Yelp : Investor Presentation August 2019

Investor Presentation

August 2019

Safe Harbor: Forward-Looking Statements

These slides and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical facts contained in these slides and the accompanying oral presentation, including statements regarding Yelp Inc.'s ("Yelp" or the "Company") future operations, future performance, expected financial results and future financial position, future revenue and revenue growth rates, future share repurchase activity, strategic and investment priorities, long-term financial targets and target margins, projected growth, expenses and savings, trends, opportunities, prospects, estimates and plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "believe," "may," "will," "estimate," "forecast," "guidance," "continue," "anticipate," "intend," "could," "would," "project," "plan," "potential," "target," "opportunity," "model," "expect" or the negative or plural of these words or similar expressions. The Company has based these forward-looking statements largely on its estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs.

These forward looking statements are subject to a number of risks, uncertainties and assumptions, including the fact that we have a limited operating history in an evolving and competitive industry; that our growth rate may not be sustainable; that we rely on traffic to our website from search engines like Google and Bing; our ability to generate sufficient revenue to maintain and increase profitability, particularly in light of our significant ongoing sales and marketing expenses; our ability to reduce or control expenses sufficiently to meet our profitability targets; our ability to introduce successful new products, services and partnerships; our ability to maintain and expand our base of advertisers, including enterprise customers, particularly as an increasing portion of advertisers have the ability to cancel their ad campaigns at any time; our ability to attract, retain and motivate well-qualified employees, particularly in sales and marketing; our ability to increase traffic to our platform and generate and maintain sufficient high quality content from our users; our ability to maintain a strong brand and manage negative publicity that may arise; our ability to manage acquisitions of new businesses, solutions and technologies and to integrate and monetize those businesses, solutions or technologies; the efficacy of our automated recommendation software; our ability to develop our communities effectively; our ability to deal with an increasingly competitive local search environment; our ability to timely upgrade and develop our systems and infrastructure; and changes in political, business and economic conditions. These risks and uncertainties may also include those described in the Company's most recent Form 10-Q or 10-K filed with the Securities and Exchange Commission.

New risks emerge from time to time. It is not possible for Company management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in these slides and the accompanying oral presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Any forward-looking statement speaks only as of its date. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation, to conform these statements to actual results or to changes in the Company's expectations.

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Our mission: Connecting people with great local businesses

4.6 million		192 million		37 million
Active claimed local		Cumulative reviews1		App unique devices3
business locations1, 2

549,000			2.4 million		2.2 million
	Paying advertising			Seated diners via Yelp3		Request-a-quote
	locations4						leads delivered3

1.	As of June 30, 2019
2.	Represents the number of claimed local business locations that are both (a) active on Yelp and (b) associated with an active business account as of a given date. We consider a
	claimed local business to be active if it has not closed, been removed from our platform, or merged with another claimed local business location.	2
3.	Monthly average for Q2 2019

4. All business locations associated with a business account from which Yelp recognized advertising revenue in a given month, averaged over Q2 2019.

Our powerful, self-reinforcing network delivers significant value to consumers and businesses

Consumers

Local businesses

Trusted source

Expanded reach

Personalized discovery

Differentiated offerings

Convenient transaction capabilities

High intent consumers

Saves time & money

Fine-tuned operations

3

We have built a comprehensive local platform and we are just getting started

2012

IPO

Reference guide to local businesses

2019

Today

App to discover and engage with local businesses

Target customer

Product

Engagement

Go to market

segment

Consumer

Directory

Review

Desktop

Local SMB

Business

Direct-to-SMB telesales

Read and publish

Ads

One-size-fits-all

Consumer

Directory

Integrated

Review

Multi-Channel Strategy

Book

Local SMB

Mobile-first

Sales

+

Ads

Self serve

Multi-location

Browse, book, buy

Order

Channel partners

National

Channel

Personalized

Quote

Customer success

Mid-

market

4

Where we plan to go

Pillars of our next phase of growth

Increase focus on		Enhance our		Execute our established
advertisers and		go-to-market strategy by		long-term targets for
business owners		integrating product and		growth, profitability and
		product marketing with		capital return
		sales efforts

5

Planned steps to create long-term shareholder value

• Deliver mid-teensrevenue CAGR from 2019 through 2023

• Drive margin expansion and optimize cost structure
  3 Accelerate strategy through effective partnerships

• Align capital allocation with shareholder value creation
  5 Continually develop our talent and Board of Directors

6

• Deliver mid-teensrevenue CAGR from 2019 through 2023

					…with a large market opportunity to
	Strong track record for growing revenue...			sustain long-term growth

		$943
	55%
	10-year CAGR
	$233	32%
		5-year CAGR
$12
2008	2013	2018

($ in millions)

$150 billion

Local advertising spend1

Multi-Location

SMB

20 million

Local U.S. business locations2

4.6 million active claimed

Local business locations on Yelp3

1.

