YELP INC (YELP)

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual 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 and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

The following section also includes information regarding 2024 and 2023 and year-over-year comparisons between these periods. A full discussion of 2022 items and year-over-year comparisons between 2023 and 2022 can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

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 the more than 280 million ratings and reviews available on our platform 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 CPC basis. In the year ended December 31, 2024, our net revenue was $1.41 billion, up 6% from the year ended December 31, 2023 and 18% from the year ended December 31, 2022, and we recorded net income of $132.9 million and adjusted EBITDA of $358.0 million. For information on how we define and calculate adjusted EBITDA and a reconciliation of this non-GAAP financial measure to net income (loss), see “—Non-GAAP Financial Measures” below.

In 2024, we delivered another year of record annual revenue and profitable growth through the consistent execution of our product-led strategic initiatives:

Deliver the best Home Services experience for consumers and service pros

•The Home Services category was the major focus of our strategy in 2024 and has been the largest driver of growth in the Services categories for nearly a decade. In 2024, we launched a number of new products and features to facilitate even better connections between consumers and service professionals. These included our AI chatbot, Yelp Assistant, which has particularly resonated with consumers, with project submissions through this feature increasing by more than 50% from the third to fourth quarter of 2024. To help service professionals more easily evaluate leads — phone calls, requests and website clicks — we enhanced the business owner inbox by providing brief AI-powered summaries of crucial job information. Improvements to the Request-a-Quote flow led to an approximately 25% year-over-year increase in projects in 2024. These efforts drove record advertising revenue from Services businesses in 2024, which grew 11% year over year to $879 million, led by approximately 15% year-over-year revenue growth in our Home Services category.

Provide the most trusted local search and discovery platform

•In 2024, we continued our efforts to grow the trusted content that has made Yelp a leading resource for consumers to search for and discover great local businesses. Our users contributed 21 million new reviews in 2024, bringing our cumulative reviews to 308 million. We introduced a number of new features and updates, including dozens of AI-powered updates, to enhance the Yelp experience and drive user engagement. For example, we updated the Yelp app’s home feed to surface additional types of content while also making it a more visual experience by showcasing user-generated videos. We also introduced trending searches and businesses to inspire exploration and highlight popular new spots nearby, and redesigned Yelp business pages to make it even easier for users to discover businesses that suit their needs. These improvements to the search experience benefited consumer searches following their implementation. For consumers engaging with our trusted reviews, we launched Review Insights, which leverages LLMs to gauge reviewer sentiment about common aspects of a business, such as the quality of its food, service,

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ambiance, wait time and drinks. We also made a number of user experience and backend improvements to our mobile and desktop websites that together led to year-over-year increases in desktop and mobile web unique devices in 2024.

Optimize advertiser value through our advanced technology

•In 2024, our improved matching and ad formats delivered more value to our advertisers in the form of more clicks at compelling prices. We introduced smart selection, an AI-powered feature for advertisers that automatically selects the best reviews and photos to showcase, optimizing ads for the highest return. We also expanded local advertiser reach through a variety of partnerships, including by leveraging users’ on-Yelp search intent to surface relevant Yelp ads to them on local platforms like Facebook. As a result, ad clicks increased by 6% year over year as users interacted with even more relevant content while average CPC remained flat in 2024, resulting in an improvement in our retention of non-term advertisers’ budgets compared to 2023.

Drive profitable growth through our most efficient channels

•By prioritizing investments in our Self-serve and Multi-location channels, we have significantly shifted our go-to-market mix toward our most efficient channels in recent years. In 2024, revenue from these channels together accounted for approximately 50% of our total advertising revenue, a significant expansion from approximately 30% in 2018. Our product and marketing efforts contributed to another year of record Self-serve customer acquisition in 2024, which drove annual revenue growth of approximately 15% year over year in this channel. For example, we continued to enhance the business owner experience through budget recommendations and billing optimizations as well as new competitive insights on the business owner dashboard, such as page view comparisons.

•Multi-location channel revenue was approximately flat year over year in 2024 as businesses in the RR&O categories continued to face a challenging operating environment. However, we remained focused on improving our offerings for multi-location advertisers. For example, we launched a conversion API to provide additional attribution capabilities, expanded Yelp Audiences to include audio platforms and introduced a leads API for multi-location Services businesses.

Looking ahead, we see further opportunities to build upon the success of these strategic initiatives and deliver even more value to both consumers and advertisers by investing in our 2025 strategic initiatives. As we enter 2025, we expect that our expenses will increase from the fourth quarter of 2024 to the first quarter of 2025, primarily reflecting a seasonal increase in expenses from payroll taxes and benefits. We expect stock-based compensation expense as a percentage of revenue to decrease to less than 8% by the end of 2025 and reach less than 6% by the end of 2027. We also expect that our revenue will grow year over year in 2025 as our initiatives gain traction; however, we expect revenue in the first quarter of 2025 to be slightly down sequentially, reflecting seasonal trends and the macroeconomic challenges facing our RR&O categories.

Factors Affecting Our Performance

Macroeconomic Conditions. The United States continues to face widespread macroeconomic uncertainties, including labor shortages, inflation and recessionary concerns, which may be exacerbated by proposed tariffs and changes to U.S. immigration policy. These challenging macroeconomic conditions have had, and may continue to have, a significant adverse impact on our business and results of operations. For example, adverse macroeconomic conditions have had, and may continue to have, a negative impact on the ability and willingness of advertisers to spend on our products and services. Although advertiser demand from Services businesses was strong in 2024, RR&O businesses continued to face a challenging operating environment, including supply chain issues, inflation and its impact on consumer spending, labor shortages and an increased cost of labor, which has negatively impacted their advertising spending with us.

Changes in consumer behavior due to adverse economic conditions have also had, and may continue to have, a negative impact our business. For example, in 2024, economic uncertainty and inflationary pressures contributed to consumer use of our mobile app and web traffic to our platform remaining below pre-pandemic 2019 levels, particularly in our RR&O categories. Because traffic to and user engagement on our platform together impact the number of ads we are able to show as well as the value of those ads to businesses, such negative impacts on consumer activity may also make it more difficult to convince existing and prospective advertisers that our products offer them a material benefit and generate a competitive return relative to other alternatives.

