YELP INC - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________________________________________

Form 10-Q

______________________________________________________________________________________________________


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to

Commission file number: 001-35444

_____________________________________________________________________________________________________

YELP INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________________________________________________________


Delaware			20-1854266
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

350 Mission Street, 10th Floor

San Francisco, California 94105

(Address of principal executive offices) (Zip Code)

(415) 908-3801

(Registrant’s Telephone Number, Including Area Code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.000001 per share

YELP

New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 27, 2023, there were 68,472,771 shares outstanding of the registrant’s common stock, par value $0.000001 per share.

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YELP INC.

QUARTERLY REPORT ON FORM 10-Q

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		Page
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
Part II.	Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities , Use of Proceeds , and Issuer Purchases of Equity Securities.	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures

___________________________________

Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “Yelp,” the “Company,” “we,” “us” and “our” refer to Yelp Inc. and, where appropriate, its subsidiaries.

Unless the context otherwise indicates, where we refer in this Quarterly Report to our “mobile application” or “mobile app,” we refer to all of our applications for mobile-enabled devices; references to our “mobile platform” refer to both our mobile app and the versions of our website that are optimized for mobile-based browsers. Similarly, references to our “website” refer to versions of our website dedicated to both desktop- and mobile-based browsers, as well as the U.S. and international versions of our website.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements that involve risks, uncertainties and assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements contained in this Quarterly Report that are not purely historical, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include, but are not limited to, statements about:

•our financial performance, including our revenue, operating expenses and margins, as well as our ability to maintain profitability;

•our ability to maintain and expand our advertiser base;

•our strategic initiatives to support revenue growth and margin expansion;

•our investment plans and priorities, including planned investments in product development, marketing and our sales channels, as well as our ability to execute against those priorities and the results thereof;

•our ability to operate with a distributed workforce as well as the benefits and costs thereof;

•trends and expectations regarding customer and revenue retention;

•trends and expectations regarding our key metrics, including consumer traffic and engagement and the opportunity they present for growth;

•our liquidity and working capital requirements; and

•our plans with respect to our stock repurchase program.

Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements.

These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our 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 we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”), as updated by Part II, Item 1A of this Quarterly Report, and elsewhere in this Quarterly Report, such as:

•adverse macroeconomic conditions, including the uncertain and inflationary economic environment in the United States, and their impact on consumer behavior and advertiser spending;

•our ability to maintain and expand our advertiser base, particularly as many businesses continue to face macroeconomic challenges, including labor and supply chain difficulties;

•our ability to execute on our strategic initiatives and the effectiveness thereof;

•our ability to hire, retain, motivate and effectively manage well-qualified employees in a primarily remote work environment;

•our ability to maintain and increase user engagement on our platform, including our ability to generate, maintain and recommend sufficient content that consumers find relevant, helpful and reliable;

•our reliance on third-party service providers and strategic partners;

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•our reliance on search engines and application marketplaces, certain providers of which offer products and services that compete directly with our products;

•our ability to maintain the uninterrupted and proper operation of our technology and network infrastructure;

•actual or perceived security breaches as well as errors, vulnerabilities or defects in our software or in products of third-party providers;

•our ability to generate sufficient revenue to maintain profitability, particularly in light of our limited operating history in an evolving industry, significant ongoing investments in our strategic initiatives, and the ongoing impact of macroeconomic challenges;

•our ability to accurately forecast revenue and appropriately plan expenses;

•our ability to operate effectively on mobile devices and other platforms beyond desktop computers;

•our actual or perceived failure to comply with laws and regulations applicable to our business;

•our ability to maintain, protect and enhance the Yelp brand and manage negative publicity that may arise; and

•our ability to successfully manage any strategic opportunities, including the acquisition and integration of any new businesses, solutions or technologies, as well as our ability to monetize the acquired products.

Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

NOTE REGARDING METRICS

We review a number of performance metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. Please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics” in this Quarterly Report and in our Annual Report for information on how we define our key metrics. Unless otherwise stated, these metrics do not include metrics from subscription products or our business-owner products.

While our metrics are based on what we believe to be reasonable calculations, there are inherent challenges in measuring usage across our large user base. Certain of our performance metrics, including the number of unique devices accessing our mobile app, ad clicks, average cost-per-click and active claimed local business locations, are tracked with internal company tools, which are not independently verified by any third party and have a number of limitations. For example, our metrics may be affected by mobile applications that automatically contact our servers for regular updates with no discernible user action involved; this activity can cause our system to count the device associated with the app as an app unique device in a given period. Although we take steps to exclude such activity and, as a result, do not believe it has had a material impact on our reported metrics, our efforts may not successfully account for all such activity.

Our metrics that are calculated based on data from third parties — the number of desktop and mobile website unique visitors — are subject to similar limitations. Our third-party providers periodically encounter difficulties in providing accurate data for such metrics as a result of a variety of factors, including human and software errors. In addition, because these traffic metrics are tracked based on unique cookie identifiers, an individual who accesses our website from multiple devices with different cookies may be counted as multiple unique visitors, and multiple individuals who access our website from a shared device with a single cookie may be counted as a single unique visitor. As a result, the calculations of our unique visitors may not accurately reflect the number of people actually visiting our website.

Our measures of traffic and other key metrics may also differ from estimates published by third parties (other than those whose data we use to calculate such metrics) or from similar metrics of our competitors. We are continually seeking to improve our ability to measure these key metrics, and regularly review our processes to assess potential improvements to their accuracy. From time to time, we may discover inaccuracies in our metrics or make adjustments to improve their accuracy, including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

YELP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	305,103	$	306,379
Short-term marketable securities	121,468		94,244
Accounts receivable (net of allowance for doubtful accounts of $10,889 and $9,277 at September 30, 2023 and December 31, 2022, respectively)	159,633		131,902
Prepaid expenses and other current assets	39,735		63,467
Total current assets	625,939		595,992
Property, equipment and software, net	72,373		77,224
Operating lease right-of-use assets	72,098		97,392
Goodwill	101,927		102,328
Intangibles, net	7,977		8,997

Other non-current assets	147,004		133,989
Total assets	$	1,027,318	$	1,015,922
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	143,889	$	137,950
Operating lease liabilities — current	38,733		39,674
Deferred revenue	7,064		5,200
Total current liabilities	189,686		182,824
Operating lease liabilities — long-term	57,527		86,661
Other long-term liabilities	40,531		36,113
Total liabilities	287,744		305,598
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock, $0.000001 par value — 200,000 shares authorized, 68,962 shares issued and outstanding at September 30, 2023, and 69,797 shares issued and outstanding at December 31, 2022	—		—
Additional paid-in capital	1,757,174		1,649,692
Treasury stock	(267)		—
Accumulated other comprehensive loss	(15,278)		(15,545)
Accumulated deficit	(1,002,055)		(923,823)
Total stockholders' equity	739,574		710,324
Total liabilities and stockholders' equity	$	1,027,318	$	1,015,922

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenue	$	345,122	$	308,891	$	994,686	$	884,403
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	28,370		26,805		84,613		77,222
Sales and marketing	137,703		133,061		424,308		388,570
Product development	81,020		75,803		254,247		233,336
General and administrative	45,695		48,381		145,609		126,141
Depreciation and amortization	10,461		11,417		31,881		34,165

Total costs and expenses	303,249		295,467		940,658		859,434
Income from operations	41,873		13,424		54,028		24,969
Other income, net	6,154		2,691		17,264		4,947
Income before income taxes	48,027		16,115		71,292		29,916
(Benefit from) provision for income taxes	(10,189)		7,007		(475)		13,714
Net income attributable to common stockholders	$	58,216	$	9,108	$	71,767	$	16,202
Net income per share attributable to common stockholders
Basic	$	0.84	$	0.13	$	1.03	$	0.23
Diluted	$	0.79	$	0.13	$	0.98	$	0.22
Weighted-average shares used to compute net income per share attributable to common stockholders
Basic	69,030		70,630		69,366		71,158
Diluted	73,566		72,658		72,920		73,577

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income attributable to common stockholders	$	58,216	$	9,108	$	71,767	$	16,202
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax	(1,502)		(4,349)		429		(8,916)
Unrealized gain (loss) on available-for-sale debt securities, net of tax	100		(618)		(162)		(618)

Other comprehensive (loss) income	(1,402)		(4,967)		267		(9,534)
Comprehensive income	$	56,814	$	4,141	$	72,034	$	6,668

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)



	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance as of June 30, 2022	71,226	$	—	$	1,587,337	$	(3,138)	$	(15,657)	$	(849,938)	$	718,604

Issuance of common stock upon exercises of employee stock options	192	—		5,083		—		—		—		5,083
Issuance of common stock upon vesting of restricted stock units ("RSUs")	688	—		—		—		—		—		—

Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		39,750		—		—		—		39,750
Taxes withheld related to net share settlement of equity awards	—	—		(16,200)		—		—		—		(16,200)
Repurchases of common stock	—	—		—		(50,000)		—		—		(50,000)
Retirement of common stock	(1,707)	—		—		53,138		—		(53,138)		—
Other comprehensive loss	—	—		—		—		(4,967)		—		(4,967)
Net income	—	—		—		—		—		9,108		9,108
Balance as of September 30, 2022	70,399	$	—	$	1,615,970	$	—	$	(20,624)	$	(893,968)	$	701,378

Balance as of June 30, 2023	69,287	$	—	$	1,732,909	$	(159)	$	(13,876)	$	(1,010,272)	$	708,602
Issuance of common stock upon exercises of employee stock options	69	—		2,426		—		—		—		2,426
Issuance of common stock upon vesting of RSUs	821	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	2	—		65		—		—		—		65
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		44,826		—		—		—		44,826
Taxes withheld related to net share settlement of equity awards	—	—		(23,052)		—		—		—		(23,052)
Repurchases of common stock	—	—		—		(50,107)		—		—		(50,107)
Retirement of common stock	(1,217)	—		—		49,999		—		(49,999)		—
Other comprehensive loss	—	—		—		—		(1,402)		—		(1,402)
Net income	—	—		—		—		—		58,216		58,216
Balance as of September 30, 2023	68,962	$	—	$	1,757,174	$	(267)	$	(15,278)	$	(1,002,055)	$	739,574

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

(In thousands)

(Unaudited)



	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance as of December 31, 2021	72,171	$	—	$	1,522,572	$	—	$	(11,090)	$	(760,164)	$	751,318

