Q3 2019 Earnings Call
And from or as a substitute for financial information prepared in accordance with generally accepted accounting principles.
And our shareholder letter released this afternoon, and our filings with the SEC each of which is posted on our website, you'll find additional disclosures regarding these non-GAAP financial measures as well as historical reconciliations of GAAP net income to both adjusted EBITDA and adjusted EBITDA margin.
And with that ill turn the call over to Jeremy.
Thanks, Ron and welcome everyone Yelp had a strong third quarter consistent with our outlook, we re accelerated year over year revenue growth to 9% up sharply from a 5% we reported in the second quarter at the same time, we continued to significantly improve the underlying profitability of the business third quarter adjusted EBITDA margin increase.
Just a 140 basis points from the third quarter of last year to 22% also in line with our outlook.
We achieved these strong results by executing several key initiatives in our long term strategic plan that we laid out at the start of the year number one we improved local advertising retention by driving more AD clicks to our clients number two we increased local sales productivity by expanding our product portfolio and retaining more veteran sales reps and number three.
We drove strong growth in our multilocation business by delivering compelling new advertising solutions and expanding client coverage.
The execution of our strategy is also yielding stronger business economics in the third quarter, we delivered faster revenue growth on lower sales head count than this time last year. We also continued to generate healthy double digit growth in app usage by leveraging yelp, waitlist, and yelp reservations, allowing us to significantly reduce consumer.
Senses.
The successful execution of our strategy has also generated significant cash flow, enabling us to returned $475 million to shareholders in the form of stock repurchases since the start of the year.
I'm proud of our teams focused execution and the encouraging results we have it.
Chief thus far.
Hello.
We are still in the first year of our.
Movement over this time last year.
We continue to drive value for our advertisers clicks are up 42% year over year, and Cpcs are down 22% year over year and that really starts just come out in the value that our customers feel everyday.
This is really the first year that we put kind of the full firepower of our engineering and product team behind delivering that value.
And we believe there's still plenty in the hopper in terms of of the future moving forward.
And in terms of the multi location opportunity you know it's been up we're really again happy with that perform at 21% plus year over year on the revenue side.
It's been a combination of a few things.
Attribution continues to play a big roll we've grown the national Salesforce by over a third over the course of the last year and had wins both in new logos into yelp as well as expanding the revenue that we have with our existing clients I think if you look back.
To advertisers, who were advertising with us a year ago, we've had a 15% growth within just in that segment. So it's really coming from two places.
Our product team continues to deliver for this segment as well we have showcase ads, which is really resonated in the marketplace allow people to kind of talk about specials that they have menu items seasonal campaigns that are specific to certain.
Initiatives that these folks are trying to get out into the marketplace and in fact, just recently, we we launched video ads within within those showcase ads. It's actually not in search result is on the business gauge, but anybody organically, we'll see those ads.
And anybody.
And anybody who is driven from an AD itself. So obviously video is a big untapped opportunity for us and we're starting to departure there as well.
Okay. Thank you Jeff.
Our next question today will come from Lloyd Wamsley of Deutsche Bank. Please go ahead.
And Mr. Ron fully your line is lives.
Hi, This is Chris on for Lloyd.
I think one of the key trends that we've heard this week is that the CEO environment is more challenging.
Just talk a little bit about some of the trends you guys saw on the Seo environment this quarter and.
Same thing your decision to cut advertising spend is ads.
App devices continue to slow thanks.
Hi, This is Jeremy I'll take that you know it over the years I've certainly seen a lot of fluctuations on the ASCO side.
Also we have.
A lot of engagement and push back on the regulatory front against Google, but that said well spent about a decade for getting ready for this environment and so really focused on our app and the direct relationship that we have with consumers because of our successful out I mean in particular, we started spending three or four years.
Years ago on restaurant services and started with Yelp reservations in his also morphed into a yelp waitlist product and those are actually driving distribution. So as part of using those products you end up downloading the yelp out very frequently and so that's actually allowed us to cut back on our consumer marketing spend and still maintain healthy double.
Digit growth rate for our anyway. So we feel pretty good obviously, there is always going to be some volatility on the ASCO side is Google tweaks algorithms, but we feel great about on the engagement, we see on or Yelp and continue to see overall engagement at a healthy rate.
Got it thanks.
Our next question today will come from Brent Thill of Jefferies. Please go ahead.
Hey, this is John calling Tony on for Brian Thanks for taking the question.
