Q1 2022 Yelp Inc Earnings Call

People with great local businesses and remain committed to delivering long term shareholder value.

That I'd like to turn it over to David.

Thanks, Jeremy.

Define historical seasonal trends net revenue increased by $3 million from the fourth quarter and 19% year over year.

$277 million 7 million above the high end of our range.

This strong growth was driven by year over year increases in both paying advertising locations and revenue per location.

Paying advertising locations increased by 3% from the fourth quarter and by 9% year over year to reach 546000.

As Jeremy mentioned.

We have also accelerated year over year advertising revenue growth across categories with services up 14% and restaurant retail and other up 20%.

AD clicks increased by 4% year over year, while average CPC increased by 17% over the same period.

Growth in average CPC outpaced growth in AD clicks due to higher advertising demand and consumer engagement, particularly in services.

We believe this was driven by a combination of macro factors, including inflation.

We enjoyed another quarter of record non term contract retention rates, reflecting the value that we continue to deliver to advertisers overall, we see yelps diversified local AD platform and dynamic auction system is enabling us to respond to shifts in consumer demand across categories as they occur.

And we remain focused on delivering value to advertisers through our portfolio of initiatives.

Turning to expenses, our flexible operating posture and disciplined focus on ROI has positioned us to lean into a broad set of growth opportunities for.

For example in the first quarter, we increased our marketing efforts, which contributed to record self serve customer acquisition.

We also invested in driving incremental growth through our off platform solution Yelp audiences.

And approach that has expanded our total addressable market to include non location based advertisers.

Even as we increase these strategic investments in the first quarter net loss improved by $5 million year over year to a loss of $1 million.

Our adjusted EBITDA increased by 10% year over year to 48 million $3 million above the high end of that range.

Turning to capital to shareholders through share repurchases remains an important element of our overall capital allocation strategy in the first quarter, we repurchased $50 million worth of shares at an average purchase price of $34 14.

Turning to our outlook.

In the second quarter, we anticipate net revenue will increase from the first quarter to be in the range of $280 million to $290 million.

As our initiatives back in addition, following strength in the first quarter.

We currently expect net revenue to fall towards the higher end of the range of our previously disclosed outlook of 116 to $1 8 billion for the full year.

We continue to see attractive long term growth opportunities and plan to further invest in product development and marketing in the second quarter.

As such we expect second quarter expenses will increase modestly from the first quarter.

We anticipate adjusted EBITDA will be relatively flat compared to the first quarter and in the range of $45 million to $55 million.

We expect adjusted EBITDA will meaningfully increase in the second half of the year and currently expect a range of $260 million to $280 million and adjusted EBITDA for 2022.

In closing <unk> first quarter results demonstrate a great start for the year, while the macro environment remains complex. We are confident in our team's ability to overcome challenges by staying focused on our strategic priorities.

We're excited about the opportunities ahead and plan to continue prioritizing investment in areas that we believe will drive profitable growth and shareholder value over the long term.

With that operator, please open up the line for questions.

Certainly thank you I'd like to ask a question. Please press star followed by one on your telephone keypad.

Any reason you would like to turn that question. Please press star followed by team again to ask a question press Star one.

As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking a question. We'll pause here briefly ask questions are registering.

My first question is from the line of Colin Sebastian with Baird. Please proceed.

Hi, Thanks, good afternoon, good quarter.

I guess I have a couple of questions related to the dynamic between the gross and clicks and pricing.

One hand that that speaks to the value youre, providing advertisers, but I'm also wondering if this could turn into a headwind for growth over time.

On that note I guess.

Given that request a quote requests remain relatively flat year over year.

Yes, he is increasing that.

Priority looking forward as far as the consumer facing side of the App is concerned and I guess more broadly what initiatives are underway. What are you prioritizing otherwise to improve the consumer facing side.

That could increase the number of users and engagement. Thanks.

Hi, Colin this is Jeremy I think I can take that one.

Yes, so on the click side, we saw 4% year over year growth there.

And we noted that retention.

Look healthy really healthy for us and I think.