Issuance of common stock upon exercises of employee stock options	280	—		7,022		—		—		—		7,022
Issuance of common stock upon vesting of RSUs	2,223	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	364	—		9,110		—		—		—		9,110
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		125,741		—		—		—		125,741
Taxes withheld related to net share settlement of equity awards	—	—		(48,475)		—		—		—		(48,475)
Repurchases of common stock	—	—		—		(150,006)		—		—		(150,006)
Retirement of common stock	(4,639)	—		—		150,006		—		(150,006)		—
Other comprehensive loss	—	—		—		—		(9,534)		—		(9,534)
Net income	—	—		—		—		—		16,202		16,202
Balance as of September 30, 2022	70,399	$	—	$	1,615,970	$	—	$	(20,624)	$	(893,968)	$	701,378

Balance as of December 31, 2022	69,797	$	—	$	1,649,692	$	—	$	(15,545)	$	(923,823)	$	710,324
Issuance of common stock upon exercises of employee stock options	785	—		17,975		—		—		—		17,975
Issuance of common stock upon vesting of RSUs	2,479	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	382	—		10,977		—		—		—		10,977
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		139,988		—		—		—		139,988
Taxes withheld related to net share settlement of equity awards	—	—		(61,458)		—		—		—		(61,458)
Repurchases of common stock	—	—		—		(150,266)		—		—		(150,266)
Retirement of common stock	(4,481)	—		—		149,999		—		(149,999)		—
Other comprehensive income	—	—		—		—		267		—		267
Net income	—	—		—		—		—		71,767		71,767
Balance as of September 30, 2023	68,962	$	—	$	1,757,174	$	(267)	$	(15,278)	$	(1,002,055)	$	739,574

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Operating Activities
Net income	$	71,767	$	16,202
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	31,881		34,165
Provision for doubtful accounts	26,664		18,249
Stock-based compensation	133,304		119,753
Amortization of right-of-use assets	22,848		24,962
Deferred income taxes	(8,845)		(41,162)
Amortization of deferred contract cost	17,818		13,477
Asset impairment	3,555		10,464
Other adjustments, net	(229)		1,291
Changes in operating assets and liabilities:
Accounts receivable	(54,395)		(38,130)
Prepaid expenses and other assets	3,101		(39,920)
Operating lease liabilities	(30,255)		(29,928)
Accounts payable, accrued liabilities and other liabilities	9,896		58,413
Net cash provided by operating activities	227,110		147,836
Investing Activities
Purchases of marketable securities — available-for-sale	(115,388)		(92,895)
Sales and maturities of marketable securities — available-for-sale	89,613		1,649



Purchases of property, equipment and software	(20,850)		(20,104)
Other investing activities	160		43
Net cash used in investing activities	(46,465)		(111,307)
Financing Activities
Proceeds from issuance of common stock for employee stock-based plans	28,958		16,143
Taxes paid related to the net share settlement of equity awards	(61,142)		(48,161)
Repurchases of common stock	(149,999)		(150,006)
Payment of issuance costs for credit facility	(1,049)		—
Net cash used in financing activities	(183,232)		(182,024)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	903		(3,030)
Change in cash, cash equivalents and restricted cash	(1,684)		(148,525)
Cash, cash equivalents and restricted cash — Beginning of period	307,138		480,641
Cash, cash equivalents and restricted cash — End of period	$	305,454	$	332,116
Supplemental Disclosures of Other Cash Flow Information
Cash paid for income taxes, net	$	8,800	$	40,129
Supplemental Disclosures of Noncash Investing and Financing Activities
Purchases of property, equipment and software recorded in accounts payable and accrued liabilities	$	1,064	$	6,461


Repurchases of common stock recorded in accounts payable and accrued liabilities	$	2,677	$	2,378

See Notes to Condensed Consolidated Financial Statements.

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YELP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS FOR PRESENTATION

Yelp Inc. was incorporated in Delaware on September 3, 2004. Except where specifically noted or the context otherwise requires, the use of terms such as the "Company" and "Yelp" in these Notes to Condensed Consolidated Financial Statements refers to Yelp Inc. and its subsidiaries.

Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust Yelp for its extensive ratings and reviews of businesses across a broad range of categories, while businesses advertise on Yelp to reach its large audience of purchase-oriented and generally affluent consumers. Yelp has operations in the United States, United Kingdom, Canada, Ireland and Germany.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Annual Report.

The unaudited condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP, including certain notes to the financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments of a normally recurring nature necessary for the fair presentation of the interim periods presented.

Principles of Consolidation

These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of the Company’s unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. Items that require estimates, judgments or assumptions include, but are not limited to, determining variable consideration and identifying the nature and timing of satisfaction of performance obligations, allowance for doubtful accounts and credit losses, fair value and estimated useful lives of long- and indefinite-lived assets, litigation loss contingencies, liabilities related to incurred but not reported insurance claims, fair value and achievement of targets for performance-based restricted stock units (“PRSUs”) and income taxes. These estimates, judgments and assumptions are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates due to macroeconomic uncertainty and other factors.

Significant Accounting Policies

There have been no material changes to the Company's significant accounting policies from those described in the Annual Report.

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2. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash, cash equivalents and restricted cash as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Cash	$	96,050	$	56,304
Cash equivalents	209,053		250,075
Total cash and cash equivalents	$	305,103	$	306,379
Restricted cash	351		759
Total cash, cash equivalents and restricted cash	$	305,454	$	307,138

Restricted cash is included in other non-current assets on the Company’s condensed consolidated balance sheets.

3. MARKETABLE SECURITIES

Short-term investments and certain cash equivalents consist of investments in debt securities that are classified as available-for-sale. The amortized cost, gross unrealized gains and losses and fair value of investments as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Cash equivalents:
U.S. government securities	$	4,864	$	1	$	—	$	4,865
Total cash equivalents	4,864		1		—		4,865
Short-term marketable securities:
Certificates of deposit	3,751		—		—		3,751
Commercial paper	1,058		—		—		1,058
Corporate bonds	22,871		7		(217)		22,661
Agency bonds	17,174		2		(48)		17,128
U.S. government securities	77,490		2		(622)		76,870
Total short-term marketable securities	122,344		11		(887)		121,468





Total	$	127,208	$	12	$	(887)	$	126,333

	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Cash equivalents:
Commercial paper	$	2,524	$	—	$	—	$	2,524
Total cash equivalents	2,524		—		—		2,524
Short-term marketable securities:
Certificates of deposit	10,651		—		—		10,651
Commercial paper	13,054		—		—		13,054
Corporate bonds	32,701		3		(353)		32,351
Agency bonds	3,010		—		(11)		2,999
U.S. government securities	35,479		8		(298)		35,189
Total short-term marketable securities	94,895		11		(662)		94,244



Total	$	97,419	$	11	$	(662)	$	96,768

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The following tables present gross unrealized losses and fair values for those securities that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, aggregated by investment category and the length of time that the individual securities have been in a continuous loss position (in thousands):


	September 30, 2023
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss


Corporate bonds	$	6,134	$	(52)	$	13,227	$	(165)	$	19,361	$	(217)
Agency bonds	14,333		(48)		—		—		14,333		(48)
U.S. government securities	55,871		(461)		13,696		(161)		69,567		(622)
Total	$	76,338	$	(561)	$	26,923	$	(326)	$	103,261	$	(887)

	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss


Corporate bonds	$	29,428	$	(353)	$	—	$	—	$	29,428	$	(353)
Agency bonds	2,999		(11)		—		—		2,999		(11)
U.S. government securities	27,368		(298)		—		—		27,368		(298)
Total	$	59,795	$	(662)	$	—	$	—	$	59,795	$	(662)

As of September 30, 2023 and December 31, 2022, the Company did not recognize any credit loss related to available-for-sale marketable securities.

The contractual maturities for marketable securities classified as available-for-sale as of September 30, 2023 were as follows (in thousands):


	Amortized Cost		Fair Value
Due in one year or less	$	72,005	$	71,593
Due in one to five years	55,203		54,740
Total	$	127,208	$	126,333

4. FAIR VALUE MEASUREMENTS

The Company’s investments in money market accounts are recorded as cash equivalents at fair value on the condensed consolidated balance sheets. Additionally, the Company carries its available-for-sale debt securities at fair value. See Note 3, "Marketable Securities," for further details.

The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value in the following hierarchy:

Level 1—Observable inputs, such as quoted prices in active markets,

Level 2—Inputs other than quoted prices in active markets that are observable either directly or indirectly, or

Level 3—Unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions.

This hierarchy requires the Company to use observable market data, when available, to minimize the use of unobservable inputs when determining fair value. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets. The Company's certificates of deposit, commercial paper, corporate bonds, agency bonds and U.S. government securities are classified within Level 2 of the fair value hierarchy because they have been valued using inputs other than quoted prices in active markets that are observable directly or indirectly.

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The following table represents the fair value of the Company’s financial instruments, including those measured at fair value on a recurring basis, as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023								December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	178,473	$	—	$	—	$	178,473	$	247,551	$	—	$	—	$	247,551

U.S. government securities	—		4,865		—		4,865		—		—		—		—
Commercial paper	—		—		—		—		—		2,524		—		2,524
Marketable securities:
Certificates of deposit	—		3,751		—		3,751		—		10,651		—		10,651
Commercial paper	—		1,058		—		1,058		—		13,054		—		13,054
Corporate bonds	—		22,661		—		22,661		—		32,351		—		32,351
Agency bonds	—		17,128		—		17,128		—		2,999		—		2,999
U.S. government securities	—		76,870		—		76,870		—		35,189		—		35,189
Other investments:
Certificates of deposit	—		10,000		—		10,000		—		10,000		—		10,000
Total cash equivalents, marketable securities and other investments	$	178,473	$	136,333	$	—	$	314,806	$	247,551	$	106,768	$	—	$	354,319

The certificates of deposit that are categorized as other investments are reflected in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.

The Company's long- and indefinite-lived assets, such as property, equipment and software, goodwill, other intangible assets and right-of-use ("ROU") assets, are measured at fair value on a non-recurring basis if the assets are determined to be impaired. The Company recognized impairment charges related to the write off of ROU assets and leasehold improvements associated with certain of its office space that it abandoned and subleased during the nine months ended September 30, 2023 and 2022, respectively, based on the Company's determination that the fair values of these impaired assets were zero. See Note 8, "Leases," for further details.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Prepaid expenses	$	15,846	$	14,632
Certificates of deposit	10,000		10,000
Non-trade receivables(1)	4,566		31,338
Other current assets	9,323		7,497
Total prepaid expenses and other current assets	$	39,735	$	63,467

(1) The decrease in non-trade receivables during the nine months ended September 30, 2023 was primarily due to the release of the remaining receivable for loss recovery related to the litigation described under "Legal Proceedings—Securities Class Action and Derivative Action" in Note 12, "Commitments and Contingencies ."