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It is not possible for us to predict the remaining duration of the ongoing adverse macroeconomic conditions or the duration or magnitude of any resulting adverse impact on our business. Adverse macroeconomic conditions have historically been particularly challenging for the SMBs on which we rely and any protracted economic downturn would have significant negative effects on our business.

Investment in Growth. In 2025, we plan to invest in our strategic initiatives to lead in Services, drive advertiser value and transform the consumer experience. These initiatives will require substantial investments that may not prioritize short-term financial results, depend on our ability to develop innovative, relevant and useful products in a timely manner, and involve significant risks and uncertainties. For example, new products and initiatives may fail to generate sufficient revenue, operating margin or other value to justify the investments we made in them, which is a particular risk for new products and initiatives that are unproven or that are outside of our historical core business, such as our plans to expand our use of AI throughout our platform and business operations. While we believe these initiatives will ultimately drive revenue growth, our investments in them will increase our operating expenses, and any increase in revenue resulting from these product innovations will likely trail the increase in expenses.

Our Ability to Attract, Retain and Engage Consumers. We generate substantially all of our revenue based on our users’ engagement with the ads that we display. Because traffic to and user engagement on our platform together determine the number of ads we are able to show, affect the value of those ads to businesses and support the content creation that drives further traffic, our ability to attract, retain and engage visitors on our platform is critical to our business and financial success. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Our Ability to Attract and Retain Advertisers. Our revenue growth is driven by our ability to attract and retain advertising customers. To do so, we must deliver tailored advertising products at a competitive price in a highly competitive market. A substantial portion of our advertisers have the ability to cancel their advertising campaigns at any time. Their decisions to renew depend on the degree of satisfaction with our products as well as a number of factors that are outside of our control, including their ability to continue their operations and spending levels. Although the opportunity presented by multi-location Services businesses remains a strategic focus, we continue to rely heavily on SMBs that often have limited advertising budgets, may view online advertising products like ours as experimental and unproven, and are disproportionately impacted by macroeconomic conditions.

Our Ability to Attract and Retain Talent. Our ability to execute on our strategic initiatives depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we expect to continue to face significant competition from other companies in hiring such personnel. Our employee operations are complex and place substantial demands on management and our operational infrastructure, particularly in our fully remote work environment. We believe our decision to maintain distributed operations will provide even greater flexibility to our employees, who now have the opportunity to relocate within the countries where we operate so they can live where they want to live and work where they will feel most effective, and will allow us to access and attract great talent from a wider pool of candidates across North America and Europe.

Stock Repurchases. Since July 2017, our Board has authorized us to repurchase up to an aggregate of $1.95 billion of our outstanding common stock, $304.7 million of which remained available as of February 18, 2025 and which does not have an expiration date. During the year ended December 31, 2024, we repurchased on the open market 6,686,518 shares for an aggregate purchase price of $250.9 million. The actual timing and amount of repurchases remain subject to a variety of factors, including liquidity, cash flow and market conditions. In addition, the terms of our Credit Agreement impose limitations on our ability to repurchase shares during the term of our revolving credit facility. We have funded the repurchases, and expect to fund future repurchases under the stock repurchase program, with cash available on our balance sheet. As a result, this program could diminish our cash reserves and reduce our ability to invest in our business, in addition to affecting the trading price and volatility of our stock.

Corporate Development Activities. As part of our business strategy, we may decide to expand our product offerings and grow our business through the acquisition of complementary businesses or technologies, as well as through partnerships. For example, in November 2024, we acquired RepairPal to expand our offerings in the Auto Services category. In addition to diverting our management’s attention and otherwise disrupting our operations, our corporate development activities will affect our future financial results due to factors such as expenses incurred in identifying, investigating and pursuing transactions, whether or not they are consummated, possible dilutive issuances of equity securities or the incurrence of debt, unidentified liabilities and the amortization of acquired intangible assets. Maintaining relationships with partners also requires significant time and resources, as does integrating their data, services and technologies onto our platform. We may not realize the full

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benefits of synergies, innovation and operational efficiencies that may be possible from a corporate transaction; similarly, if our relationships with partners deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with our content or services.

Seasonality. Our business is affected by seasonal fluctuations in Internet usage and advertising spending. Based on historical trends, our revenue is typically lowest in the first quarter and increases sequentially through the third quarter. Fourth quarter revenue is typically similar to the third quarter as well as to the first quarter of the subsequent year. Multi-location ad budgets typically increase throughout the year, generally starting the year at their lowest and peaking in the fourth quarter, though our SMB customers tend to decrease their spending at that time. With regard to expenses, we generally decrease our marketing expenditures in the fourth quarter before increasing them again in the first quarter of the following year. Our personnel expenses tend to increase from the fourth quarter to the first quarter due to the timing of payroll taxes and benefits, as well as our annual compensation cycle. Our traffic is also typically weakest in the fourth quarter of the year.

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 price we charge for each ad click (“CPC”).

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.

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

In each of the three and twelve months ended December 31, 2024, advertising revenue grew 6% year over year due to year-over-year increases in ad clicks. The increases in ad clicks in both periods were driven by improvements to our advertising technology and, to a lesser extent, our acquisition of Services projects through paid search. Average CPC remained flat in each of the three and twelve months ended December 31, 2024.

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 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 presented (in thousands, except percentages):

Paying Advertising Locations

Paying advertising locations comprise all business locations associated with a business account from which we recognized advertising revenue in a given month, excluding RepairPal business locations as well as business accounts that purchased advertising through partner programs other than Yelp Ads Certified Partners, averaged over a given three- or twelve-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 current inflationary pressures and labor and supply chain challenges, have had a predominant negative impact on RR&O paying advertising locations over the past year. 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.