That's representative of the value we continue to provide for advertisers. So we do feel good about that with clicks theres a lot under our control. So theres, obviously, the consumer engagement side and we've talked about in Q4 that there is a whole set of initiatives that we've got.

Unfolding across the year around driving additional consumer engagement as well as audience. There's also a lot that we can do on the AD matching side and the AD Tech side and as you may remember for years now we've been investing in that area and it continues to be very high ROI for us so as the AD system gets more efficient it can.

Essentially create inventory out of thin air because using the same traffic and do.

It's all more efficiently and so that can drive additional opportunity as well so we feel pretty good about that.

That portfolio and then on the request a quote side Youre correct <unk>.

That year over year.

In fact, we run each time, a consumer enters inquiry and is looking at a search result that <unk>, obviously match supply and demand efficiently and just to underscore with Jeremy saying, we think that we have a broad set of initiatives underway that will enable us to continue to deliver value to advertisers.

And on the theme of delivering diet advertisers, we think that the strong non term contract retention rate being a record once again in the first quarter.

Reflects the fact that we're delivering value.

Great. Thank you.

Thank you Mister Sebastian.

The next question is from the line of Sweat that has area with Evercore ISI. Please proceed.

Okay. Thank you for taking my questions I've Gotcha.

One is.

You've done a great job with product changes in terms of new product launches and.

Driving growth through that over the past year and a half when we think about all the products that is launched and perhaps those that maybe in the pipeline could you point to to that a couple of them that you are most excited about in terms of the magnitude of the impact of those products over the next 12 months, which ones do you think would have an out.

Positive impact on the business over the next year.

Second question is if you could please comment on the overall.

Trends that you're seeing macro occurrence that you're seeing with being multilocation advertisers.

Any color on on the AD spend sentiment across different vertical, perhaps and how you see that trend this quarter and in the back half. Thank you.

Oh sure it I'll take the first part here.

No. Thank you first off for noting all of the great progress, we've been making on the product.

<unk> you know I think if you.

<unk> over the past few years now where has there been impact this moment I think it's largely yellow okay.

<unk>.

It's really on the AD system side, we've made huge strides in improving the AD system, making it more efficient driving value to our advertisers and we've really improve the quality of our quirks and it's just so high leverage when we make improvements there because those are mentioned in the earlier question. It really is creating additional.

Tori Everytime, you make the system more efficient and everybody is getting happier. So the consumer is getting matched with a business is more appropriate it's more likely that that matches going to result in it you know.

John Funneled transaction and so the more opportunities we could take advantage up there the better I think we can be over the longterm as a business.

One of the other areas that we've just started to to highlight again, obviously, it's been something to please work done in the past, but were finally able you know now that the company is just not simply on a different footing, we're able to return to the consumer experience and as we look around one area that we see is has been particularly lagging just because you know frankly.

We haven't had the the resources to keep up is an Android.

Low hanging fruit there an opportunity to improve the consumer experience bring it up to parody with I O S.

We made you know over the quarter of simple improvement, bringing the map experience to Andrew or a map experience that we didn't have an Android that we did have an I O S and we did see significant improvement nightclub. So thick. It was up 20 per cent on that particular platform.

Gives you know it's meant to be kind of a very concrete easy to understand look there are low hanging fruit here and we're gonna go after it with the same you know energy and rigor that we have on things like the AD Tech staff that we've made huge strides on.

And you know beyond Android, there's lots of opportunities on the consumer side, you know, whether it's from SCO or continuing to enhance the future such you know driving more reviews driving more photos contribution all of those things are on the table and we have a wide portfolio.

Folio that I'm, particularly excited about looking forward to keeping you keeping you posted on.

The other area, where we continue to see a lot of opportunity for investment is improving on on self serving multilocation portfolios in those areas as well curbing the flows driving up conversion like that creates a positive feedback loop, where the better we get at driving you know customers through our final ourselves or final the more we can spend on.