As of September 30, 2023, other current assets primarily consisted of deferred costs related to unsettled share repurchases and subleases as well as short-term deposits and income taxes receivable.

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6. PROPERTY, EQUIPMENT AND SOFTWARE, NET

Property, equipment and software, net as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Capitalized website and internal-use software development costs	$	251,774	$	229,638
Leasehold improvements(1)	57,707		60,407
Computer equipment	48,751		50,920
Furniture and fixtures	10,358		11,627
Telecommunication	4,171		4,930
Software	1,113		1,702
Total	373,874		359,224
Less accumulated depreciation and amortization(1)	(301,501)		(282,000)
Property, equipment and software, net	$	72,373	$	77,224

(1) Leasehold improvements, net was reduced to reflect an impairment of $1.0 million recorded during the nine months ended September 30, 2023 as a result of the Company's abandonment of certain office space. For more information, see Note 8, "Leases."

Depreciation and amortization expense related to property, equipment and software was $10.2 million and $11.0 million for the three months ended September 30, 2023 and 2022, respectively, and $30.9 million and $32.8 million for the nine months ended September 30, 2023 and 2022, respectively.

7. GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill is the result of its acquisitions of other businesses and represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. The Company performed its annual goodwill impairment analysis as of August 31, 2023 and concluded that goodwill was not impaired, as the fair value of the reporting unit exceeded its carrying value. Additionally, no triggering events were identified as of September 30, 2023 or December 31, 2022 that would more likely than not reduce the fair value of goodwill below its carrying value.

The changes in carrying amount of goodwill during the nine months ended September 30, 2023 were as follows (in thousands):


Balance as of December 31, 2022	$	102,328
Effect of currency translation	(401)
Balance as of September 30, 2023	$	101,927

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Intangible assets that were not fully amortized as of September 30, 2023 and December 31, 2022 consisted of the following (dollars in thousands):


	September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Life
Business relationships	$	9,918	$	(6,081)	$	3,837	5.4 years

Licensing agreements	6,129		(1,989)		4,140		6.4 years

Domains and data licenses	2,869		(2,869)		—		0.0 years


Total	$	18,916	$	(10,939)	$	7,977


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Life
Business relationships	$	9,918	$	(5,550)	$	4,368	6.2 years

Licensing agreements	6,129		(1,505)		4,624		7.2 years

Domain and data licenses	2,869		(2,864)		5		0.5 years


Total	$	18,916	$	(9,919)	$	8,997

Amortization expense related to intangible assets was $0.3 million for each of the three months ended September 30, 2023 and 2022, and $1.0 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, estimated future amortization expense was as follows (in thousands):



Remainder of 2023	$	339
2024	1,353
2025	1,353
2026	1,353
2027	1,353
2028	1,353
Thereafter	873
Total amortization	$	7,977

8. LEASES

The components of lease cost, net for the three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	8,501	$	10,008	$	27,254	$	31,174
Short-term lease cost (12 months or less)	95		291		298		815
Sublease income	(3,403)		(3,195)		(10,197)		(8,749)
Total lease cost, net	$	5,193	$	7,104	$	17,355	$	23,240

The Company's leases and subleases do not include any variable lease payments, residual value guarantees, related-party leases, or restrictions or covenants that would limit or prevent the Company from exercising its right to obtain substantially all of the economic benefits from use of the respective assets during the lease term.

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Supplemental cash flow information related to leases for the nine months ended September 30, 2023 and 2022 was as follows (in thousands):


	Nine Months Ended September 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	34,723	$	39,148

As of September 30, 2023, maturities of lease liabilities were as follows (in thousands):



Remainder of 2023	$	10,670
2024	42,638
2025	22,103
2026	7,165
2027	6,353
2028	6,491
Thereafter	9,620
Total minimum lease payments	105,040
Less imputed interest	(8,780)
Present value of lease liabilities	$	96,260

As of September 30, 2023 and December 31, 2022, the weighted-average remaining lease term and weighted-average discount rate were as follows:


	September 30, 2023		December 31, 2022
Weighted-average remaining lease term (years) — operating leases	3.8		4.1
Weighted-average discount rate — operating leases	5.2	%	5.3	%

The Company abandoned certain office space in San Francisco during the nine months ended September 30, 2023 and entered into a sublease agreement for a portion of its office space in New York during the nine months ended September 30, 2022. The Company evaluated the associated ROU assets and leasehold improvements for impairment as a result of the abandonment and sublease in accordance with Accounting Standards Codification Topic 360, “Property, Plant, and Equipment,” because the change in circumstances indicated that the carrying amount of such assets may not be recoverable. The Company compared the carrying value of the impacted assets to the fair value to determine the impairment amount and recognized impairment charges of $3.6 million and $10.5 million during the nine months ended September 30, 2023 and 2022, respectively, which are included in general and administrative expenses on its condensed consolidated statement of operations. The impairment charge during the nine months ended September 30, 2023 reduced the carrying amount of the ROU asset and leasehold improvements by $2.6 million and $1.0 million, respectively. The impairment charge during the nine months ended September 30, 2022 reduced the carrying amount of the ROU asset and leasehold improvements by $9.0 million and $1.5 million, respectively. For more information on the fair values of the ROU asset and leasehold improvements used in the impairment analysis, see Note 4, "Fair Value Measurements."

9. OTHER NON-CURRENT ASSETS

Other non-current assets as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Deferred tax assets	$	106,290	$	97,426
Deferred contract costs	28,651		25,946
Other non-current assets	12,063		10,617
Total other non-current assets	$	147,004	$	133,989

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10. CONTRACT BALANCES

The changes in the allowance for doubtful accounts during the nine months ended September 30, 2023 and 2022 were as follows (in thousands):


	Nine Months Ended September 30,
	2023		2022
Balance, beginning of period	$	9,277	$	7,153
Add: provision for doubtful accounts	26,664		18,249
Less: write-offs, net of recoveries	(25,052)		(16,663)
Balance, end of period	$	10,889	$	8,739

In calculating the allowance for doubtful accounts as of September 30, 2023 and 2022, the Company considered expectations of probable credit losses, including those associated with the COVID-19 pandemic for the 2022 period, based on observed trends in cancellations, observed changes in the credit risk of specific customers, the impact of anticipated closures and bankruptcies using forecasted economic indicators in addition to historical experience and loss patterns during periods of macroeconomic uncertainty. The increases in the provision for doubtful accounts and write-offs, net of recoveries in the nine months ended September 30, 2023 as compared to the prior-year period were a result of the ordinary course of business, reflecting the increase in net revenue as well as higher aggregate customer delinquencies.

Contract liabilities consist of deferred revenue, which is recorded on the condensed consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.

The changes in deferred revenue during the nine months ended September 30, 2023 were as follows (in thousands):


	Nine Months Ended September 30, 2023
Balance, beginning of period	$	5,200
Less: recognition of deferred revenue from beginning balance	(4,723)
Add: net increase in current period contract liabilities	6,587
Balance, end of period	$	7,064

The majority of the Company's deferred revenue balance as of September 30, 2023 is classified as short-term and is expected to be recognized as revenue in the subsequent three-month period ending December 31, 2023. An immaterial amount of long-term deferred revenue is included in other long-term liabilities as of September 30, 2023. No other contract assets or liabilities were recorded on the Company's condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Accounts payable	$	6,673	$	14,525
Employee-related liabilities	91,750		66,929


Accrued cost of revenue	9,346		6,248

Accrued legal settlements	15,000		26,250
Other accrued liabilities	21,120		23,998
Total accounts payable and accrued liabilities	$	143,889	$	137,950

As of September 30, 2023, other accrued liabilities primarily consisted of accrued operating expenses, income taxes payable and unsettled share repurchases.

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12. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Securities Class Action and Derivative Action

On January 18, 2018, a putative class action lawsuit alleging violations of the federal securities laws was filed in the U.S. District Court for the Northern District of California (the "Court"), naming as defendants the Company and certain of its officers (the “Securities Class Action”). Following the Court's approval of a stipulation to certify a class and denial of the defendants’ motion for summary judgment, the defendants reached an agreement with the plaintiff to settle this matter for $22.25 million. The proposed settlement was subsequently filed with the Court, which preliminarily approved it on July 25, 2022. The settlement was then funded by defendants' insurers during the three months ended September 30, 2022. The Court entered an order granting final approval to the settlement on January 27, 2023 and, on the same day, entered judgment in the Securities Class Action. The settlement resolved all claims asserted against all defendants in the Securities Class Action without any liability or wrongdoing attributed to them.

On August 26, 2022, the Court granted final approval of the settlement of a stockholder derivative action (the “Derivative Action”) asserting claims against certain current and former officers, and naming the Company as a nominal defendant, which arose out of the same facts as the Securities Class Action and was pending before the Court. The settlement resolved all claims asserted against all defendants in the Derivative Action without any liability or wrongdoing attributed to them personally or to the Company. Under the terms of the settlement, the Company’s board of directors adopted certain corporate governance modifications and the Company received $18.0 million of insurance proceeds. The Company paid $3.75 million of such insurance proceeds to the plaintiff’s attorneys as fees. The remaining insurance proceeds partially funded the Securities Class Action settlement.

In 2021, the Company recorded an accrual for loss contingency within accounts payable and accrued liabilities in the aggregate amount of $26.0 million, which represented the total settlement amount for both the Securities Class Action and the Derivative Action, as well as a $26.0 million receivable for loss recovery within prepaid expenses and other current assets for the anticipated insurance proceeds related to these settlements. As of December 31, 2022, following payment to the plaintiff's attorneys in the Derivative Action, the Company had $22.25 million remaining for the settlement of the Securities Class Action on its condensed consolidated balance sheets for the loss contingency accrual and loss recovery receivable. In January 2023, the Company released the remaining receivable and accrual upon the Court granting final approval of these settlements.