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The following table presents the number of paying advertising locations for the periods presented (in thousands, except percentages):

Total paying advertising locations decreased in the three and twelve months ended December 31, 2024 compared to the prior-year periods, as the decreases in paying advertising locations in our RR&O categories were partially offset by increases in paying advertising locations in our Services categories over the same periods. We believe the decreases in RR&O paying advertising locations reflect the challenging operating environment facing businesses in these categories and, to a lesser extent, competition for ad spend from such businesses, including from food ordering and delivery providers.

Reviews and Traffic

We report our reviews and traffic metrics on an annual basis as measures of the volume of our content and the size of our audience, respectively. Although measures of our content (including our reviews metric) and traffic do not factor directly into the advertising arrangements we have with our customers, this dynamic underpins our ability to deliver ad clicks and drive conversion of advertisers’ products and services. Consumer engagement metrics validate our value proposition to businesses as they seek easy-to-use and effective advertising solutions.

Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. Users can access the reviews that are not currently recommended, as well as the star rating and other information about reviews that were removed for violation of our terms of service, through a link on the business’s page.

As of December 31, 2024, 308.1 million reviews had been submitted to our platform, of which 281.8 million reviews were available on business pages, including 46.9 million reviews that were not recommended, and 26.3 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of December 31, 2024 and 2023 (in thousands):

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Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, devices accessing our non-mobile optimized website, which we refer to as our desktop website, and devices accessing our mobile-optimized website, which we refer to as our mobile website.

A substantial majority of each of these traffic streams goes to our RR&O categories, with traffic to our mobile app particularly heavily weighted toward RR&O. Because RR&O traffic is particularly sensitive to changes in consumer confidence levels, our overall traffic levels generally fluctuate with macroeconomic conditions. For example, although our traffic has recovered from its lowest levels during the pandemic in 2020, it has remained below our pre-pandemic 2019 traffic levels due to ongoing economic uncertainty and inflationary pressures, among other macroeconomic concerns. We cannot predict the remaining duration of these conditions, or the duration or magnitude of any resulting adverse impacts on our traffic, and we expect that our traffic levels will continue to fluctuate with consumers’ level of confidence.

In addition, we have historically benefited from the integration of our content into Apple Maps, driving a significant amount of traffic to our website and downloads of our mobile app. However, the volume of traffic and app downloads from this source has declined following certain changes to the display of our content in Apple Maps and it may to continue to decline in the future.

As a result of these dynamics, as well as the maturation of our business and high penetration rates in most major geographic markets within the United States and Canada, we generally expect our traffic to continue fluctuating and to decrease in certain periods going forward. In 2025, we expect RR&O traffic to remain challenged as consumers continue to face economic uncertainty and inflation, likely offsetting modest growth in Services traffic. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. Prior to 2024, we calculated app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given twelve-month period. As a result of our ongoing efforts to improve the accuracy of our key metrics, in 2024, we updated our methodology for measuring app unique devices to exclude devices that access our mobile app in a given month but do not meet a minimum level of engagement with it during such month by, for example, viewing a business, performing a search, viewing or submitting content, or other similar interactions (“minimum required level of engagement”). Under both our current and historical methodologies, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize. The following table presents app unique devices for the periods presented (in thousands):

In 2024, app unique devices decreased year over year as consumers visited restaurants less frequently amid macroeconomic pressures. It also continued to be negatively impacted by the reduced volume of app downloads driven by Apple Maps.

Desktop and Mobile Website Unique Devices. Prior to 2024, we calculated our desktop and mobile web traffic metrics based on the number of “users,” as measured by Google Analytics, who had visited our desktop website and mobile website, respectively, at least once in a given month, averaged over a given twelve-month period. We referred to these metrics as desktop unique visitors and mobile web unique visitors. However, as of July 1, 2024, Google discontinued the Universal Analytics version of Google Analytics that we previously used.

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We now calculate desktop web traffic and mobile web traffic as (1) the number of devices identified by our internal measurement tools that have visited our desktop website and mobile website, respectively, at least once in a given month, (2) adjusted to exclude devices that do not meet our minimum required level of engagement during such month, (3) averaged over a given twelve-month period. We believe this methodology will allow us to better analyze web traffic data. We refer to our web traffic metrics calculated under this methodology as unique devices rather than unique visitors to conform to the name of our app unique devices metric as well as to better reflect that these metrics measure devices that visit our website rather than individuals who visit our website, as discussed below.

Our internal measurement tools and Google Analytics measure devices and “users,” respectively, based on unique identifiers. As a result, an individual who visits our website from multiple devices with different identifiers may be counted as multiple unique devices or unique visitors, as applicable, and multiple individuals who visit our website from a shared device with a single identifier may be counted as a single unique device or unique visitor. Accordingly, the calculations of our unique visitors and unique devices may not accurately reflect the number of individuals who actually visit our website.

The following table presents our web traffic for the periods presented (in thousands):

Improvements to our desktop and mobile websites, including matching improvements and a more visually appealing user experience, drove slight year-over-year increases in desktop and mobile web unique devices in 2024.

Active Claimed Local Business Locations

We report active claimed local business locations annually as a measure of the scope of our Local advertising business. The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The table set forth below presents the number of active claimed local business locations as of the dates presented (in thousands).

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Results of Operations

The following table sets forth our results of operations for 2024 and 2023 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.

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

(2)    For the year ended December 31, 2024, other revenue includes revenue generated from transactions with consumers, which we reported separately as transactions revenue in prior periods. Prior-period amounts have been reclassified to conform to the current-period presentation.

Years Ended December 31, 2024 and 2023

Net Revenue

Advertising. We generate advertising revenue from the sale of our advertising products — including Yelp Ads and business page upgrades — 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, as well as revenue from the RepairPal Network. We present advertising revenue on a disaggregated basis for our high-level category groupings, Services and RR&O.

Advertising revenue increased in 2024 compared to 2023, primarily driven by a 6% increase in ad clicks.