Growth in App unique devices was up double digits. Although this does represent a deceleration to nearly an all time low I'm. Considering these are on average are most engaged users can you discuss the top one or two consumer facing initiatives, you're working on to continue increasing yelps relevance and usefulness for consumers. Thank you.
Yeah. Brett. This is Jeremy you know, we're really happy with the continued growth rate of our App at this stage. They gave me a healthy double digits and also it's driven organically through our restaurant services products Yelp Weightless Yelp reservations as well as you know from our Seo traffic App store downloads and just.
Relationship with consumers. So overall, we feel really good about it and there is always the opportunity to accelerate if we wanted to spend on consumer marketing, but the same time.
I'd be really careful with that make sure that it's it's high ROI for the business and right now leaning into our restaurant services products for additional growth is where we're investing.
Great. Thanks, one more with high single digit revenue growth in 2019 as a backdrop what are the one or two key drivers of accelerating revenue growth to your mid teens long term target and also can you give us a bit more detail on how you're thinking about the cadence of revenue growth over the next few years.
Thank you.
Hey, John This is James I'll take back.
Yeah, obviously, we'll share more details on a 2020 outlook. When we were pull in February but I think you're right at the end of 29 team. We're very pleased with the progress we've made on our initiatives to Reaccelerate growth.
And as we expect to end this year growing revenue at double digit right I think that sets us out well for 2020 and moving towards those longer term targets. We've got a lot in the pipeline, which is really on the same themes that you've seen this year on inline with our longer term strategy. So.
Improving values for our advertisers to drive continued improvements in retention.
Turning to expand as product offerings I think.
Opportunities to bundled package to benefit to our most important segments.
Then we'll continue to evolve our go to market penetrating that multi location opportunity and onboarding more appetizers three to self serve channel thing those are going to be the key drivers.
Great. Thanks, so much.
Again, if he would like to ask a question. Please press star and then one our next question today will come from Tom Champion of Cowen. Please go ahead.
Hey, guys. Thanks, it's it's Henry on for Tom.
How are you guys thinking about the cadence of from new product launches for the remainder of the year in and I think you briefly touched on this but we noticed that some of the recent product updates like weightlifting connect the.
Fall within the restaurants vertical and just curious of.
The reason is that you guys are seeing the most demand or or monetization opportunities in that category. Thanks.
Hi, Andrew this Jeremy.
I can take that one yeah, we've had a pretty exciting year on that product and engineering from a you know launched a whole host of new products business highlights verified license or on the multi looks I had improved attribution is as well as a new AD formats and you mentioned you know more recently there has been additional products that.
Weve announced portfolios to showcase businesses offering as well as help connect which initially is more targeted at the restaurant vertical but we do see that there are lots of businesses that have kind of a social media presence in like to put their voice out there put their images out there put menu items or maybe.
So long as salon or a spa that has images as well as anything visual I think we'll play well with that functionality and so we're just getting started as far as go to market for those.
New products and we'll see how how it goes over the coming here, but you know the early reception is strong and we're pretty proud of all of the work product and engineering is delivered this year. It's really made a difference I think in our results.
Okay.
And our next question today will come from Elliot Alper of D.A. Davidson. Please go ahead.
Great. Thank you so on the 42 growth and clicks that was partly driven by the better our customer targeting can you talk about what you're doing differently on the targeting front and where there's room for continued growth.
And then secondly, you touched on this already slightly but kind of with its new video feature that will be within the business profiles. What we'll do you experienced looked like for the consumer and kind of whereas the balance between the video advertisement and the organic search.
Within the profile. Thank you.
I think I'll take the first one here Elliot yeah. So on the AD targeting front, we have a deep pipeline of improvements that we're working on some of the things that can help our geographic targeting start targeting specific service offering to improve matching more efficiently using the inventory that we've got you know different types of auction.
And Ah Theres a lot of technical work that goes into that but you can see I think buyer you know AD clicks moving up.
42% Cpcs dropping that we're having real impact and a you know we have reason to believe that we you know there will be more impact to calm.
And then maybe on the video front jet you want to take that sure. So the video product is relatively new for us.
Amount at that at that last part of the third quarter, obviously video as it is a big place where folks want to spend money. These days and you know I I think if you look in the shareholder letter. We've gotten example of a client that's actually using those video ads and so.
When you hit the profile page weather on mobile, you'll see kind of below some of the information and.
Video AD that plays and really allows attack those advertisers to tell a deeper story and you know we've had good feedback from the marketplace. Thus far it's still very early days in terms of gave it getting out to market, but we're encouraged by the early signals.
Great appreciate it.