CIPA Action

On October 12, 2016, a putative class action lawsuit asserting claims under the California Invasion of Privacy Act was filed against the Company (the "CIPA Action") in the Superior Court of California for the County of San Francisco (the "Superior Court"), in which the plaintiff sought statutory damages and other relief based on alleged unlawful call recording. The Company filed a motion for summary judgment on the basis that it had never recorded the plaintiff, which the Superior Court granted. The plaintiff appealed and, in October 2020, the California Court of Appeal for the First District (the "Court of Appeal") reversed the decision of the Superior Court, holding that the recording of only the Company's consenting sales representatives could violate CIPA, even if the plaintiff was not recorded. The California Supreme Court subsequently denied review of the Court of Appeal's decision and the case was remanded to the Superior Court. On January 18, 2023, the Superior Court granted the plaintiffs’ motion for class certification. In February 2023, the Company filed a petition for a writ with the Court of Appeal seeking reversal of the Superior Court’s class certification decision. The Court of Appeal summarily denied the writ petition on May 25, 2023, following which the Company filed a petition with the California Supreme Court on June 2, 2023 seeking an order directing the Court of Appeal to review the merits of the Company's writ petition. On July 17, 2023, the Company reached a preliminary agreement with the plaintiffs to settle the CIPA Action for $15.0 million, which payment the Company expects to be partially funded by insurance proceeds. The settlement would resolve all claims asserted against the Company in the CIPA Action without any liability or wrongdoing attributed to it. The parties have executed a settlement agreement, which the plaintiff has presented to the Superior Court for approval. A hearing regarding the preliminary approval of the settlement is scheduled for December 21, 2023.

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The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies, which it will accrue when it believes a loss is probable and the amount can be reasonably estimated. Although the settlement agreement for the CIPA Action remain subject to court approval, the Company believes the loss is probable and the payment amount of $15.0 million represents a reasonable estimate of loss contingency as of September 30, 2023. The Company had previously recorded a $4.0 million accrual for loss contingency related to the CIPA Action as of December 31, 2022, and recorded an additional accrual of $11.0 million during the three months ended June 30, 2023, resulting in a $15.0 million accrual for loss contingency within accounts payable and accrued liabilities on the Company's condensed consolidated balance sheet as of September 30, 2023. The Company also believes that anticipated insurance proceeds of $3.9 million are probable and represent a reasonable estimate for loss recovery as of September 30, 2023. The Company had previously reflected a $3.3 million receivable for loss recovery as of June 30, 2023, and recorded an additional receivable of $0.6 million for legal fee reimbursements during the three months ended September 30, 2023, resulting in a $3.9 million receivable for loss recovery within prepaid expenses and other current assets on the Company's condensed consolidated balance sheet as of September 30, 2023.

Other Legal Proceedings

The Company is subject to other legal proceedings arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently does not believe that the final outcome of any of these other matters will have a material effect on the Company’s business, financial position, results of operations or cash flows.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

While the outcome of claims cannot be predicted with certainty, the Company does not believe that the outcome of any claims under the indemnification arrangements will have a material effect on the Company’s business, financial position, results of operations or cash flows.

Revolving Credit Facility

On April 28, 2023, the Company entered into a Revolving Credit and Guaranty Agreement with certain lenders and JPMorgan Chase Bank, N.A., as administrative and collateral agent, which provides for a five-year $125.0 million senior secured revolving credit facility (the "2023 credit facility"). The 2023 credit facility replaced the Company’s previous $75.0 million revolving credit facility entered into on May 5, 2020 with Wells Fargo Bank, N.A. (the “2020 credit facility”), which terminated concurrently with the establishment of the 2023 credit facility. The 2023 credit facility includes a letter of credit sub-limit of $25.0 million, a bilateral letter of credit facility of $25.0 million and an accordion option, which, if exercised, would allow the Company to increase the aggregate commitments by up to $250.0 million, plus additional amounts if the Company is able to satisfy a leverage test, subject to certain conditions. The commitments under the 2023 credit facility expire on April 28, 2028.

Loans under the 2023 credit facility bear interest, at the Company’s election, at either (a) an adjusted term Secured Overnight Financing Rate plus 0.10% plus a margin of 1.25% - 1.50%, depending on the Company’s total leverage ratio, or (b) an alternative base rate plus a margin of 0.25% - 0.50%, depending on the Company’s total leverage ratio. The Company is required to pay a commitment fee on the undrawn portion of the aggregate commitments that accrues at 0.20% - 0.25% per annum, depending on the Company’s total leverage ratio, as well as a letter of credit fee on any outstanding letters of credit that accrues at 1.25% - 1.50% per annum, depending on the Company’s total leverage ratio.

The 2023 credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict the Company’s ability to incur indebtedness, grant liens, make distributions, pay dividends, repurchase shares, make investments, or engage in transactions with the Company’s affiliates, in each case subject to certain exceptions. The 2023 credit facility also requires the Company to maintain a total leverage ratio of no greater than 3.75 to 1.00, subject to an increase up to 4.25 to 1.00 for a certain period following significant acquisitions, and an interest coverage ratio of no less than 3.00 to 1.00. The obligations under the 2023 credit facility are secured by liens on substantially all of the Company’s domestic assets,

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including certain domestic intellectual property assets and the equity of its domestic subsidiaries, as well as a portion of the equity interests the Company holds directly in its foreign subsidiaries.

As of September 30, 2023, the Company had $14.1 million of letters of credit outstanding under the 2023 credit facility sub-limit, which were moved from the 2020 credit facility. The letters of credit are primarily related to lease agreements for certain office locations and are required to be maintained and issued to the landlords of each facility. No loans were outstanding under the 2023 credit facility and the Company was in compliance with all conditions and covenants thereunder as of September 30, 2023.

13. STOCKHOLDERS’ EQUITY

The following table presents the number of shares authorized and issued as of the dates indicated (in thousands):


	September 30, 2023		December 31, 2022
	Shares Authorized	Shares Issued	Shares Authorized	Shares Issued
Stockholders’ equity:
Common stock, $0.000001 par value	200,000	68,962	200,000	69,797
Undesignated preferred stock	10,000	—	10,000	—

Stock Repurchase Program

As of September 30, 2023, the Company's board of directors had authorized it to repurchase up to an aggregate of $1.45 billion of its outstanding common stock, $131.7 million of which remained available as of September 30, 2023. The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions or a combination of the foregoing.

During the nine months ended September 30, 2023, the Company repurchased on the open market and subsequently retired 4,481,278 shares for an aggregate purchase price of $150.0 million. Although no shares were held in treasury stock as of September 30, 2023, an immaterial balance that remained was comprised of excise tax under the Inflation Reduction Act of 2022 on stock repurchases, net of shares issued, during the nine-month period. The Company expects to pay the excise tax in early 2024.

During the nine months ended September 30, 2022, the Company repurchased on the open market and subsequently retired 4,639,373 shares for an aggregate purchase price of $150.0 million. The Company had no treasury stock balance as of September 30, 2022.

Equity Incentive Plans

Stock Options

Stock options are granted at a price per share not less than the fair value of a share of the Company’s common stock on the grant date. Options generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining shares vesting monthly thereafter or (b) ratably on a monthly basis. Options granted are generally exercisable for contractual terms of up to 10 years. The Company issues new shares when stock options are exercised.

A summary of stock option activity for the nine months ended September 30, 2023 is as follows:


	Number of Shares (in thousands)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	3,543	$	32.81	3.6	$	7,507

Exercised	(785)	22.90
Canceled	(139)	44.28
Outstanding at September 30, 2023	2,619	$	35.17	3.8	$	20,466
Options vested and exercisable at September 30, 2023	2,567	$	35.16	3.7	$	20,144

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Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock as quoted on the New York Stock Exchange on a given date and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $0.6 million and $2.1 million for the three months ended September 30, 2023 and 2022, respectively, and $6.1 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively.

There were no options granted during the nine months ended September 30, 2023. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 was $16.07 per share.

As of September 30, 2023, total unrecognized compensation costs related to nonvested stock options were approximately $0.8 million, which the Company expects to recognize over a weighted-average time period of 1.5 years.

RSUs

RSUs generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining vesting quarterly or annually thereafter or (b) ratably on a quarterly basis.

RSUs also include PRSUs, which are subject to either (a) a market condition or (b) the achievement of performance goals. PRSUs may also be subject to a time-based vesting schedule of quarterly over four years (the "Time-Based Vesting Schedule"). For PRSUs subject to a market condition, the Company recognizes expense from the date of grant. For PRSUs subject to performance goals, the Company recognizes expense when it is probable that the performance condition will be achieved.

The Company granted PRSUs subject to market conditions in 2022 and 2023. The shares underlying each of these PRSU awards vest based on the relative performance of the Company's total stockholder return ("TSR") over a three-year period. A percentage of the target number of shares underlying each award, ranging from zero to 200%, will vest based on the percentile rank of the Company's TSR relative to that of the other companies in the Russell 2000 Index over the period beginning January 1st of the year of grant and ending three years later (the "Performance Period"). The Company’s TSR, as well as the TSR of the other companies in the Russell 2000 Index, will be calculated based on the average closing price of each company's stock over the last 20 trading days of the Performance Period compared to the average closing price over the first 20 trading days of the Performance Period. Any shares that become eligible to vest based on the Company's level of achievement of the market goal will fully vest on or following certification of the Company's performance on February 20, 2025 and 2026, respectively, or, if certification occurs following such date, March 15, 2025 and 2026, respectively, for the 2022 and 2023 grants, subject to the applicable employee's continued service as of such vesting dates.

For PRSUs subject to performance goals, a percentage of the target number of shares, ranging from zero to 200%, will become eligible to vest based on the Company's level of achievement of certain financial targets, subject to the Time-Based Vesting Schedule. The shares subject to performance goals become eligible to vest once the achievement against the financial targets is known, which will be no later than March of the year following the year in which the PRSUs are granted. On the quarterly vest date immediately following such determination (or a vest date otherwise specified in the agreement), the eligible shares, if any, will vest to the extent that the employee has met the Time-Based Vesting Schedule as of such date. Thereafter, the eligible shares will continue to vest in accordance with the Time-Based Vesting Schedule, subject to the applicable employee's continued service as of each such vesting date. The Company performed an analysis as of September 30, 2023 to assess the probability of achievement of the PRSU financial targets and, as a result, recorded compensation costs in the three and nine months ended September 30, 2023 for the PRSUs that it expected to vest.

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As the PRSU activity during the nine months ended September 30, 2023 was not material, it is presented together with the RSU activity in the table below. A summary of RSU and PRSU activity for the nine months ended September 30, 2023 is as follows (in thousands, except per share amounts):


	Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2022	9,962	$	33.48
Granted	6,651	30.26
Vested(1)	(4,256)	31.70
Canceled	(962)	32.11
Nonvested at September 30, 2023(2)	11,395	$	32.39

(1) Includes 1,773,410 shares that vested but were not issued due to the Company's use of net share withholding for payment of employee taxes.

(2) Includes 822,473 PRSUs.

