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Yelp Reports Third Quarter 2020 Financial Results

Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today posted its financial results for the third quarter ended September 30, 2020 in the Q3 2020 Shareholder Letter available on its Investor Relations website at www.yelp-ir.com.

“Yelp’s third quarter results demonstrate our business’s considerable resilience, highlighted by positive year-over-year revenue growth in two key areas of our long-term strategy: Home & Local Services and our Self-serve sales channel,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “Together with our strong balance sheet and increased sales efficiency, we are confident in our ability to return to sustainable growth in the new year while still managing the impacts of the pandemic.”

Yelp today separately announced the appointment of Tony Wells to its Board of Directors. More information on Mr. Wells and the expansion of Yelp’s Board to nine seats can be found here.

Quarterly Conference Call

Yelp will host a live Q&A session today at 2:00 p.m. Pacific Time to discuss the third quarter 2020 financial results and outlook for the fourth quarter of 2020. 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 Yelp’s ability to return to sustainable growth in the new year as well as the strength and resilience of its business, 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:

  • the duration and magnitude of the COVID-19 pandemic and measures implemented to help control its spread;
  • The pace of reopening and recovery by local economies;
  • Yelp’s ability to maintain and expand its base of advertisers, particularly as many businesses reduce spending on advertising in connection with COVID-19;
  • 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;
  • Yelp’s ability to generate sufficient revenue to regain profitability, particularly in light of the ongoing impact of COVID-19 and Yelp’s relief initiatives; and
  • Yelp’s ability to generate and maintain sufficient high-quality content from its users.
 

YELP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

September 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

590,789

$

170,281

Short-term marketable securities

242,000

Accounts receivable, net

84,813

106,832

Prepaid expenses and other current assets

18,590

14,196

Total current assets

694,192

533,309

Long-term marketable securities

53,499

Property, equipment and software, net

105,488

110,949

Operating lease right-of-use assets

176,603

197,866

Goodwill

106,772

104,589

Intangibles, net

14,240

10,082

Restricted cash

826

22,037

Other non-current assets

40,829

38,369

Total assets

$

1,138,950

$

1,070,700

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued liabilities

$

103,378

$

72,333

Operating lease liabilities — current

54,396

57,507

Deferred revenue

4,731

4,315

Total current liabilities

162,505

134,155

Operating lease liabilities — long-term

155,297

174,756

Other long-term liabilities

5,520

6,798

Total liabilities

323,322

315,709

Stockholders' equity:

Common stock

Additional paid-in capital

1,358,804

1,259,803

Accumulated other comprehensive loss

(9,576

)

(11,759

)

Accumulated deficit

(533,600

)

(493,053

)

Total stockholders' equity

815,628

754,991

Total liabilities and stockholders' equity

$

1,138,950

$

1,070,700

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net revenue

$

220,807

$

262,474

$

639,738

$

745,371

Costs and expenses:

Cost of revenue (1)

13,193

16,514

41,865

45,754

Sales and marketing (1)

101,301

127,655

334,887

374,016

Product development (1)

53,022

56,661

174,104

169,302

General and administrative (1)

30,887

39,703

100,825

101,927

Depreciation and amortization

12,544

12,391

37,484

36,507

Restructuring

535

3,847

Total costs and expenses

211,482

252,924

693,012

727,506

Income (loss) from operations

9,325

9,550

(53,274

)

17,865

Other income, net

399

3,063

3,277

11,645

Income (loss) before income taxes

9,724

12,613

(49,997

)

29,510

Provision for (benefit from) income taxes

10,744

2,552

(9,484

)

5,781

Net (loss) income attributable to common stockholders

$

(1,020

)

$

10,061

$

(40,513

)

$

23,729

Net (loss) income per share attributable to common stockholders

Basic

$

(0.01

)

$

0.14

$

(0.56

)

$

0.31

Diluted

$

(0.01

)

$

0.14

$

(0.56

)