Other. We generate other revenue through non-advertising contracts, such as our subscription services, which include our Yelp Guest Manager product, and through our Yelp Fusion and Yelp Fusion Insights programs, which provide Yelp content and data for a fee. In addition, we now report transactions revenue together with other revenue to reflect that neither transactions revenue nor the underlying business is a core part of our current business model. As a result, other revenue now includes revenue from various transactions with consumers. We generate revenue from such transactions 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.

Other revenue increased in 2024 compared to 2023, primarily due to the continued growth of our Yelp Fusion, Yelp Guest Manager and Yelp Fusion Insights programs, partially offset by a lower volume of food takeout and delivery orders.

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Trends and Uncertainties of Net Revenue. Net revenue in the year ended December 31, 2024 increased by 6% year over year as momentum in our Services categories continued. We expect net revenue for the first quarter of 2025 to decrease slightly from the fourth quarter of 2024, reflecting typical seasonality and ongoing operating challenges for businesses in our RR&O categories.

Costs and Expenses

Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of 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 and credit card processing fees.

Cost of revenue increased in 2024 compared to 2023, primarily as a result of an increase in website infrastructure expense of $8.8 million, primarily as a result of investments in maintaining and improving our infrastructure as well as higher cost of labor.

We expect cost of revenue to increase on an absolute dollar basis in 2025 compared to 2024.

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 increased in 2024 compared to 2023, primarily due to:

•an increase in marketing and advertising costs of $23.0 million, driven by increased investments in acquiring Services projects through paid search; and

•an increase in employee costs of $16.2 million resulting from higher cost of labor, partially offset by lower average headcount.

These increases were partially offset by a decrease in workplace operating costs of $9.8 million resulting from reductions in our leased office space. See Note 10, “Leases,” of the Notes to Consolidated Financial Statements for further detail.

We expect sales and marketing expenses to increase in 2025 compared to 2024 as our sales and marketing employees become more tenured as well as additional headcount from the acquisition of RepairPal. However, we expect sales and marketing expenses to decrease as a percentage of net revenue as we realize efficiencies from our sales and marketing initiatives.

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 decreased in 2024 compared to 2023, primarily due to a decrease in employee costs of $5.8 million resulting from more employee costs being capitalized and lower average headcount, partially offset by higher cost of labor.

We expect product development expenses to remain relatively consistent on an absolute dollar basis in 2025 compared to 2024, but decrease as a percentage of net revenue as our distributed operations provide leverage.

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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 decreased in 2024 compared to 2023, primarily due to:

•a decrease in impairment charges of $17.7 million related to our leased office spaces. See Note 10, “Leases,” of the Notes to Consolidated Financial Statements for further detail;

•an $11.0 million loss contingency recorded in 2023 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 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements for further detail; and

•a decrease in employee costs of $5.3 million, primarily driven by lower average headcount.

These decreases were partially offset by an increase in our provision for doubtful accounts of $4.9 million due to higher customer delinquencies and higher advertising revenue.

We expect general and administrative expenses to increase slightly on an absolute dollar basis in 2025 compared to 2024 to support the continued growth of our business, but remain relatively consistent as a percentage of net revenue.

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 expense decreased $3.2 million in 2024 compared to 2023, primarily due to a decrease in depreciation expense of leasehold improvements from asset retirements related to lease abandonments and expirations as well as certain other assets becoming fully depreciated since the prior-year period.

This decrease was partially offset by an increase in amortization expense of $1.4 million related to intangible assets acquired as part of the acquisition of RepairPal. See Note 8, “Acquisition,” of the Notes to Consolidated Financial Statements for further detail.

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, foreign exchange gains and losses, and, in the year ended December 31, 2024, the release of a reserve related to a one-time payroll tax credit.

Other income, net increased in 2024 compared to 2023 due to the release of a $3.1 million reserve related to a one-time payroll tax credit, higher tax incentives of $1.9 million related to research and development activity in the United Kingdom, and $1.8 million of higher interest income earned on our cash, cash equivalents and marketable securities primarily due to higher federal interest rates.

Provision for Income Taxes

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.

The increase in the provision for income taxes in 2024 compared to the prior year was primarily driven by an increase in profit before tax as well as a decrease in the discrete tax benefits related to the federal and state tax provision to return adjustments.

As of December 31, 2024, we had approximately $139.6 million in net deferred tax assets (“DTAs”). As of December 31, 2024, 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

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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 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 continue to estimate that our effective GAAP tax rate (before discrete items) for 2025 will be in the range of 24% to 28%. However, our GAAP tax rate is impacted by a number of factors that are not in our direct control and that are subject to quarterly variability, which limits our visibility into the applicable rate for future fiscal periods.

Non-GAAP Financial Measures

Our consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA, adjusted EBITDA margin and free cash flow, each of which is a non-GAAP financial measure. We have included adjusted EBITDA, adjusted EBITDA margin and free cash flow because they are key measures used by our management and Board to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, to develop short- and long-term operational plans, and to assess our sources of liquidity. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations, while free cash flow provides information about the quality of our earnings. Accordingly, we believe that adjusted EBITDA, adjusted EBITDA margin and free cash flow provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board.

Adjusted EBITDA and free cash flow have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, adjusted EBITDA and free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures 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, acquisition and integration costs, and fees related to shareholder activism;

•free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and

•other companies, including those in our industry, may calculate adjusted EBITDA and free cash flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider adjusted EBITDA, adjusted EBITDA margin and free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities 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 that management determines are not indicative of ongoing operating performance, such as material litigation settlements, impairment charges, acquisition and integration costs, and fees related to shareholder activism.

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

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 the periods presented (in thousands, except percentages):

(1)    Includes the release of a $3.1 million reserve related to a one-time payroll tax credit in the year ended December 31, 2024.

(2)    Recorded within general and administrative expenses on our consolidated statements of operations.

(3)    Represents the loss contingency recorded in connection with our 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 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements in this Annual Report for additional information.

Free Cash Flow. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.