The aggregate fair value as of the vest date of RSUs and PRSUs that vested during the nine months ended September 30, 2023 and 2022 was $147.9 million and $122.2 million, respectively. As of September 30, 2023, the Company had approximately $342.7 million of unrecognized stock-based compensation expense related to RSUs and PRSUs, which it expects to recognize over the remaining weighted-average vesting period of approximately 2.4 years.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan ("ESPP") allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations, during designated six-month offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of the offering period, based on the closing sales price of the Company's common stock as quoted on the New York Stock Exchange on such date.

There were 2,295 and 382,627 shares purchased by employees under the ESPP at a weighted-average purchase price per share of $28.48 and $28.69 during the three and nine months ended September 30, 2023, respectively. There were 364,436 shares purchased by employees under the ESPP at a weighted-average purchase price per share of $25.00 during the nine months ended September 30, 2022, and no shares were purchased during the three-month period. The Company recognized stock-based compensation expense related to the ESPP of $0.9 million and $0.8 million during the three months ended September 30, 2023 and 2022, respectively. The Company recognized stock-based compensation expense related to the ESPP of $2.7 million and $2.3 million during the nine months ended September 30, 2023 and 2022, respectively.

Stock-Based Compensation

The following table summarizes the effects of stock-based compensation expense related to stock-based awards in the condensed consolidated statements of operations during the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of revenue	$	1,298	$	1,148	$	4,026	$	3,701
Sales and marketing	9,200		8,606		26,921		25,461
Product development	24,047		21,352		74,888		66,781
General and administrative	8,922		7,526		27,469		23,810
Total stock-based compensation recorded to income before income taxes	43,467		38,632		133,304		119,753
Benefit from income taxes	(9,023)		(8,489)		(27,898)		(26,446)
Total stock-based compensation recorded to net income attributable to common stockholders	$	34,444	$	30,143	$	105,406	$	93,307

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The Company capitalized $2.2 million and $1.9 million of stock-based compensation expense as website development costs and, to a lesser extent, implementation costs incurred related to cloud computing arrangements that are service contracts in the three months ended September 30, 2023 and 2022, respectively, and $7.5 million and $6.7 million in the nine months ended September 30, 2023 and 2022, respectively.

14. OTHER INCOME, NET

Other income, net for the three and nine months ended September 30, 2023 and 2022 consisted of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest income, net	$	5,187	$	2,007	$	13,850	$	2,558
Transaction loss on foreign exchange, net	(100)		(213)		(69)		(236)
Other non-operating income, net	1,067		897		3,483		2,625
Other income, net	$	6,154	$	2,691	$	17,264	$	4,947

15. INCOME TAXES

The Company is subject to income taxes in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income taxes. The benefit from income taxes for the nine months ended September 30, 2023 was $0.5 million, which was due to $20.1 million of net discrete tax benefit primarily related to: the 2022 federal and state tax provision to return adjustments, which mainly resulted from the release of Internal Revenue Service guidance related to the requirement to capitalize and amortize certain research and development expenses under the U.S. Tax Cuts and Jobs Act; a one-time litigation settlement loss contingency in connection with the agreement to settle the CIPA Action; and the tax benefit related to stock-based compensation. These tax benefits were partially offset by $19.6 million of U.S. federal, state and foreign income tax expense. The provision for income taxes for the nine months ended September 30, 2022 was $13.7 million, which was due to $13.7 million of U.S. federal, state and foreign income tax expense.

Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, excluding unusual or infrequently occurring discrete items, for the reporting period. For the three and nine months ended September 30, 2023, the difference between the effective tax rate and the federal statutory tax rate primarily related to tax credits, offset by stock-based compensation. For the three and nine months ended September 30, 2022, the difference between the effective tax rate and the federal statutory tax rate primarily related to stock-based compensation and the inclusion of global intangible low-taxed income, offset by tax credits.

As of September 30, 2023, the Company had $33.6 million of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate. In the three and nine months ended September 30, 2023, the Company recorded an immaterial amount of interest and penalties.

As of September 30, 2023, the Company estimated that it had accumulated undistributed earnings generated by its foreign subsidiaries of approximately $23.3 million. Any taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of the Company's foreign investments would generally be limited to foreign and state taxes. The Company has not recognized a deferred tax liability related to unremitted foreign earnings, as it intends to indefinitely reinvest these earnings, and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs.

In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company’s federal and state income tax returns for tax years subsequent to 2003 remain open to examination. In the Company’s foreign jurisdictions — Canada, Germany, Ireland and the United Kingdom — the tax years subsequent to 2017 remain open to examination. The Company regularly assesses the likelihood of adverse outcomes resulting from examinations to determine the adequacy of its provision for income taxes and monitors the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. As of September 30, 2023, although the timing of the resolution

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or closure of audits is not certain, the Company believes it is reasonably possible that unrecognized tax benefits will not be reduced within the next 12 months.

16. NET INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

Basic net income (loss) per share attributable to common stockholders is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted net income (loss) per share attributable to common stockholders is computed using the weighted-average number of outstanding shares of common stock and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options, RSUs (including PRSUs) and, to a lesser extent, ESPP shares. If dilutive, such potentially dilutive securities are reflected in net income (loss) per share attributable to common stockholders using the treasury stock method.

The following tables present the calculation of basic and diluted net income per share attributable to common stockholders for the periods presented (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Basic net income per share:
Net income attributable to common stockholders	$	58,216	$	9,108	$	71,767	$	16,202
Shares used in computation:
Weighted-average common shares outstanding	69,030		70,630		69,366		71,158
Basic net income per share attributable to common stockholders:	$	0.84	$	0.13	$	1.03	$	0.23


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Diluted net income per share:
Net income attributable to common stockholders	$	58,216	$	9,108	$	71,767	$	16,202
Shares used in computation:
Weighted-average common shares outstanding	69,030		70,630		69,366		71,158
Stock options	501		472		246		494
RSUs	3,899		1,398		3,259		1,868
ESPP	136		158		49		57
Number of shares used in diluted calculation	73,566		72,658		72,920		73,577
Diluted net income per share attributable to common stockholders:	$	0.79	$	0.13	$	0.98	$	0.22

The following stock-based instruments were excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	761	2,354	1,319	2,415
RSUs	26	5,674	364	1,649

17. INFORMATION ABOUT REVENUE AND GEOGRAPHIC AREAS

The Company considers operating segments to be components of the Company for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the chief executive officer. The chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by product line and geographic region for purposes of allocating resources and evaluating financial performance.

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The Company has determined that it has a single operating and reporting segment. When the Company communicates results externally, it disaggregates net revenue into major product lines and primary geographical markets, which is based on the billing address of the customer. The disaggregation of net revenue by major product lines is based on the type of service provided and also aligns with the timing of revenue recognition for each. To reflect the Company's strategic focus on creating differentiated experiences for its Services categories and Restaurants, Retail & Other categories, the Company further disaggregates advertising revenue to reflect these two high-level category groupings. The Services categories consist of the following businesses: home, local, auto, professional, pets, events, real estate and financial services. The Restaurants, Retail & Other categories consist of the following businesses: restaurants, shopping, beauty & fitness, health and other.

Net Revenue

The following table presents the Company’s net revenue by major product line (and by category for advertising revenue) for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenue by product:
Advertising revenue by category:
Services	$	206,178	$	180,957	$	589,972	$	515,518
Restaurants, Retail & Other	123,854		112,707		359,175		324,901
Advertising	330,032		293,664		949,147		840,419
Transactions	3,145		3,652		10,081		10,772
Other	11,945		11,575		35,458		33,212
Total net revenue	$	345,122	$	308,891	$	994,686	$	884,403

During the three and nine months ended September 30, 2023 and 2022, no individual customer accounted for 10% or more of consolidated net revenue.

The following table presents the Company’s net revenue by major geographic region for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
United States	$	342,600	$	306,773	$	987,535	$	878,293
All other countries	2,522		2,118		7,151		6,110
Total net revenue	$	345,122	$	308,891	$	994,686	$	884,403

Long-Lived Assets

The following table presents the Company’s long-lived assets by major geographic region as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		December 31, 2022
United States	$	66,029	$	72,325
All other countries	6,344		4,899
Total long-lived assets	$	72,373	$	77,224

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A in our Annual Report, as updated by Part II, Item 1A of this Quarterly Report. See “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Overview

As one of the best-known internet brands in the United States, Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust us for our more than 240 million ratings and reviews of businesses across a broad range of categories, while businesses advertise with us to reach our large audience of purchase-oriented and generally affluent consumers. We believe our ability to provide value to both consumers and businesses not only fulfills our mission to connect consumers with great local businesses, but also positions us well in the local, digital advertising market in the United States.

We generate substantially all of our revenue from the sale of performance-based advertising products, which our advertising platform matches to individual consumers through auctions priced on a cost-per-click ("CPC") basis. In the three months ended September 30, 2023, our net revenue was $345.1 million, up 12% from the three months ended September 30, 2022, and we recorded net income of $58.2 million and adjusted EBITDA of $96.5 million. In the nine months ended September 30, 2023, our net revenue was $994.7 million, up 12% from the nine months ended September 30, 2022, and we recorded net income of $71.8 million and adjusted EBITDA of $234.4 million. For information on how we define and calculate adjusted EBITDA, and a reconciliation of this non-GAAP financial measure to net income, see "Non-GAAP Financial Measures" below.

In the third quarter of 2023, our strategic investments in product and marketing continued to drive further progress on our revenue growth initiatives:

•Grow quality leads and monetization in Services. Advertising revenue from Services businesses increased by 14% year over year in the third quarter, led by approximately 20% year-over-year revenue growth in the Home Services category. Improvements to the Request-a-Quote flow drove a sequential increase in consumer requests despite muted consumer demand for Services in the third quarter, with requests down approximately 5% year over year. We also continued working to improve the overall Services experience, including completing the nationwide expansion of Yelp Guaranteed. Additionally, we launched new dynamic landing pages based on the consumer's location that serve as an entry point to a monetized project submission flow for several test categories and geographies. We expect such product features, among others, will enable us to drive more leads to advertisers both on Yelp and through search engine marketing.

•Drive sales through the most efficient channels. Revenue from our Self-serve and Multi-location channels together comprised the majority of our advertising revenue in the third quarter. Performance marketing and improvements to the claim and ads purchase flows drove record Self-serve customer acquisition, which accounted for nearly half of all small and medium-sized business acquisitions in the third quarter. We also continued to improve the experience for advertisers through in-product recommendations. These efforts contributed to an approximately 25% year-over-year increase in Self-serve channel revenue. Revenue from our Multi-location channel grew by approximately 10% year over year, driven by growth in advertiser demand, as reflected in average revenue per location and consistent revenue growth from enterprise advertisers.

