Business Wire | Nov 5, 2020 04:05PM EST

Yelp Reports Third Quarter 2020 Financial Results

Nov. 05, 2020

SAN FRANCISCO--(BUSINESS WIRE)--Nov. 05, 2020--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, December 31, 2020 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 EndedSeptember 30,

Nine Months EndedSeptember 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 EndedSeptember 30,

Nine Months EndedSeptember 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 OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended September 30, 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 ^ 101,301 127,655 334,887 374,016 (1)

Product development ^ 53,022 56,661 174,104 169,302 (1)

General and 30,887 39,703 100,825 101,927 administrative^ (1)

Depreciation and 12,544 12,391 37,484 36,507 amortization

Restructuring 535 - 3,847 -

Total costs and 211,482 252,924 693,012 727,506 expenses

Income (loss) from 9,325 9,550 (53,274 ) 17,865 operations

Other income, net 399 3,063 3,277 11,645

Income (loss) before 9,724 12,613 (49,997 ) 29,510 income taxes

Provision for(benefit from) income 10,744 2,552 (9,484 ) 5,781 taxes

Net (loss) incomeattributable to $ (1,020 ) $ 10,061 $ (40,513 ) $ 23,729 common stockholders



Net (loss) income pershare attributable to common stockholders

Basic $ (0.01 ) $ 0.14 $ (0.56 ) $ 0.31

Diluted $ (0.01 ) $ 0.14 $ (0.56 ) $ 0.30



Weighted-averageshares used tocompute net (loss) income per shareattributable tocommon stockholders

Basic 73,514 70,773 72,495 75,975

Diluted 73,514 73,712 72,495 79,315



^(1) Includesstock-based compensation expenseas follows:

Three Months Ended Nine Months Ended September 30, 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 6,659 5,249 17,428 17,876 administrative

Total stock-based $ 30,255 $ 29,236 $ 92,590 $ 91,006 compensation

YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months EndedSeptember 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):

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 $ (40,513 ) $ 23,729 stockholders

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 23,181 17,329 liabilities

Net cash provided by operating activities 128,385 149,268



Investing Activities

Sales and maturities of marketable securities - 290,395 - available-for-sale

Purchases of marketable securities - (87,438 ) (396,648 ) held-to-maturity

Maturities of marketable securities - 93,200 530,597 held-to-maturity

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 11,620 15,813 employee stock-based plans

Repurchases of common stock - (474,993 )

Taxes paid related to the net share settlement of (12,557 ) (32,784 ) equity awards

Other financing activities (433 ) -

Net cash used in financing activities (1,370 ) (491,964 )



Effect of exchange rate changes on cash, cash (132 ) 258 equivalents and restricted cash



Change in cash, cash equivalents and restricted 399,297 (209,306 ) cash

Cash, cash equivalents and restricted cash - 192,318 354,835 Beginning of period

Cash, cash equivalents and restricted cash - End $ 591,615 $ 145,529 of period

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 Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Reconciliation ofNet (Loss) Income to EBITDA andAdjusted EBITDA:

Net (loss) income $ (1,020 ) $ 10,061 $ (40,513 ) $ 23,729

Provision for(benefit from) 10,744 2,552 (9,484 ) 5,781 income taxes

Other income, net (399 ) (3,063 ) (3,277 ) (11,645 )

Depreciation and 12,544 12,391 37,484 36,507 amortization

EBITDA 21,869 21,941 (15,790 ) 54,372

Stock-based 30,255 29,236 92,590 91,006 compensation

Fees related toshareholder - 7,116 - 7,116 activism^(1)

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 24 % 22 % 13 % 20 %margin

^(1) Recorded within general and administrative expenses on our CondensedConsolidated Statements of Operations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005776/en/

CONTACT: Investor Relations Contact Kate Krieger ir@yelp.com