The following is a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

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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 December 31, 2024, we had cash and cash equivalents of $217.3 million and marketable securities of $100.6 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of three month or less. Our cash held internationally as of December 31, 2024 was $54.0 million. As of December 31, 2024, we also had $10.0 million of investments in certificates of deposit with minority depository institutions.

Our investment portfolio comprises highly rated marketable securities that are classified as available-for-sale on our consolidated balance sheets, 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 the Credit Agreement, which provides for a five-year $125.0 million senior secured revolving credit facility (the “credit facility”). The 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 credit facility provides us with the ability to access backup liquidity to fund working capital and for other capital requirements, as needed.

As of December 31, 2024, we were in compliance with all covenants and there were no loans outstanding under the credit facility. We had $14.0 million of letters of credit under the sub-limit primarily related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $111.0 million remained available under the credit facility as of December 31, 2024.

For additional details regarding the credit facility, see Note 14, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

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” in this Annual 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 2025 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— 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 $44.0 million of uncertain tax positions. We may be required to draw down funds from our 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 from 2025 to 2031. Our cash requirements related to these lease agreements are $46.6 million, of which $22.2 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 $18.3 million. See Note 10, “Leases,” of the Notes to Consolidated Financial Statements 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 $181.2 million, of which approximately $91.3 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

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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 presented (in thousands):

Operating Activities. Net cash provided by operating activities during the year ended December 31, 2024 decreased by $20.5 million compared to 2023, primarily due to an increase of $27.6 million in income taxes paid, an increase of $25.7 million in payments to vendors, and higher employee-related payments of $18.2 million for salaries, commissions, bonuses and benefits, mainly due to higher cost of labor as well as a shift towards a compensation mix that emphasizes cash over equity. The higher cash outflow was also driven by the payment of $15.0 million to settle the CIPA Action in 2024, as well as other cash payments that were not individually significant. These cash outflows were partially offset by an increase of $79.9 million in cash collected from customers primarily due to the increase in revenue.

Investing Activities. Net cash used in investing activities during the year ended December 31, 2024 increased compared to 2023 primarily due to our acquisition of RepairPal as well as an increase in capitalized website and internal-use software development costs. These increases were partially offset by net sales and maturities of marketable securities during the year ended December 31, 2024 compared to net purchases of marketable securities in 2023.

Financing Activities. Net cash used in financing activities during the year ended December 31, 2024 increased compared to 2023 primarily due to an increase in repurchases of our common stock and a decrease in proceeds from stock option exercises, partially offset by a decrease in taxes paid related to the net share settlement of equity awards during the year ended December 31, 2024 compared to 2023.

Stock Repurchase Program

Since the initial authorization of our stock repurchase program in July 2017, our Board has authorized us to repurchase up to an aggregate of $1.95 billion of our outstanding common stock, including the $500.0 million authorized in February 2024, of which $304.7 million remained available for future repurchases on February 18, 2025.

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 year ended December 31, 2024, we repurchased 6,686,518 shares on the open market for an aggregate purchase price of $250.9 million.

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

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Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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 change materially in future periods.

We consider the estimates discussed below to be critical as we believe that the assumptions and estimates associated with these policies have the greatest potential impact on our consolidated financial statements. For further information on these and our other significant accounting estimates, see Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Revenue Recognition—We generate revenue from the sale of advertising products and other revenue sources, which correspond to our major product lines. We recognize revenue by applying the following steps: the contract with the customer is identified; the performance obligations in the contract are identified; the transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We apply the portfolio practical expedient to account for contracts with customers in each category of revenue. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the amount of revenue we recognize is equal to the amount we have a right to invoice.

We perform estimates and apply judgment when determining the amount of revenue to be recognized and may accept lower consideration than what is agreed to in the relevant contract. We refer to the difference between the agreed upon consideration amount and the actual consideration estimated to be received as variable consideration; types of variable consideration include cash-based incentives, credits and refunds that are estimated based on historical information as well as considering economic conditions, which constrain the revenue. For all contracts with customers, estimates and assumptions include determining variable consideration and identifying the nature and timing of satisfaction of performance obligations. We believe that there will not be significant changes to our estimates of variable consideration. To date, actual amounts of consideration received have been materially consistent with the provisions we have made based on our historical estimates. For contracts satisfied over time, we apply the invoice practical expedient to depict the value transferred to the customer and measure of progress towards completion of its obligations. We consider the right to receive consideration from a customer to correspond directly with the value to the customer of our performance completed to date. We do not consider the effects of the time value of money as substantially all of our contracts are invoiced on a monthly basis, one month in arrears.

For revenue generated from arrangements that involve third parties, considerable judgment may be required in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider whether we obtain control of the specified goods or services before they are transferred to the customer as well as other indicators, such as whether we are the party primarily responsible for the fulfillment, inventory risk and discretion in establishing price. The assessment of whether we are considered the principal or agent in a transaction could impact our revenue and cost of revenue recognized on our consolidated statements of operations. Changes in judgments with respect to assumptions and estimates could impact the amount of revenue recognized.

Website and Internal-Use Software Development Costs—Costs related to website and internal-use software are primarily related to our website and mobile app, including support systems. We capitalize our costs to develop software when: preliminary development efforts are successfully completed; management has authorized and committed project funding; and it is probable that the project will be completed and the software will be used as intended. We use judgment to determine which projects will be capitalized and the estimated useful life over which the related asset will be amortized. Costs incurred for enhancements that are expected to result in additional material functionality are capitalized and amortized over the estimated useful life of the upgrades. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is generally three years. This estimated useful life of three years has not historically changed and actual useful lives have been materially consistent with our estimates. While we do not believe that there is a reasonable likelihood of material change in our estimates, factors including obsolescence, the pace of changes in technology, changes in the expected use of the software, competition and other economic factors could require us to change the estimated useful life, which would result in a change to the amount of amortization that we record on our consolidated statements of operations.