•Deliver more value to advertisers. In the third quarter, we continued to deliver value to advertisers through high-quality ad clicks by further improving our ad system and formats. We implemented an update that paces ad campaigns more evenly throughout the month, freeing up additional inventory for ad clicks. Recent ad format improvements, as well as our photo selector tool, which leverages artificial intelligence to predict which photo to display in an ad to maximize clicks, have resulted in a significant increase in click-through rates. These improvements together contributed to ad clicks returning to year-over-year growth in the third quarter. While strength in advertiser demand drove an increase in average CPC in the third quarter, the continued improvements to our ad system kept its growth to 4% year over year, allowing us to deliver more value to advertisers through more clicks at compelling prices.

•Enhance the consumer experience. We continued improving the consumer experience through the use of advanced technologies in the third quarter. We utilized neural networks to better detect photos that may violate our content guidelines, which contributes to a safer environment for consumers while also improving the efficiency of our user

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operations team. We also leveraged multiple machine learning models to create a simplified system for review topic suggestions, which we expect to facilitate the expansion of review topic suggestions into more categories. Our new neural network-powered ranking model for our mobile app's home feed also contributed to greater engagement.

Our performance-based ad products and high-intent audience continued to generate robust advertiser demand in the third quarter. We believe our broad-based local advertising platform and product-led strategy position us well in the current uncertain macroeconomic environment. While we anticipate net revenue will decrease modestly in the fourth quarter compared to the third quarter due to typical seasonality in Services and macroeconomic uncertainties, we expect net revenue for the full year 2023 to increase compared to 2022.

Key Metrics

We regularly review a number of metrics, including the key metrics set forth below, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.

Ad Clicks and Average CPC

The amount of revenue we generate from our pay-for-performance advertising products is determined by the number of ad clicks we deliver to advertisers and the CPCs we charge for those ad clicks.

Ad clicks represent user interactions with our pay-for-performance advertising products, including clicks on advertisements on our website and mobile app, clicks on syndicated advertisements on third-party platforms and Request-a-Quote submissions, among others. Ad clicks include only user interactions that we are able to track directly, and therefore do not include user interactions with ads sold through our advertising partnerships. We do not expect the exclusion of such user interactions to materially affect this metric. We report the year-over-year percentage change in ad clicks as a measure of our success in monetizing more of our consumer activity and delivering more value to advertisers.

Average CPC is calculated as revenue from our performance-based ad products — excluding certain revenue adjustments that do not impact the outcome of an auction for an individual ad click, such as refunds, as well as revenue from our advertising partnerships — divided by the total number of ad clicks for a given period. Average CPC represents the average amount we charge advertisers for each ad click.

We believe that ad clicks and average CPC together reflect one of the most significant dynamics affecting our advertising revenue performance: the interplay of advertiser demand and consumer activity. At the level of an auction for an individual ad click, advertiser demand — consisting of advertiser budgets and the number of advertisers competing to purchase the ad click — intersects with the supply of consumer activity — consisting of the predicted levels of relevant consumer traffic and engagement — to determine CPC, with higher advertiser demand putting upward pressure on the CPC and higher consumer activity putting downward pressure on the CPC. In aggregate, advertiser demand consists of the number of business locations advertising with us (which we refer to as paying advertising locations, as discussed below) and the aggregate budget they allocate to purchasing our advertising products. Aggregate monetizable consumer activity depends on the levels of consumer traffic and engagement with our ads, the numbers of locations where we can display ads and other monetizable features, and our click-through rate, which is the ratio of ad clicks to the number of times the ads were displayed to consumers. The relative strengths of these factors in aggregate are reflected in average CPC.

Ad clicks and average CPC also provide important insight into the value we deliver to advertisers, which we believe is a significant factor in our ability to retain both revenue and customers. For example, a positive change in ad clicks for a given period combined with lower growth or a negative change in average CPC over the same period would indicate that we delivered more ad clicks at lower prices, thereby delivering more value to our advertisers; we would expect this to have a positive impact on retention. Conversely, growth in average CPC paired with a negative or lower growth rate in ad clicks would indicate we charged more without delivering more ad clicks; we would expect this to have a negative impact on retention unless we are able to increase the value we deliver through higher performing ad clicks.

The following table presents year-over-year changes in our ad clicks and average CPC for the periods indicated (each expressed as a percentage):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Ad Clicks	9%	(15)%	3%	(8)%
Average CPC	4%	36%	11%	29%

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In the three and nine months ended September 30, 2023, advertising revenue grew 12% and 13% year over year, respectively, due to year-over-year increases in both ad clicks and average CPC. Ad clicks returned to growth in the three and nine months ended September 30, 2023, driven by ad system and ad format improvements. Average CPC also increased in the three and nine months ended September 30, 2023 due to interrelated factors including higher advertiser demand, as reflected in increases in average advertising revenue per paying advertising location.

Although average CPC was up year over year in the third quarter of 2023, it continued the moderating trend observed from the first to the second quarter of 2023, compared to the more volatile quarter-to-quarter fluctuations in 2022. However, complex macroeconomic pressures may continue to cause volatility in the near term.

Advertising Revenue by Category

Our advertising revenue comprises revenue from the sale of our advertising products, including the resale of our advertising products by partners and syndicated ads appearing on third-party platforms.

To reflect our strategic focus on creating two differentiated experiences on Yelp, we provide a breakdown of our advertising revenue attributable to businesses in two high-level category groupings: Services and Restaurants, Retail and Other ("RR&O"). Our Services categories consist of home, local, auto, professional, pets, events, real estate and financial services. Our RR&O categories consist of restaurants, shopping, beauty & fitness, health and other.

The following table presents our advertising revenue by category for the periods indicated (in thousands, except percentages):


	Three Months Ended September 30,				% Change	Nine Months Ended September 30,				% Change
	2023		2022			2023		2022
Services	$	206,178	$	180,957	14%	$	589,972	$	515,518		14%
Restaurants, Retail & Other	123,854		112,707		10%	359,175		324,901			11%
Total Advertising Revenue	$	330,032	$	293,664	12%	$	949,147	$	840,419		13%

Paying Advertising Locations by Category

Paying advertising locations comprise all business locations associated with a business account from which we recognized advertising revenue in a given month, excluding business accounts that purchased advertising through partner programs other than Yelp Ads Certified Partners, averaged over a given three- or nine-month period. We also provide a breakdown of paying advertising locations between our Services categories and RR&O categories.

We provide our paying advertising locations as a measure of the reach and scale of our business; however, this metric may exhibit short-term volatility as a result of factors such as seasonality and macroeconomic conditions. For example, macroeconomic factors, such as the lingering impact of the COVID-19 pandemic, inflationary pressures and labor and supply chain challenges, have had a predominant negative impact on RR&O paying advertising locations in recent quarters. Short-term fluctuations in paying advertising locations may also reflect the acquisition or loss of single advertising accounts associated with large numbers of locations, or the pausing/restarting of advertising campaigns by such multi-location advertisers.

The following table presents the number of paying advertising locations by category during the periods indicated (in thousands, except percentages):


	Three Months Ended September 30,		% Change	Nine Months Ended September 30,		% Change
	2023	2022		2023	2022
Services	235	238	(1)%	237	231	3%
Restaurants, Retail & Other	326	334	(2)%	322	331	(3)%
Total Paying Advertising Locations	561	572	(2)%	559	562	(1)%

Paying advertising locations decreased in the three and nine months ended September 30, 2023 compared to the prior-year periods largely due to a few lower-spend enterprise advertisers that turned off their advertising spend prior to the current-year periods.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates and assumptions are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from those estimates. Due to macroeconomic conditions and other factors, certain estimates and assumptions have required and may continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may materially change in future periods.

We believe that the assumptions and estimates associated with revenue recognition, website and internal-use software development costs and income taxes have the greatest potential impact on our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report.

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Results of Operations

The following table sets forth our results of operations for the periods indicated (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of the results of operations to be anticipated for the full year 2023 or any future period.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023		2022		$ Change		% Change(1)		2023		2022		$ Change		% Change(1)
Condensed Consolidated Statements of Operations Data:
Net revenue by product:
Advertising revenue by category:
Services	$	206,178	$	180,957	$	25,221	14	%	$	589,972	$	515,518	$	74,454	14	%
Restaurants, Retail & Other	123,854		112,707		11,147		10	%	359,175		324,901		34,274		11	%
Advertising	330,032		293,664		36,368		12	%	949,147		840,419		108,728		13	%
Transactions	3,145		3,652		(507)		(14)	%	10,081		10,772		(691)		(6)	%
Other	11,945		11,575		370		3	%	35,458		33,212		2,246		7	%
Total net revenue	345,122		308,891		36,231		12	%	994,686		884,403		110,283		12	%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	28,370		26,805		1,565		6	%	84,613		77,222		7,391		10	%
Sales and marketing	137,703		133,061		4,642		3	%	424,308		388,570		35,738		9	%
Product development	81,020		75,803		5,217		7	%	254,247		233,336		20,911		9	%
General and administrative	45,695		48,381		(2,686)		(6)	%	145,609		126,141		19,468		15	%
Depreciation and amortization	10,461		11,417		(956)		(8)	%	31,881		34,165		(2,284)		(7)	%

Total costs and expenses	303,249		295,467		7,782		3	%	940,658		859,434		81,224		9	%
Income from operations	41,873		13,424		28,449		212	%	54,028		24,969		29,059		116	%
Other income, net	6,154		2,691		3,463		129	%	17,264		4,947		12,317		249	%
Income before income taxes	48,027		16,115		31,912		198	%	71,292		29,916		41,376		138	%
(Benefit from) provision for income taxes	(10,189)		7,007		(17,196)		(245)	%	(475)		13,714		(14,189)		(103)	%
Net income attributable to common stockholders	$	58,216	$	9,108	$	49,108	539	%	$	71,767	$	16,202	$	55,565	343	%

(1) Percentage changes are calculated based on rounded numbers and may not recalculate exactly due to rounding.

Three and Nine Months Ended September 30, 2023 and 2022

Net Revenue

Advertising. We generate advertising revenue from the sale of our advertising products — including enhanced business pages and performance-based advertising in search results and elsewhere on our platform — to businesses of all sizes, from single-location local businesses to multi-location national businesses. Advertising revenue also includes revenue generated from the resale of our advertising products by certain partners and monetization of advertising inventory through third-party ad networks. We present advertising revenue on a disaggregated basis for our high-level category groupings, Services and RR&O.

