Yelp Reports Third Quarter 2019 Financial Results

Date : 11/07/2019 @ 9:05PM
Source : Business Wire
Stock : Yelp Inc (YELP)
Quote : 34.79  -0.77 (-2.17%) @ 4:09PM
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Yelp Reports Third Quarter 2019 Financial Results

Yelp (NYSE:YELP)
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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

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.

Investor Relations Contact Kate Krieger 415-266-3513 ir@yelp.com

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