BIA Kelsey, U.S. Local Advertising Forecast 2018; BIA Kelsey, What's Next? BIA/Kelsey 2017 Analyst Predictions Webinar, Tuesday, January 24, 2017

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1. U.S. Small Business Administration
2. As of June 30, 2019

• Deliver mid-teensrevenue CAGR from 2019 through 2023

Multiple initiatives tailored to help connect consumers and businesses

and drive accelerated growth

Consumers

Win in key

Drive more value to

Save time & money

Expand offerings

categories

business customers

Enhance consumer

Capture multi-

experience

location opportunity

Mid-teens

Long-term revenue CAGR target

Local businesses

Indispensable partner

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• Deliver mid-teensrevenue CAGR from 2019 through 2023

Win in key categories

Optimize traffic and monetization

Restaurants			Home services
High traffic		High value
High engagement		High monetization

Expand offerings

Meet the specific needs of every business

More choices

More price points

More functionality

Objective targeting

Yelp verified

Set Your Goal

Let Yelp optimize

More phone calls

Drive more value to business customers

Underscore value / enhance monetization

Opportunity:

More leads to advertisers

10% leads monetized1

Greater control, attribution and reporting

More website clicks

1. As of Q4 2018	9

• Deliver mid-teensrevenue CAGR from 2019 through 2023

		Enhance consumer				Capture multi-
			experience				location opportunity
	Grow audience and engagement		Open up large untapped market
		Personalization
									Product innovation
								Focused go-to-market organization
								Expanding strategic channel partnerships

				20%+		5x+
				Planned increase		Revenue per
	"Yelp-only"		in Multi-loc sales		National rep vs.
				team in 2019		Local rep

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• Deliver mid-teensrevenue CAGR from 2019 through 2023

Win in key categories

Drive growth across SMB and multi-location customers

Target 2019 - 2023 revenue CAGR

Expand offerings

Drive more value to business customers

Enhance consumer experience

Capture multi-location opportunity

	20%+
10%+
SMB	Multi-loc

Mid-teens %

Total advertising

revenue

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• Drive margin expansion and optimize cost structure

Shift emphasis to most efficient sales

channels

Hold Local sales headcount steady and

drive rep productivity

Relocate sales out of San Francisco to save ~$10 million/year once complete

Optimize consumer marketing spend to

save ~$15 million in 2019

Reduce / control other corporate expenses

We have delivered profitable growth and

target further margin expansion

Adjusted EBITDA Margin1

			30-35%
		19%
	13%
	2013	2018	2023 target
Net (loss) income:	$(10.1)	$55.4 million
	million

Over 6.5 percentage points of adjusted EBITDA

margin expansion between 2013 - 2018

1.	See slide 20 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool		12

• Accelerate strategy through effective partnerships

Restaurants delivering on Yelp		Strong partner ecosystem

2x

advertising

ad starts & claims

fusion

90K+ partnership

Dec 2018

delivers more

profitable growth

in food ordering

mobile distribution

45K

Oct 2017

knowledge

Yelp Eat24	GrubHub	platform
	partnership

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• Align capital allocation with shareholder value creation

Strong profitability and balance sheet

allow robust capital return plan

$398 million of stock repurchases

completed in 1H 2019

More than $600 million returned to

shareholders via stock repurchases since July 2017

$250M$700M

$250M

$200M

		Authorized		Authorized	Authorized		Total repurchase
		July 2017		November 2018	February 2019		authorization

Completed as of August 8, 2019

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• Continually develop our talent and Board of Directors

8 experienced directors with a diverse skillset...