Advertising revenue for the three months ended September 30, 2023 increased 12% year over year as a result of a 9% increase in ad clicks and a 4% increase in average CPC. Advertising revenue for the nine months ended September 30, 2023 increased 13% year over year as a result of a 3% increase in ad clicks and a 11% increase in average CPC.

Transactions. We generate revenue from various transactions with consumers, primarily through our partnership integrations, which are mainly revenue-sharing arrangements that provide consumers with the ability to place food orders for pickup and delivery through third parties directly on Yelp. We earn a fee for acting as an agent for transactions placed through these integrations, which we record on a net basis and include in revenue upon completion of a transaction.

Transactions revenue for the three and nine months ended September 30, 2023 decreased by immaterial amounts compared to the prior-year periods primarily due to decreases in the volume of food takeout and delivery orders compared to the prior-year periods. For the nine months ended September 30, 2023, the decrease was partially offset by an increase in the per-order transaction fee that we receive from Grubhub following the renewal of our partnership in March 2022.

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Other Revenue. We generate revenue through our subscription services, including our Yelp Guest Manager product. We also generate revenue through our Yelp Fusion and Yelp Knowledge programs, which provide access to Yelp data for a fee, as well as other non-advertising partnerships.

Other revenue for the three and nine months ended September 30, 2023 increased compared to the prior-year periods, primarily reflecting higher revenue from the continued growth of our Yelp Fusion and Yelp Knowledge programs.

Trends and Uncertainties of Net Revenue. Net revenue increased in the three months ended September 30, 2023 compared to the three months ended June 30, 2023 as we continued to execute on our strategic initiatives. We expect net revenue for the three months ending December 31, 2023 to decrease slightly from the third quarter of 2023, reflecting typical seasonality in Services and macroeconomic uncertainties.

Costs and Expenses

Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of credit card processing fees and website infrastructure expense, which includes website hosting costs and employee costs (including stock-based compensation expense) for the infrastructure teams responsible for operating our website and mobile app, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs.

Cost of revenue for the three and nine months ended September 30, 2023 increased compared to the prior-year periods, primarily due to:

•increases in website infrastructure expense of $0.9 million and $1.9 million, respectively, as a result of investments in maintaining and improving our infrastructure; and

•increases in merchant credit card fees of $0.8 million and $2.1 million, respectively, due to higher volumes of transactions associated with the increase in advertising revenue.

Cost of revenue for the nine months ended September 30, 2023 also increased year over year due to a $2.8 million increase in advertising fulfillment costs, which were largely attributable to the expansion of Yelp Audiences.

We expect cost of revenue to increase on an absolute dollar basis in 2023 compared to 2022.

Sales and Marketing. Our sales and marketing expenses primarily consist of employee costs (including sales commission and stock-based compensation expenses) for our sales and marketing employees. Sales and marketing expenses also include business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.

Sales and marketing expenses for the three and nine months ended September 30, 2023 increased compared to the prior-year periods, primarily due to increases in employee costs of $11.2 million and $49.8 million, respectively, resulting from higher average sales headcount, the increased productivity of our Local sales team and higher cost of labor.

The increases during the three- and nine- month periods were partially offset by:

•decreases in marketing spend of $4.8 million and $9.6 million, respectively, primarily for business owner and consumer marketing; and

•decreases in workplace operating costs of $1.8 million and $4.5 million, respectively, due to reductions in our leased office space.

We expect sales and marketing expenses to increase in 2023 compared to 2022 as we maintain the headcount on our sales and marketing teams. However, we expect sales and marketing expenses to decrease as a percentage of net revenue in 2023 compared to 2022.

Product Development. Our product development expenses primarily consist of employee costs (including bonuses and stock-based compensation expense, net of capitalized employee costs associated with capitalized website and internal-use software development) for our engineers, product management and corporate infrastructure employees. In addition, product development expenses include allocated workplace and other supporting overhead costs.

Product development expenses for the three and nine months ended September 30, 2023 increased compared to the prior-year periods primarily due to increases in employee costs of $5.5 million and $20.7 million, respectively, as a result of higher average headcount and higher cost of labor.

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We expect product development expenses to increase in 2023 compared to 2022 as we maintain our headcount to support our product initiatives. We expect product development expenses as a percentage of net revenue to remain relatively consistent in 2023 compared to 2022.

General and Administrative. Our general and administrative expenses primarily consist of employee costs (including bonuses and stock-based compensation expense) for our executive, finance, user operations, legal, people operations and other administrative employees. Our general and administrative expenses also include our provision for doubtful accounts, consulting costs, as well as allocated workplace and other supporting overhead costs.

General and administrative expenses for the three months ended September 30, 2023 decreased compared to the prior-year period due to the $10.5 million impairment charge incurred in the prior-year period related to the sublease of the New York office, which did not recur in the current-year period. See Note 8, "Leases," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail. This decrease was partially offset by:

•an increase in our provision for doubtful accounts of $6.5 million due to an increase in advertising revenue, an anticipated increase in customer delinquencies and the release of a higher amount of bad debt reserves in the prior-year period; and

•an increase in employee costs of $2.3 million, primarily driven by higher cost of labor.

General and administrative expenses for the nine months ended September 30, 2023 increased compared to the prior-year period due to:

•a one-time litigation settlement loss contingency of $11.0 million incurred in the current-year period in connection with the agreement to settle a putative class action lawsuit asserting claims under the California Invasion of Privacy Act (the "CIPA Action"). See Note 12, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail;

•an increase in employee costs of $9.3 million as a result of higher cost of labor and higher average headcount; and

•an increase in our provision for doubtful accounts of $8.4 million due to an increase in advertising revenue and the release of a higher amount of bad debt reserves in the prior-year period.

These increases during the nine-month period were partially offset by a $6.9 million decrease in impairment charges due to the sublease of the New York office in the prior-year period, partially offset by the abandonment of certain office space in San Francisco in the current-year period. See Note 8, "Leases," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail.

We expect general and administrative expenses to increase in 2023 compared to 2022 to support the continued growth of our business. We expect general and administrative expenses as a percentage of net revenue to remain relatively consistent in 2023 compared to 2022.

Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation on computer equipment, software, leasehold improvements, capitalized website and internal-use software development costs, and amortization of purchased intangible assets.

Depreciation and amortization expense for the three and nine months ended September 30, 2023 decreased compared to the prior-year periods primarily due to certain assets becoming fully depreciated since the prior-year periods.

Other Income, Net

Other income, net consists primarily of the interest income earned on our cash, cash equivalents and marketable securities, research and development tax credits, the portion of our sublease income in excess of our lease cost, accretion of discounts and amortization of premiums on investments, credit facility fees and foreign exchange gains and losses.

Other income, net for the three and nine months ended September 30, 2023 increased compared to the prior-year periods, primarily driven by $3.0 million and $10.0 million, respectively, of higher interest income due to increased federal interest rates.

(Benefit from) Provision for Income Taxes

(Benefit from) provision for income taxes consists of: federal and state income taxes in the United States and income taxes in certain foreign jurisdictions; deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Benefit from income taxes for the three and nine months ended September 30, 2023 increased from a provision in the prior-year periods primarily due to a decrease in the annual effective tax rate estimated for 2023 primarily as a result of Internal Revenue Service ("IRS") guidance published in the third quarter of 2023 that reduced the amount of research and development expenses required to be capitalized under the U.S. Tax Cuts and Jobs Act (the "Tax Act"). This guidance also resulted in increases in discrete tax benefits, including a $15 million benefit from the 2022 federal and state tax provision to return adjustments.

As of December 31, 2022, we had approximately $97.4 million in net deferred tax assets ("DTAs"). As of September 30, 2023, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs. However, it is possible that some or all of these DTAs will not be realized. Therefore, unless we are able to generate sufficient taxable income from our operations, a substantial valuation allowance may be required to reduce our DTAs, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our condensed consolidated financial statements. The exact timing and amount of the valuation allowance recognition are subject to change on the basis of the net income that we are able to actually achieve. We will continue to evaluate the possible recognition of a valuation allowance on a quarterly basis.

We currently estimate that our effective GAAP tax rate (before discrete items) for 2023 and beyond will be in the range of 22% to 26%. However, our GAAP tax rate depends on a number of factors that are not in our direct control and/or that are subject to quarterly variability, such as potential legislative reforms, IRS interpretive guidance and our stock price, which limits our visibility into the applicable rate for future fiscal periods. We do not plan to provide regular updates to the estimated range provided here given the uncertainty inherent in it as a result of these factors; however, we note that these may have a material and adverse impact on our cash flows in 2023 as well as future years.

Non-GAAP Financial Measures

Our condensed consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA and adjusted EBITDA margin, each of which is a non-GAAP financial measure.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. In particular, adjusted EBITDA should not be viewed as a substitute for, or superior to, net income (loss) 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 adjusted EBITDA does not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does 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 consider the potentially dilutive impact of equity-based compensation;

•adjusted EBITDA does not take into account any income or costs that management determines are not indicative of ongoing operating performance, such as material litigation settlements, impairment charges and fees related to shareholder activism; and

•other companies, including those in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, net income (loss) and our other GAAP results.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), 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, such as material litigation settlements, impairment charges and fees related to shareholder activism that we deem not to be indicative of our ongoing operating performance.

Adjusted EBITDA margin. Adjusted EBITDA margin is a non-GAAP financial measure that we calculate as adjusted EBITDA divided by net revenue.

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The following is a reconciliation of net income to adjusted EBITDA, as well as the calculation of net income margin and adjusted EBITDA margin, for each of the periods indicated (in thousands, except percentages):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022				2023			2022
Reconciliation of Net Income to Adjusted EBITDA:
Net income	$	58,216		$	9,108			$	71,767		$	16,202
(Benefit from) provision for income taxes	(10,189)			7,007				(475)			13,714
Other income, net	(6,154)			(2,691)				(17,264)			(4,947)
Depreciation and amortization	10,461			11,417				31,881			34,165
Stock-based compensation	43,467			38,632				133,304			119,753
Litigation settlement(1)(2)	—			—				11,000			—

Asset impairment(1)	—			10,464				3,555			10,464
Fees related to shareholder activism(1)	671			—				671			—
Adjusted EBITDA	$	96,472		$	73,937			$	234,439		$	189,351

Net revenue	$	345,122		$	308,891			$	994,686		$	884,403
Net income margin	17		%	3		%		7		%	2		%
Adjusted EBITDA margin	28		%	24		%		24		%	21		%

(1) Recorded within general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Represents the loss contingency recorded in connection with the agreement to settle the CIPA Action. Note that this amount does not include any legal fee reimbursements that we expect to receive related to this matter; we do not adjust for legal fees and related reimbursements, which we consider to be part of our ongoing operations. See Note 12, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for additional information.

Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are our cash and cash equivalents, marketable securities and cash generated from operations. As of September 30, 2023, we had cash and cash equivalents of $305.1 million and marketable securities of $121.5 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of three months or less. Our cash held internationally as of September 30, 2023 was $25.3 million. As of September 30, 2023, we also had $10.0 million of investments in certificates of deposit with minority-owned financial institutions.

In July 2022, we began purchasing highly rated debt securities which are classified as available-for-sale on our condensed consolidated balance sheets. Our investment portfolio comprises highly rated marketable securities, and our investment policy limits the amount of credit exposure to any one issuer. The policy generally requires securities to be investment grade (i.e., rated ‘A’ or higher by bond rating firms) with the objective of minimizing the potential risk of principal loss.

On April 28, 2023, we entered into a Revolving Credit and Guaranty Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for a five-year $125.0 million senior secured revolving credit facility (the "2023 credit facility"). The 2023 credit facility replaced our previous $75.0 million revolving credit facility entered into on May 5, 2020 with Wells Fargo Bank, N.A. (the “2020 credit facility”), which terminated concurrently with the establishment of the 2023 credit facility. The 2023 credit facility includes a $25.0 million letter of credit sub-limit, a $25.0 million bilateral letter of credit facility and an accordion option, which, if exercised, would allow us to increase the aggregate commitments by up to $250.0 million, plus additional amounts if we are able to satisfy a leverage test, subject to certain conditions. The 2023 credit facility provides us with the ability to access backup liquidity to fund working capital and for other capital requirements, as needed.

As of September 30, 2023, we were in compliance with all covenants and there were no loans outstanding under the 2023 credit facility. We had $14.1 million of letters of credit under the sub-limit primarily related to lease agreements for certain

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office locations, which are required to be maintained and issued to the landlords of each facility, and $110.9 million remained available under the 2023 credit facility as of September 30, 2023.

For additional details regarding the 2023 credit facility, see Note 12, "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report.

Material Cash Requirements

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" included under Part I, Item 1A in our Annual Report, as updated by Part II, Item 1A of this Quarterly Report. We believe that our existing cash, cash equivalents and marketable securities, together with any cash generated from operations, will be sufficient to meet our material cash requirements in the next 12 months and beyond, including: working capital requirements; our anticipated repurchases of common stock pursuant to our stock repurchase program; payment of taxes related to the net share settlement of equity awards; payment of lease costs related to our operating leases; the potential payment of a higher amount of income taxes in 2023 and beyond due to, among other things, the requirement to capitalize and amortize certain research and development expenses under the Tax Act and the other factors discussed in "—Results of Operations—(Benefit from) Provision for Income Taxes" above; and purchases of property, equipment and software and website hosting services. However, this estimate is based on a number of assumptions that may prove to be materially different and we could fully utilize our available cash, cash equivalents and marketable securities earlier than presently anticipated. We are not able to reasonably estimate the timing of future cash flows related to $34.9 million of uncertain tax positions. We may be required to draw down funds from our revolving credit facility or seek additional funds through equity or debt financings to respond to business challenges associated with the uncertain macroeconomic environment or other challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies.

We lease office facilities under operating lease agreements that expire through 2031. Our cash requirements related to these lease agreements are $105.0 million, of which $42.8 million is expected to be paid within the next 12 months. The total lease obligations are partially offset by our future minimum rental receipts to be received under non-cancelable subleases of $31.1 million. See Note 8, "Leases," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail on our operating lease obligations.

Our cash requirements related to purchase obligations consisting of non-cancelable agreements to purchase goods and services required in the ordinary course of business — primarily website hosting services — are approximately $211.0 million, of which approximately $47.9 million is expected to be paid within the next 12 months.

The cost of capital associated with any additional funds sought in the future might be adversely impacted by the effects of macroeconomic conditions on our business. Additionally, amounts deposited with third-party financial institutions exceed the Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits, as applicable. These cash and cash equivalents could be impacted if the underlying financial institutions fail or are subjected to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to our cash and cash equivalents; however, we can provide no assurances that access to our invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):


	Nine Months Ended September 30,
	2023		2022
Condensed Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities	$	227,110	$	147,836
Net cash used in investing activities	$	(46,465)	$	(111,307)
Net cash used in financing activities	$	(183,232)	$	(182,024)

Operating Activities. Net cash provided by operating activities during the nine months ended September 30, 2023 increased by $79.3 million compared to the nine months ended September 30, 2022, primarily as a result of an increase of $90.7 million in cash collected from customers primarily due to an increase in revenue, and a decrease of $31.3 million due to the timing of income taxes paid, primarily as a result of our deferral of certain federal income tax payments pursuant to the tax relief provided by the IRS release CA-2023-03. These movements were partially offset by an increase of $50.1 million in the amount

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of employee salaries, commissions and bonuses paid, primarily resulting from higher average headcount, higher cost of labor and increased productivity of our sales teams.

Investing Activities. Net cash used in investing activities during the nine months ended September 30, 2023 decreased compared to the prior-year period primarily due to a decrease in net purchases of marketable securities. In July 2022, we began investing in highly rated debt securities as we changed our investment strategy in order to earn a higher overall rate of return from our cash position.

Financing Activities. Net cash used in financing activities during the nine months ended September 30, 2023 increased compared to the prior-year period primarily due an increase in taxes paid related to the net share settlement of equity awards as well as the payment of issuance costs for the 2023 Credit Facility, partially offset by an increase in proceeds from stock option exercises during the nine months ended September 30, 2023 compared to the prior-year period.

Stock Repurchase Program

Since its initial authorization in July 2017, our board of directors has authorized us to repurchase up to an aggregate of $1.45 billion of our outstanding common stock, $108.5 million of which remained available as of October 27, 2023.

We may repurchase shares at our discretion in the open market, privately negotiated transactions, in transactions structured through investment banking institutions or a combination of the foregoing. The program is not subject to any time limit and may be modified, suspended or discontinued at any time. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow and market conditions.

During the nine months ended September 30, 2023, we repurchased on the open market 4,481,278 shares for an aggregate purchase price of $150.0 million. During the nine months ended September 30, 2022, we repurchased on the open market 4,639,373 shares for an aggregate purchase price of $150.0 million.

We have funded all repurchases to date and expect to fund any future repurchases with cash and cash equivalents available on our condensed consolidated balance sheet.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of business. These risks primarily include interest rate, foreign exchange risks and inflation, and have not changed materially from the market risks we were exposed to in the year ended December 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by the collusion of two or more people or by management override of controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding material legal proceedings in which we are involved, see "Legal Proceedings" in Note 12, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report, which is incorporated herein by reference. We are also subject to legal proceedings arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently do not believe that the final outcome of any of these other matters will have a material effect on our business, financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes to the risks factors set forth in the section titled "Risk Factors" included under Part I, Item 1A of our Annual Report, which describes various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. You should carefully consider the risks and uncertainties described in the Annual Report and below before making an investment decision.

If we default on our credit obligations, our business, revenue and financial results could be harmed.

Our 2023 credit facility provides our lenders with a first-priority lien against substantially all of our domestic assets, including certain domestic intellectual property, and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations. It contains a number of covenants that limit our ability to, among other things, incur indebtedness, grant liens, make distributions, pay dividends, repurchase shares, make investments, or engage in transactions with our affiliates, merge or consolidate with other companies, sell material businesses or assets, or license or transfer certain of our intellectual property. We are also required to maintain certain financial covenants. Complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies who are not subject to such restrictions.

If we fail to comply with the covenants under the 2023 credit facility, lenders would have a right to, among other things, terminate the commitments to provide additional loans under the facility, enforce any liens on collateral securing the obligations under the facility, declare all outstanding loans and accrued interest and fees to be due and payable and require us to post cash collateral to be held as security for any reimbursement obligations in respect of any outstanding letters of credit issued under the facility. If any remedies under the facility were exercised, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately materially and adversely affect our business, cash flows, operations and financial condition. Even if we were able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us.

Additionally, our 2023 credit facility utilizes Secured Overnight Financing Rate ("SOFR") or various alternative methods to calculate the amount of accrued interest on any loans. If a published U.S. dollar SOFR is unavailable, the interest rates on our debt indexed to SOFR will be determined using one of the alternative methods, any of which could, if the revolver is drawn, result in interest obligations that are more than the current form, which could have a material adverse effect on our financing costs.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities

The following table summarizes our stock repurchase activity for the three months ended September 30, 2023 (in thousands, except for price per share):


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program
July 1 - July 31, 2023	631	$	39.34	631	$	156,851
August 1 - August 31, 2023	223	$	42.64	223	$	147,348
September 1 - September 30, 2023	363	$	43.16	363	$	131,659

(1) Since the initial authorization of our Stock Repurchase Program in July 2017, our board of directors authorized us to repurchase up to an aggregate of $1.45 billion of our outstanding common stock, of which $108.5 million remained available as of October 27, 2023. The actual timing and amount of repurchases depend on a variety of factors, including liquidity, cash flow and market conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Stock Repurchase Program" included under Part I, Item 2 in this Quarterly Report.

(2) Average price paid per share includes costs associated with the repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

On August 18, 2023, Sam Eaton, our Chief Technology Officer, entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale of an aggregate of up to (i) 45,034 shares of our common stock and (ii) 44,094 shares of our common stock that may vest during the plan period, net of any shares we withhold to satisfy income tax withholding and remittance obligations in connection with the net settlement of the equity awards, the amount of which cannot currently be determined. The plan will terminate on the earlier of January 31, 2024 or when all shares subject to the plan have been sold, subject to early termination for certain specified events set forth in the plan.

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ITEM 6. EXHIBITS.

Exhibit

Incorporated by Reference

Filed Herewith

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of Yelp Inc., as Amended.

8-K

001-35444

3.1

7/8/2020

3.2

Amended and Restated Bylaws of Yelp Inc.

8-K

001-35444

3.1

3/15/2023

4.1

Reference is made to Exhibits 3.1 and 3.2.

4.2

Form of Common Stock Certificate.

8-A/A

001-35444

4.1

9/23/2016

31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a).

32.1†

Certifications of Chief Executive Officer and Chief Financial Officer.

101.INS

Inline XBRL Instance Document (embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

†

The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Yelp Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		YELP INC.
Date:	November 3, 2023	/s/ David Schwarzbach
		David Schwarzbach
		Chief Financial Officer
		(Principal Financial and Accounting Officer and Duly Authorized Signatory)