$

0.30

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

Basic

73,514

70,773

72,495

75,975

Diluted

73,514

73,712

72,495

79,315

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Cost of revenue

$

849

$

1,054

$

2,835

$

3,415

Sales and marketing

7,196

7,683

22,194

23,143

Product development

15,551

15,250

50,133

46,572

General and administrative

6,659

5,249

17,428

17,876

Total stock-based compensation

$

30,255

$

29,236

$

92,590

$

91,006

 

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Nine Months Ended
September 30,

2020

2019

Operating Activities

Net (loss) income attributable to common stockholders

$

(40,513

)

$

23,729

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

37,484

36,507

Provision for doubtful accounts

26,802

15,259

Stock-based compensation

92,590

91,006

Noncash lease cost

31,545

31,379

Deferred income taxes

(6,505

)

(673

)

Other adjustments, net

1,316

(2,559

)

Changes in operating assets and liabilities:

Accounts receivable

(4,783

)

(29,395

)

Prepaid expenses and other assets

1,552

(2,312

)

Operating lease liabilities

(34,284

)

(31,002

)

Accounts payable, accrued liabilities and other liabilities

23,181

17,329

Net cash provided by operating activities

128,385

149,268

Investing Activities

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

290,395

Purchases of marketable securities — held-to-maturity

(87,438

)

(396,648

)

Maturities of marketable securities — held-to-maturity

93,200

530,597

Release of escrow deposit

28,750

Purchases of property, equipment and software

(24,072

)

(29,950

)

Other investing activities

329

383

Net cash provided by investing activities

272,414

133,132

Financing Activities

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

11,620

15,813

Repurchases of common stock

(474,993

)

Taxes paid related to the net share settlement of equity awards

(12,557

)

(32,784

)

Other financing activities

(433

)

Net cash used in financing activities

(1,370

)

(491,964

)

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

(132

)

258

Change in cash, cash equivalents and restricted cash

399,297

(209,306

)

Cash, cash equivalents and restricted cash — Beginning of period

192,318

354,835

Cash, cash equivalents and restricted cash — End of period

$

591,615

$

145,529

Non-GAAP Financial Measures

This press release and statements made during the above referenced webcast 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 (loss), adjusted to exclude: provision for (benefit from) income taxes; other income, net; and depreciation and amortization.

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 and 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 operating performance and trends, to prepare and approve Yelp’s annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA and Adjusted EBITDA can provide a useful measure for period-to-period comparisons of Yelp’s primary business operations. Accordingly, Yelp believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating its operating results in the same manner as its management and board of directors.

EBITDA and Adjusted EBITDA, 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, EBITDA and Adjusted EBITDA should not be viewed as substitutes 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 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, Yelp's working capital needs;
  • 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 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 and fees related to shareholder activism; and
  • other companies, including those in Yelp’s industry, may calculate EBITDA and Adjusted EBITDA differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider EBITDA, 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 (loss) income to EBITDA and Adjusted EBITDA (in thousands, except percentages; unaudited):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA:

Net (loss) income

$

(1,020

)

$

10,061

$

(40,513

)

$

23,729

Provision for (benefit from) income taxes

10,744

2,552

(9,484

)

5,781

Other income, net

(399

)

(3,063

)

(3,277

)

(11,645

)

Depreciation and amortization

12,544

12,391

37,484

36,507

EBITDA

21,869

21,941

(15,790

)

54,372

Stock-based compensation

30,255

29,236

92,590

91,006

Fees related to shareholder activism(1)

7,116

7,116

Restructuring

535

3,847

Adjusted EBITDA

$

52,659

$

58,293

$

80,647

$

152,494

Net revenue

$

220,807

$

262,474

$

639,738

$

745,371

Adjusted EBITDA margin

24

%

22

%

13

%

20

%

 

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

Contacts:

Investor Relations Contact
Kate Krieger
ir@yelp.com

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