Advertising, making that go even faster and I think you're seeing some of the benefits that you look at the performance in Q1, where revenue was up 19% on Multilocation a big driver has been an attribution that is absolutely critical to getting in unlocking larger advertising budgets from our most sophisticated custer.

<unk> and we've created a yelp store visits product and so even though a lot of these customers rely on third party attribution partners, which we work with that area has been challenged by some of the privacy things going on in the space, but our Yelp store visits attribution product is first party data. It's like you know looking at our users do the ads work do they driving.

Criminal store visits and that's been a really fantastic tool to have in the tool chest for our sales team that they go out and talk to these you know very well very sophisticated enterprise customers.

Great and this is jet I can take the second part of the question, which was around kind of macro trends within Multilocation advertisers I guess stepping back you know we've been really pleased with the performance of the Multilocation channel up 35% year over year, it's something we've been working on for multiple years now and we made investments in the team first and.

And as well as simultaneously kind of in the product portfolio. If you look at our portfolio today versus where it was a couple of years ago. You know we have a much broader offering that we can bring out to those multilocation customers. You know in terms of specific vertical is that we've been successful in you know it's been largely <unk>.

Broad based and you see it go from shopping to restaurants retail, another and and you know and and services as well. So I don't I don't think that there's something that stands out certainly when you look at kind of the <unk> the <unk> the.

Powell number and the increase that we saw year over year in the Powell number.

At 546000 paying advertiser locations, you know multiple contributed that in a big way in the restaurant retail and other category. So you know things are resonating with our customers were really happy with the progress of Yap audience is although it's still very small compared to the overall revenue pie it's <unk>.

<unk> with with different types of customers that maybe we were not able to touch in the past and you can think of things like D. T C or C. P G or alcohol brands that you know want to be able to reach that yelp audience, but hadn't been able to do so with our traditional advertising product kind of on Yelp. So what you know bottom line is we're focused on up and down the final often on Yelp and.

Those are are resonating with those large multilocation customers.

Okay. Thanks, Tammy think again.

Thank you Miss <unk>.

The next question is from the line of <unk> salmon with BMO capital markets. Please 15.

Great. Good afternoon, everybody two questions first we'd love to hear an update on the attraction of Yelp connect with both both users and with advertisers just Bradley.

And then seconds.

I think probably more than ever we're hearing <unk>.

Confidence in.

Happiness with the improvement in the AD tech in the AD system and that continues to build in at a lot of that's been organic work pretty much so far.

Curious.

You can lean in here more do you feel like you have the engineering capacity as a hiring market, okay or do you start to maybe look at a M&A market to do tuck in acquisitions Aqua hires to reel in a little bit more than that maybe lead into the success you've had on the AD platform. Thanks guys.

Yeah, So I guess I'll tackle the ads peace first.

He was alluding to some of the earlier questions. You know we've had a really great impact working on this area great Roy and as a result, we have an annual planning process, where we're looking at the overall portfolio and trying to make tradeoffs across the business, where do we want to.

Make bigger beds and Yo Yo <unk> has been like a winter isn't that process. It.

Consistently for years, but you know, especially with 2022.

You know one of our bigger areas of investment.

Certainly those those are valuable folks or they can be very hard to find but you know I think we we do have a great team in place we have been able to fill many of the roles. You know I'm sure. There are probably open wrecks out there someone nearby <unk> I mean do you have any initiatives that we set out to do we're making great progress and we'll keep you up.

Updated there on they'll connect don't have any stats in front of me I do know we bundle that is part of our add upgrade package and so consumers do alright, sorry business owners do have the opportunity to do you know more social like pose with the idea of being you know, taking an image and and.

Some additional taxes being able to promote that to consumers, especially ones that have shown an interest in their area.

Yeah, but geographically as well as relevance because you know they looked at that business in the past or looked at relevant categories.

So that's all I've got.

Yeah, Jeremy I would just add on it's for sure Yeah I would just add on the connect side. You know we've also seen some traction on the multi look side in bundling that with our other products and so you know as I mentioned kind of in the previous answer when you kind of take the totality of what we can offer whether that's C. P. C ads on Yap Yap audience adds.

