Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yelp Inc (YELP, Financial) delivered record net revenue of $357 million, a 6% increase year over year, exceeding the high end of their outlook range.
- The services business saw continued momentum with a 11% year-over-year increase in revenue, marking the 13th consecutive quarter of double-digit growth.
- Request to quote project growth accelerated to approximately 35% year-over-year in the second quarter, driven by both organic improvements and paid project acquisition.
- Yelp Inc (YELP) improved net income margin by 6 percentage points and adjusted EBITDA margin by 1 percentage point from the prior year period.
- The company repurchased $63 million worth of shares, demonstrating a commitment to returning capital to shareholders.
Negative Points
- Revenue from the restaurant, retail, and other categories declined by 3% year over year due to a challenging operating environment.
- Overall paying advertising locations decreased by 6% year-over-year to 531,000, offsetting growth in services locations.
- Multi-location revenue remained flat year-over-year, reflecting continued softness in the restaurant, retail, and other categories.
- Yelp Inc (YELP) expects to incur an impairment charge of approximately $4 million in the third quarter related to subleasing a portion of their Toronto office space.
- The company revised its full-year net revenue outlook downward by $12.5 million from the midpoint of their prior range, citing continued RR&O headwinds.
Q & A Highlights
Q: How does Yelp view the evolving AI landscape and its potential impact on the company?
A: Jeremy Stoppelman, CEO, expressed excitement about the AI landscape, highlighting Yelp's integration of large language models (LLMs) to enhance search and ad tech. He mentioned partnerships with emerging search engines like Perplexity, which use Yelp's local data. Stoppelman sees opportunities in data licensing and potential API applications, emphasizing the positive impact of the recent antitrust decision against Google on competition and innovation in the search space.
Q: Can you elaborate on Yelp's strategy regarding paid search and its impact on user engagement?
A: Jeremy Stoppelman, CEO, explained that Yelp is focusing on driving projects through paid search, particularly Request-A-Quote, which saw a 35% increase in top-of-funnel metrics. Yelp is honing in on lead distribution to businesses with fewer reviews, which show higher responsiveness. The strategy aims to optimize ROI by targeting businesses most likely to change their behavior, such as increasing budgets or retaining services longer.
Q: What factors contributed to the EBITDA outperformance in the second quarter?
A: David Schwarzbach, CFO, attributed the EBITDA outperformance to increased efficiency in marketing spend and capitalized software development projects. He noted improved results from marketing efforts and normal forecasting variances, such as healthcare costs. The reduction in expected paid search spend also contributed to higher EBITDA, reflecting Yelp's ongoing efforts to enhance business efficiency.
Q: How does Yelp plan to address the weakness in the Restaurants, Retail, and Other (RR&O) category?
A: Jed Nachman, COO, acknowledged the pressure on RR&O due to macroeconomic factors and competition from food delivery platforms. Yelp is focusing on services opportunities within multi-location businesses, which currently account for only 20% of services revenue. Yelp has launched improvements to streamline lead handling and introduced a leads API for enterprise customers, aiming to capitalize on the recovery when consumer spending returns.
Q: What is Yelp's approach to balancing profitability and growth in light of macroeconomic conditions?
A: David Schwarzbach, CFO, emphasized Yelp's commitment to a product-led strategy that enables margin leverage over time. While margins have increased, Yelp continues to invest in growth opportunities, such as tapping into off-Yelp traffic and enhancing ad tech. The company remains disciplined in evaluating trade-offs between top-line growth and EBITDA, aiming for long-term profitable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