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Business Combinations—We account for acquisitions of entities that consist of inputs and processes that have the ability to contribute to the creation of outputs as business combinations. We allocate the purchase price of the acquisition to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, forecasted revenue and expenses, customer attrition rate, royalty rates and discount rates. The excess of the purchase price over the fair values of assets acquired and liabilities assumed is recorded as goodwill. Acquisition and integration costs are expensed as incurred. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the measurement period, subsequent adjustments are reflected on our consolidated statements of operations.

Income Taxes—Significant judgment is required to determine our provision for (benefit from) for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles, complex tax laws, or variances between our actual and anticipated operating results. Therefore, actual income taxes could materially vary from these estimates.

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments or changes in the tax law or rates. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Valuation allowances are provided to reduce deferred tax assets to the amount that is more likely than not to be realized. In determining the need for a valuation allowance, the weight given to positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. The determination of future taxable income requires significant judgment and relies on various estimates and assumptions using forecasted amounts. Changes in various factors, including economic and political conditions, could drive actual results in future years to differ from our current assumptions, judgments and estimates. We evaluate the ability to realize net deferred tax assets and the related valuation allowance on a quarterly basis.

We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide for tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, relative tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual 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 and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

The following section also includes information regarding 2023 and 2022 and year-over-year comparisons between these periods. A full discussion of 2021 items and year-over-year comparisons between 2022 and 2021 can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

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 the more than 260 million ratings and reviews available on our platform 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 CPC basis. In the year ended December 31, 2023, our net revenue was $1.34 billion, up 12% from the year ended December 31, 2022 and 30% from the year ended December 31, 2021, and we recorded net income of $99.2 million and adjusted EBITDA of $330.5 million. For information on how we define and calculate adjusted EBITDA and a reconciliation of this non-GAAP financial measure to net income (loss), see “—Non-GAAP Financial Measures” below.

In 2023, we delivered another year of record annual revenue and profitable growth through the consistent execution of our product-led strategic initiatives:

Grow Quality Leads and Monetization in Our Services Categories

•By further differentiating the Services product experience for consumers and advertisers, we were able to better connect consumers with service professionals and deliver more valuable leads to Services businesses in 2023. These efforts drove record advertising revenue from Services businesses in 2023, which grew 14% year over year to $793 million, led by 20% year-over-year revenue growth in our Home Services subcategories. Our expansion of Yelp Guaranteed nationwide and across all Home Services subcategories positively impacted consumer project submissions and lead monetization. We also launched new dynamic landing pages based on a consumer’s location that serve as an entry point to monetized project submission flows for several categories and geographies. Improvements to the Request-a-Quote flow led to a year-over-year increase in consumer requests in the fourth quarter of 2023. Matching and ad system improvements drove a meaningful increase in the percentage of monetized leads in Services, which reached approximately 30% in 2023, up from 25% in 2022.

Drive Sales through Our Self-Serve and Multi-location Channels

•By prioritizing investments in our Self-serve and Multi-location channels, we have significantly shifted our go-to-market mix toward our most efficient channels in recent years. In 2023, revenue from these channels together accounted for approximately 50% of total advertising revenue, a two percentage point increase from 2022. Our product and marketing efforts contributed to another year of record Self-serve customer acquisition in 2023, which drove annual revenue growth of approximately 20% year over year in this channel. For example, we continued to enhance the onboarding and business owner experience through in-product recommendations, such as photo-upload and service offering prompts. As a result, Self-serve customer acquisition accounted for nearly half of all SMB acquisitions in 2023.

•Multi-location channel revenue also increased by approximately 15% year over year in 2023 as enterprise customers continued to increase their spend across our expanded suite of offerings, including new iterations of our Themed and

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Spotlight Ad formats. We also expanded our Agency Development Program to streamline the process by which large media agencies purchase Yelp ads on behalf of their enterprise customers. Yelp Audiences, our off-Yelp offering for multi-location businesses, also grew in 2023 and enabled us to capture incremental spend from non-location-based advertisers.

Deliver More Value to Advertisers

•In 2023, we delivered more valuable clicks to our advertisers by upgrading our ad system and technology to more efficiently match consumers with the right advertisers at the right time. For example, we used neural networks to analyze unstructured data, including to predict which photo shown in an ad will generate the most clicks for a business, and to more accurately predict click-through rates — the rate at which users interact with our advertising products — to optimize ad placement for a given consumer. As a result, advertiser demand for our high-intent ad clicks remained robust, driving a 9% year-over-year increase in average CPC in 2023, and ad clicks increased by 5% year over year as users interacted with even more relevant content.

Enhance the Consumer Experience

•In 2023, we enhanced the consumer experience with new discovery, review and Services features, supporting the growth of the trusted review content that attracts our large and valuable audience in 2023. Our users contributed 22 million new reviews in 2023, bringing our cumulative reviews to 287 million, despite web traffic remaining approximately flat and app unique devices decreasing slightly year over year. We introduced an AI-powered search experience, a more visual and interactive review-writing process, as well as Yelp Guaranteed. For example, we used LLMs to determine the most relevant information from reviews to display in the highlights appearing under each business listing in search results. To reduce friction in review writing, we launched review topics to suggest helpful topics for contributors to cover in their reviews. We also updated the review submission flow to enable users to post high-resolution videos of up to 12 seconds in length alongside their review text and photos, which contributed to the total number of videos on Yelp nearly doubling from 2022 to 2023.

Looking ahead, we see further opportunities to build upon the success of these strategic initiatives and deliver even more value to both consumers and advertisers by investing in our 2024 strategic initiatives. As we enter 2024, we expect that our expenses will increase from the fourth quarter of 2023 to the first quarter of 2024, reflecting our cash compensation adjustments and incremental marketing investments, particularly for acquiring Services leads through SEM, as well as a seasonal increase in expenses from payroll taxes and benefits. We expect stock-based compensation expense as a percentage of revenue to decrease to approximately 11% in 2024 and reach 8% by the end of 2025; however, we expect that the benefit of the reduction in 2024 will be largely offset by cash compensation increases as a result of the adjustment of our compensation mix to emphasize cash over equity. We also expect that our revenue will grow year over year in 2024 as our initiatives gain traction; however, we expect revenue in the first quarter of 2024 to be slightly down sequentially, reflecting seasonal trends and the macroeconomic challenges facing our RR&O categories.

