 

(8,775

)

 

 

(3,478

)

 

 

(26,039

)

 

 

(8,425

)

Depreciation and amortization

 

10,303

 

 

 

10,687

 

 

 

42,184

 

 

 

44,852

 

Stock-based compensation

 

40,147

 

 

 

36,337

 

 

 

173,451

 

 

 

156,090

 

Litigation settlement(1)(2)

 

 

 

 

 

 

 

11,000

 

 

 

 

Asset impairment(1)

 

20,008

 

 

 

 

 

 

23,563

 

 

 

10,464

 

Fees related to shareholder activism(1)

 

581

 

 

 

 

 

 

1,252

 

 

 

 

Adjusted EBITDA

$

96,054

 

 

$

80,408

 

 

$

330,493

 

 

$

269,759

 

 

 

 

 

 

 

 

 

Net revenue

$

342,376

 

 

$

309,103

 

 

$

1,337,062

 

 

$

1,193,506

 

Net income margin

 

8

%

 

 

7

%

 

 

7

%

 

 

3

%

Adjusted EBITDA margin

 

28

%

 

 

26

%

 

 

25

%

 

 

23

%

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

(2) Represents the loss contingency recorded in connection with the settlement of a putative class action lawsuit asserting claims under the California Invasion of Privacy Act. For additional information, see our most recently filed Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC’s website at www.sec.gov.

The following is a reconciliation of net cash provided by operating activities to Free cash flow for each of the periods indicated (in thousands; unaudited):

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:

 

 

 

 

 

 

 

Net cash provided by operating activities

$

79,170

 

 

$

44,473

 

 

$

306,280

 

 

$

192,309

 

Purchases of property, equipment and software

 

(5,997

)

 

 

(11,875

)

 

 

(26,847

)

 

 

(31,979

)

Free cash flow

$

73,173

 

 

$

32,598

 

 

$

279,433

 

 

$

160,330

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

$

(8,219

)

 

$

(14,837

)

 

$

(54,684

)

 

$

(126,144

)

 

 

 

 

 

 

 

 

Net cash used in financing activities

$

(63,546

)

 

$

(55,508

)

 

$

(246,778

)

 

$

(237,532

)

 

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