• directors have been senior executives of major public companies

• directors have technology experience

• directors have online advertising/sales/marketing experience
• directors have digital marketplace/e-commerce experience

• directors have sold companies

• directors with specific expertise in Yelp key categories1

1. Includes restaurants, hospitality and home services

…including three recently added, highly qualified,

independent directors

George Hu

Chief Operating Officer, Twilio

High growth technology experience including 13 years as a leader at Salesforce

Breadth of operational expertise including a background in product, applications and marketing

Sharon Rothstein

Former Chief Product & Marketing Officer, Starbucks

Significant marketing expertise, from senior positions at Starbucks, Sephora and Starwood Hotels

Leadership experience at restaurant and hospitality companies

Brian Sharples

Co-Founder & Former CEO, HomeAway

Founded and grew HomeAway to a market leading hospitality company before selling to Expedia in 2015

Expert in technology brand strategy

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Financial Outlook

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Strong financial performance

Total net revenue ($ in millions)		Adjusted EBITDA1 ($ in millions)

	+11%	$943
+19%	$851
$716
2016	2017	2018

		+16%	$183
	+28%	$158
	$123
	2016	2017	2018
Margin2	17%	19%	19%

1. Net Income (loss) for FY 2016 was a loss of $1.7 million. Net Income for FY 2017 was $153 million including a $164 million pre-tax gain on the disposal of Eat24. Net Income for FY 2018 was $55 million.

	See slide 20 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool	17
2.	Margin calculated as Adjusted EBITDA divided by Net Revenue

Our long-term financial targets

								Long-term target
		2013-2018
Annual revenue growth										Mid-teens
	32%
Expenses as % of revenue1
Cost of revenue			6-9%				~6%
								36-40%
Sales & marketing			51-57%
								20-22%
Product development			16-23%
								10-11%
G&A			13-18%
								~4%
D&A			~5%
Adjusted EBITDA Margin2			13-19%				30-35%

1. Calculated in accordance with GAAP, including stock-based compensation expense

2.

See slide 20 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool

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Planned steps to create long-term shareholder value

Mid-teens		Drive margin		Effective		Experienced and		Strong return
revenue CAGR		expansion		partnership		independent		of capital
		strategies	board
from 2019
through 2023

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Adjusted EBITDA reconciliation

															2017						2018
		1		1		1
($ in millions)				2016	2017	2018		Q1	Q2		Q3	Q4			Q1	Q2		Q3	Q4
Net Income / (Loss)	($10.1)		$36.5		($32.9)		($1.7)	$153.0	$55.4	($4.0)	$7.9		$8.0	$141.1		($2.3)	$10.7		$15.0	$31.9
+ Tax & Other Income	1.2		(25.4)		11.6		(0.3)	26.6	(29.5)	(0.7)	(0.7)		(1.1)	29.2		(2.5)	(3.1)		(4.6)	(19.2)
+ Depreciation &	11.5		17.6		29.6		35.3	41.2	42.8	10.2	10.7		10.7	9.7		10.0	10.5		10.7	11.6
Amortization
+ Stock Based	26.1		42.3		60.8		86.3	100.4	114.4	24.3	25.4		25.3	25.4		27.7	28.8		29.2	28.7
Compensation
- Gain on Disposal of a	0.0		0.0		0.0		0.0	(163.7)	0.0	0.0	0.0		0.0	(163.7)		0.0	0.0		0.0	0.0
Business Unit
+ Restructuring &	0.7		0.0		0.0		3.5	0.3	0.0	0.2	0.0		0.0	0.0		0.0	0.0		0.0	0.0
Integration
Adjusted EBITDA	$29.4		$70.9		$69.1		$123.0	$157.8	$183.1	$30.0	$43.2		$42.9	$41.7		$32.9	$46.9		$50.3	$52.9
/ Net Revenue	$233.0		$377.5		$549.7		$716.1	$850.8	$942.8	$198.2	$209.9		$223.3	$219.4		$223.1	$234.9		$241.1	$243.7
Adjusted	12.6%		18.8%		12.6%		17.2%	18.5%	19.4%	15.1%	20.6%		19.2%	19.0%		14.7%	20.0%		20.9%	21.7%
EBITDA Margin

This presentation includes adjusted EBITDA and adjusted EBITDA margin, non-GAAP financial measures that Yelp uses to evaluate its business. Yelp includes adjusted EBITDA because it is a key measure used by Yelp's management and board of directors to understand and evaluate core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of Yelp's core business. Accordingly, Yelp believes that adjusted EBITDA provides useful information to investors and others in understanding and evaluating Yelp's operating results in the same manner as its management and board of directors. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of Yelp's results as reported under GAAP. You can read more about the limitations of adjusted EBITDA, as well as the basis of presentation of the numbers in the table above, in Yelp's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC's website at www.sec.gov. Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and Yelp's other GAAP results.

1. Amounts have not been recast in accordance with Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (ASC 606)."

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