Factors Affecting Our Performance

Macroeconomic Conditions. The United States continues to face widespread macroeconomic uncertainties, including labor disruptions, inflation and recessionary concerns. These challenging macroeconomic conditions have had, and may continue to have, a significant adverse impact on our business and results of operations. For example, adverse macroeconomic conditions have had, and may continue to have, a negative impact on the ability and willingness of advertisers to spend on our products and services. Although advertiser demand was generally strong in 2023, many businesses — particularly in our RR&O categories — continue to face supply chain issues, rising commodity prices, and inventory and labor shortages, which has negatively impacted their advertising spending with us.

Changes in consumer behavior due to adverse economic conditions have also had, and may continue to have, a negative impact our business. For example, we believe that economic uncertainty and inflationary pressures, as well as concerns related to severe weather events and the prevalence of respiratory illnesses, contributed to web traffic to our platform remaining approximately flat and app unique devices decreasingly slightly year over year in 2023. Because traffic to and user engagement on our platform together impact the number of ads we are able to show as well as the value of those ads to businesses, such negative impacts on consumer activity may also make it more difficult to convince existing and prospective advertisers that our products offer them a material benefit and generate a competitive return relative to other alternatives. Strong advertiser demand combined with less robust consumer activity has increased our average CPC in 2023 compared to 2022; if the value our products provide to advertisers does not keep pace with any further price increases, our revenue and results of operations could be harmed.

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It is not possible for us to predict the remaining duration of the ongoing adverse macroeconomic conditions or the duration or magnitude of any resulting adverse impact on our business. Adverse macroeconomic conditions have historically been particularly challenging for the SMBs on which we rely and any protracted economic downturn would have significant negative effects on our business.

Investment in Growth. In 2024, we plan to invest heavily in our strategic initiatives to provide the most trusted local search and discovery platform, deliver the best Home Services experience for consumers and service professionals, optimize advertiser value through our advanced technology and drive profitable growth through our Self-serve and Multi-location channels. These initiatives will require substantial investments that may not prioritize short-term financial results, depend on our ability to develop innovative, relevant and useful products in a timely manner, and involve significant risks and uncertainties. For example, new products and initiatives may fail to generate sufficient revenue, operating margin or other value to justify the investments we made in them, which is a particular risk for new products and initiatives that are unproven or that are outside of our historical core business, such as our planned acquisition of Services leads through SEM. While we believe these initiatives will ultimately drive revenue growth, our investments in them will increase our operating expenses, and any increase in revenue resulting from these product innovations will likely trail the increase in expenses.

Our Ability to Attract, Retain and Engage Consumers. We generate substantially all of our revenue based on our users’ engagement with the ads that we display. Because traffic to and user engagement on our platform together determine the number of ads we are able to show, affect the value of those ads to businesses and support the content creation that drives further traffic, our ability to attract, retain and engage visitors on our platform is critical to our business and financial success. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Our Ability to Attract and Retain Advertisers. Our revenue growth is driven by our ability to attract and retain advertising customers. To do so, we must deliver tailored advertising products at a competitive price in a highly competitive market. A substantial portion of our advertisers have the ability to cancel their advertising campaigns at any time. Their decisions to renew depend on the degree of satisfaction with our products as well as a number of factors that are outside of our control, including their ability to continue their operations and spending levels. Although the opportunity presented by our Multi-location channel is a strategic priority, we continue to rely heavily on SMBs that often have limited advertising budgets, may view online advertising products like ours as experimental and unproven, and are disproportionately impacted by macroeconomic conditions.

Our Ability to Attract and Retain Talent. Our ability to execute on our strategic initiatives depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we expect to continue to face significant competition from other companies in hiring such personnel. Our employee operations are complex and place substantial demands on management and our operational infrastructure, particularly in our fully remote work environment. We believe our decision to maintain distributed operations will provide even greater flexibility to our employees, who now have the opportunity to relocate within the countries where we operate so they can live where they want to live and work where they will feel most effective, and will allow us to access and attract great talent from a more diverse pool of candidates across North America and Europe.

Stock Repurchases. Since July 2017, our Board has authorized us to repurchase up to an aggregate of $1.95 billion of our outstanding common stock, $554.7 million of which remained available as of February 20, 2024 and which does not have an expiration date. During the year ended December 31, 2023, we repurchased on the open market 5,626,851 shares for an aggregate purchase price of $200.0 million. The actual timing and amount of repurchases remain subject to a variety of factors, including liquidity, cash flow and market conditions. In addition, the terms of our Credit Agreement impose limitations on our ability to repurchase shares during the term of our revolving credit facility. We have funded the repurchases, and expect to fund future repurchases under the stock repurchase program, with cash available on our balance sheet. As a result, this program could diminish our cash reserves and reduce our ability to invest in our business, in addition to affecting the trading price and volatility of our stock.

Corporate Development Activities. As part of our business strategy, we may decide to expand our product offerings and grow our business through the acquisition of complementary businesses or technologies, as well as through partnerships. In addition to diverting our management’s attention and otherwise disrupting our operations, our corporate development activities will affect our future financial results due to factors such as expenses incurred in identifying, investigating and pursuing transactions, whether or not they are consummated, possible dilutive issuances of equity securities or the incurrence of debt, unidentified liabilities and the amortization of acquired intangible assets. Maintaining relationships with partners also requires significant time and resources, as does integrating their data, services and technologies onto our platform. We may not realize

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the full benefits of synergies, innovation and operational efficiencies that may be possible from a corporate transaction; similarly, if our relationships with partners deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with our content or services.