Again, if you have a question. Please press star and then one.
Our next question today as a follow up from Lloyd Wamsley I'd like to Bank. Please go ahead.
Hey, Chris again here I'm just.
Looking at the revenue guide or any one timers to call out for that for you and just kind of looking ahead towards 2020.
Any any early color that you guys you can share their great.
Yes.
Hey, crises James again.
So yes, we left the full Q. I think when looking at again the same trends the same execution that we've seen driving us and in Threeq. So we continue to expect the delivering more value ways continued improvements in retention.
On the benefit of new products as well as the ongoing growth of multi location, which is a important quarter for them in terms of some of the seasonal spend.
Those are what's behind our outlook for the fourth quarter and as I said earlier.
Big part of what we see driving.
You know continued break into 2020 on over the long term towards those targets.
Got it and then.
Anything any more color specific to 2020 or.
Anything yet again anything in the comp as far as the Fourq you 18 number that we should be thinking about.
No no there was an and I think we'll we'll get to talk more about 2020 at the yet when we come back in February .
Sure.
And then and then sorry, maybe maybe just one one question on some of the advertising product stuff that you guys had called out in the local and home segment, you guys talked about giving.
More control on the lead set advertisers who would be getting going forward. Just curious how we should be thinking about this seems like an interesting opportunity, but as you kind of introduce new functionality going forward like do you guys see a potential risk of this disrupting AD spend trends here and in this key segment. Thanks.
Hey, Chris is the Jeremy on the AD product side, Yeah, we have been testing out various control features a that advertisers are interested in things like you know what keywords do they want to be associated with not associated with GM geography went zip codes do they service et cetera.
And you know, obviously, especially for the high spenders.
There is real interest in having more control over your advertising you really want to match to the customers that they can service. So this is an area that well continue experimenting in.
Got it thanks for the color.
Our next question today will come from Justin Patterson of Raymond James. Please go ahead.
Great. Thank you very much I wanted to go back to click volumes versus click prices. It's not a lot of success there driving retention is getting more clicks to advertisers I'm just curious that now that you're further along with it or are you seeing evidence of more spending from those advertisers and how we should.
Think about monetization growing against that.
So that's question number one and then question number two and home services, we've seen a lot more companies start moving towards fixed price transactional products, but how do you think about the puts and takes of rolling that out onto your platform. Thank you.
Hi, Justin as Jeremy Yeah, there's a click volume and pricing does it have impact I think we have seen what we believe its impact in retention and so that's fantastic. It says that hey, when we deliver more value for our advertisers.
They tend to stick because they feel that value and so that's why we're confident in continuing investing in that area and we do have a healthy portfolio of different projects to continue to impact those numbers favorably.
On the home services front, you mentioned a fixed prices.
Her fixed pricing and how are we thinking about that certainly it's interesting I mean dependent it's really going to be dependent on the various types of jobs that are coming through and so in some cases, it's really hard to give a fixed price because you know that service provider might have to come out and take a look but you know there very well maybe some room to have.
Certain services that are fixed price it'll be something that I'm sure that we'd look at but nothing to announce today.
Got it thank you Jeremy <unk>.
Our next question today will come from Tom Champion of Cowen. Please go ahead.
Thanks, It it's Henry again.
Wondering if you could give some more color on.
Sales force efficiency it it looks like.
It really improved year over year.
The sales headcount ticked down slightly but net adds an increase so so just any more color there would be super helpful. Thanks.
Yeah, I will I'll take that Henry as jet speaking, yeah, we've seen really nice gains and salesforce productivity even in this age of in the local specifically shrinking salesforce.
And you know, it's a fair number factors the play into it and so when you look the improve retention.
That's obviously going to have a factor in in the efficiency there a higher percentage of veteran local reps.
Due to a lot of focused at retention efforts new products you know ultimately when we introduced verified license in business highlights really energized the salesforce and you can think about they have a lot want to talk about what their customers and pursue prospective customers when they're on the line.
And it's really a wider portfolio to go to market with and that has the effect of number one having market fit and number two actually energizing the salesforce as well and so we continue to have a vision into additional products coming into in its way into 2020, and we're really happy with with that Salesforce production, and then I guess last but not least.
Self serve continues to kind of.
An important factor and what we're doing it's up nearly 40% year over year, and that's obviously going to factor into that local revenue number as well.
Thanks.
Ladies and gentlemen, this will conclude our question and answer session.
And also concluded Yelps third quarter 2019 earnings conference call.
Thank you all for attending today's presentation you may now disconnect your lines.
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