Yelp(YELP) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, net revenue increased by 6% year over year to $1.41 billion, with net income growing by 34% year over year to$ 133 million and adjusted EBITDA increasing by 8% year over year to $358 million [2][3][33] - The company expanded net income margin by two percentage points and adjusted EBITDA margin by one percentage point from 2023 [3][20] - For Q4 2024, net revenue was$ 362 million, net income was $42 million with a 12% margin, and adjusted EBITDA was$ 101 million with a 28% margin [16][46] Business Line Data and Key Metrics Changes - Revenue from services increased by 11% year over year to a record $879 million, while RRNO revenue declined by 3% year over year to$ 470 million [4][34] - Advertising revenue in services rose by 11% year over year in Q4 to $225 million, while RRNO locations decreased, leading to a 4% decline in paying advertising locations to 521,000 [17][47] - Self-serve advertising grew approximately 15% year over year in Q4, while multilocation revenue remained flat year over year [18][47] Market Data and Key Metrics Changes - The home services category showed strong performance with annual revenue growth of approximately 15% year over year [4][34] - Consumer projects increased by approximately 25% year over year, with project submissions through the AI chatbot Yelp Assistant up by more than 50% from Q3 to Q4 [6][35] - Yelp users contributed 21 million new reviews in 2024, reaching a total of 308 million cumulative reviews, up 7% from the prior year [9][39] Company Strategy and Development Direction - The company plans to focus on three strategic initiatives in 2025: leading in services, driving advertiser value, and transforming the consumer experience, leveraging AI capabilities [10][40] - Following the acquisition of RepairPal, the company aims to accelerate growth in the auto services category and enhance its product focus on multilocation services businesses [12][41] - The strategy emphasizes creating a best-in-class experience for consumers and service professionals, with a strong commitment to disciplined expense management [19][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth opportunities, particularly in the services sector, despite challenges in the RRNO category due to macroeconomic pressures [25][26] - For Q1 2025, the company expects net revenue to be in the range of$ 350 million to $355 million, reflecting typical seasonality, and for the full year, net revenue is expected to be between$ 1.470 billion and $1.485 billion [26][55] - Management acknowledged the impact of inflation and uncertainties in the economic environment on their guidance for 2025, reflecting a cautious outlook [96][97] Other Important Information - The company acquired RepairPal for approximately$ 80 million in cash, which is expected to contribute positively to the auto category [24][120] - Stock-based compensation expense was reduced as a percentage of revenue by two percentage points in 2024, with plans to further decrease it to less than 6% by the end of 2027 [22][53] Q&A Session Summary Question: What are the abilities to invest behind demand generation for RRNO? - Management acknowledged headwinds in RRNO due to inflationary pressures but emphasized ongoing investments in the business and alignment of product roadmaps towards services [63][64] Question: What are the key investment areas for growth in services? - Management highlighted strong performance in services, particularly home services, and the introduction of a leads API to enhance opportunities for multilocation services [66][67] Question: What is the contribution of RepairPal to the guidance? - Management indicated that RepairPal's performance is integrated into the overall guidance, with expectations for significant growth in the auto category [101][122] Question: How is AI impacting the business? - Management noted that AI has improved consumer experience and operational efficiencies, with specific mention of the Yelp Assistant driving project submissions [78][82] Question: What are the thoughts on Yelp's positioning in the current environment? - Management expressed optimism about leveraging trusted content in the evolving AI landscape, emphasizing the importance of local search capabilities [87][90] Question: What are the drivers behind the performance this quarter? - Management noted better-than-expected performance in Q4, with seasonal increases contributing to revenue growth [91][92] Question: How does the company view sustainable long-term growth in services? - Management is confident in the continued strong performance in services, supported by trusted content and AI applications [125][127] Question: What are the competitive dynamics in the restaurant and retail sectors? - Management attributed challenges in these sectors to macroeconomic factors rather than competitive pressures, expressing optimism for future recovery [131][132]