You know off of your connected is just another way that those multilocation advertisers are used to advertising and so you know oftentimes they have the assets ready and and as part of an overall package. It certainly something that uhm is.

Attractive to that and Multilocation said.

That's great that's helpful. Thanks, Scott.

Thank you Mr Salmond.

The next question is from the line I've just been Patterson Keybanc. Please proceed.

Great. Thank you and good afternoon next question right done an excellent job.

Lisa.

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The next question is from the line of John calling Tony with Japanese. Please proceed.

Uh Huh hi, everyone. This is <unk> Jon Thank you for taking my question.

Actually I have to first one.

You mentioned earlier on the call perfect development and marketing being <unk> area. So if investment.

But the sequential merge any improvement implied in your guidance looking at the midpoint is notably Google what we've seen historically can you provide more color on the Vegas puts and takes in that guidance.

Ah question number two.

Ah you think any signs of a slowdown to them the macro environment or.

The consumer sentiment Mcnair.

Thanks for the question so starting with the first one on expenses, what we have done over the course of the past.

Number of quarters is invest particularly an increase in hiring and product in engineering and we've also had an opportunity.

To increase investment in marketing, we've seen a R Y for both of those investments.

And overall the dynamic as we came into the year was reflecting that increase in headcount. We also have our yelp audiences product audience. This product.

Actually has expense related to it as we syndicate ads across the internet on behalf of the advertisers and you'll see that increase in expense showing up in our hospital sales overall as we look at expenses coming in to the second car.

<unk>, what we intend to do is to continue to invest for that longer term since we do see an opportunity to earn a return on it and clearly we were very pleased with the 19 per cent growth that we delivered in the first quarter and then of course, the sequential guide on revenue as we come in to the.

Second quarter.

Uhm badly what we saw in the first quarter from a macro perspective again was a very complex backdrop, where we see consumer certainly very focused on inflation one of the things that we think makes yell, particularly valuable is our core mission.

<unk> of enabling consumers to make better decisions by being able to learn more about businesses and if things are more expensive whether that television not are hiring of services pro we think that's even more relevant. So we think that that trusted content is quite important for consumers.

And I think as we said earlier, we were certainly pleased by the strength of the advertiser demand over the course of the first quarter.

And we think that's a reflection both of the expanded portfolio of products that we're providing as well as obviously the opportunity for those advertisers to reach 10 consumers who come more than 50 per cent of the time from households, with income of over $100000.

Great. Thank you very much.

Thank you.

The next question is the questions on the line I've just been Patterson with Keybanc. Please proceed.

Great. Thank you and good afternoon, you've done a really great job with non term contract retention rates, how much more room for improvement you have around that metric and as retention improves how do you think about adjusting because of advertiser acquisition. Thank you.

I just this is Jed I can I can take the the retention question.

Uhm Yeah bottom line is we think that there is a a long runway for improvement on alert on the retention side.

You know I think.

The improvements that you seem have have stem from kind of delivering more value to our customers is Jeremy mentioned before improvements in the AD system better matching more efficient matching making sure we're lining up the right opportunity with the right consumer with the right lead with the right business owner at the right time that they're able to service it and there is.

A deep well of initiatives and the portfolio that we're looking to kind of continue down that path on we were pleased with with the kids continued progress on the retention side in Q1, where we did see record retention in terms of the acquisition side. We're also very pleased with with the pace. There I think you know we.

With with with half the salespeople, we were able to go deliver very very very healthy acquisition.

You know during Q1 and that just kind of speaks to the efficiency of the engine and and you know as we see opportunities to invest more on the marketing side in particular on the marketing side, we're going to take advantage of those when there's you know kind of compelling R O Y there but.

Overall, we are really pleased with the progress on both acquisition as well as the retention time.

Thank you.

Thank you Mr Patterson.

Once again to ask a question <unk> one.

Again to ask a question <unk> one.

There are no additional questions wedding at this time that concludes today's call. Thank you for your participation you may now disconnect your lines.

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