Seasonality. Our business is affected by seasonal fluctuations in Internet usage and advertising spending. Based on historical trends, our revenue is typically lowest in the first quarter and increases sequentially through the third quarter. Fourth quarter revenue is typically similar to the third quarter as well as to the first quarter of the subsequent year. Multi-location ad budgets typically increase throughout the year, generally starting the year at their lowest and peaking in the fourth quarter, though our SMB customers tend to decrease their spending at that time. With regard to expenses, we generally decrease our marketing expenditures in the fourth quarter before increasing them again in the first quarter of the following year. Our personnel expenses tend to increase from the fourth quarter to the first quarter due to the timing of payroll taxes and benefits, as well as our annual compensation cycle. Our traffic is also typically weakest in the fourth quarter of the year.

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 price we charge for each ad click (“CPC”).

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.

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

In the three and twelve months ended December 31, 2023, advertising revenue grew 11% 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 twelve months ended December 31, 2023, driven by ad system and ad format improvements. Average CPC also increased in the three and twelve months ended December 31, 2023 due to higher advertiser demand, as reflected in the increase in average advertising revenue per paying advertising location.

Although average CPC was up year over year in the fourth quarter of 2023, it continued the moderating trend observed earlier in 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 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 presented (in thousands, except percentages):

Paying Advertising Locations

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 twelve-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 current 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.

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The following table presents the number of paying advertising locations for the periods presented (in thousands, except percentages):

Paying advertising locations decreased in the three and twelve months ended December 31, 2023 compared to the prior-year periods largely due to a few lower-spend enterprise advertisers that turned off their advertising spend during 2023.

Reviews and Traffic

We report our reviews and traffic metrics on an annual basis as measures of the volume of our content and the size of our audience, respectively. Although measures of our content (including our reviews metric) and traffic do not factor directly into the advertising arrangements we have with our customers, this dynamic underpins our ability to deliver ad clicks and drive conversion of advertisers’ products and services. Consumer engagement metrics validate our value proposition to businesses as they seek easy-to-use and effective advertising solutions.

Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. Users can access the reviews that are not currently recommended, as well as the star rating and other information about reviews that were removed for violation of our terms of service, through a link on the business’s page.

As of December 31, 2023, 287.4 million reviews had been submitted to our platform, of which 262.8 million reviews were available on business pages, including 51.4 million reviews that were not recommended, and 24.6 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of December 31, 2023 and 2022 (in thousands):

Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, visitors to our non-mobile optimized website, which we refer to as our desktop website, and visitors to our mobile-optimized website, which we refer to as our mobile website. App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize, and we expect that traffic to our website will fluctuate and generally decline over time. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Since the early stages of the COVID-19 pandemic in 2020, traffic levels, particularly in our RR&O categories, have fluctuated as consumer confidence levels changed in response to the pandemic and other macroeconomic conditions. As a result, although our traffic has recovered from its lowest levels in 2020, it has remained below our pre-pandemic 2019 traffic.

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Economic uncertainty and inflationary pressures, among other macroeconomic concerns, continued to negatively impact consumer traffic in 2023 compared to 2019. We cannot predict the remaining duration of these conditions, or the duration or magnitude of any resulting adverse impacts on our traffic, and we expect that our traffic levels will continue to fluctuate with consumers’ level of confidence.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. We calculate app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given twelve-month period. Under this method of calculation, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

The following table presents app unique devices for the periods presented (in thousands):

Desktop and Mobile Website Unique Visitors. We currently calculate desktop unique visitors as the number of “users,” as measured by Google Analytics, who have visited our desktop website at least once in a given month, averaged over a given twelve-month period. Similarly, we have calculated mobile website unique visitors as the number of “users” who have visited our mobile website at least once in a given month, averaged over a given twelve-month period.

Google Analytics measures “users” based on unique identifiers. Because the numbers of desktop unique visitors and mobile website unique visitors are therefore based on unique identifiers, an individual who accesses our desktop website or mobile website from multiple devices with different identifiers may be counted as multiple desktop unique visitors or mobile website unique visitors, as applicable, and multiple individuals who access our desktop website or mobile website from a shared device with a single identifier may be counted as a single desktop unique visitor or mobile website unique visitor.

The following table presents our web traffic for the periods presented (in thousands):

We have discovered in the past, and expect to discover in the future for the duration of our use of Google Analytics, that portions of our desktop traffic measured by Google Analytics have been attributable to robots and other invalid sources. Because traffic from such sources does not represent valid consumer traffic, our reported desktop unique visitor metric for impacted periods reflects an adjustment to the Google Analytics measurement of our traffic to remove traffic that we have identified as originating from invalid sources to provide greater accuracy and transparency. However, we cannot assure you that we have identified or will be able to identify all such traffic for any particular period. For additional information, please see the risk factor included under Part I, Item 1A titled “We rely on data from both internal tools and third parties to calculate certain of our performance metrics. Real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

Additionally, Google has announced that it will no longer offer the Universal Analytics version of its Google Analytics product, which we currently use, as of July 1, 2024. We plan to begin reporting our web traffic metrics based on internal measurement tools for the year ending December 31, 2024, which we believe will allow us to better analyze web traffic data. These changes to our web traffic metrics will result in inconsistency between new data and previously reported data, and we may not have the necessary data to provide an overlapping transition period.

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Active Claimed Local Business Locations

We report active claimed local business locations annually as a measure of the scope of our business. The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The table set forth below presents the number of active claimed local business locations as of the dates presented (in thousands).

Results of Operations

The following table sets forth our results of operations for 2023 and 2022 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.

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

Years Ended December 31, 2023 and 2022

Net Revenue

Advertising. We generate advertising revenue from the sale of our advertising products — including Yelp Ads and business page upgrades — 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.

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Advertising revenue increased in 2023 compared to 2022, driven by a 5% increase in ad clicks and a 9% 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. In the three months ending March 31, 2024, we will begin recognizing revenue from these sources on a net basis within other revenue to reflect that neither transactions revenue nor the underlying business is material to our current business model.

Transactions revenue decreased in 2023 compared to 2022, primarily due to a lower volume of food takeout and delivery orders.

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. Beginning in the three months ending March 31, 2024, other revenue will also include transactions revenue.

Other revenue increased in 2023 compared to 2022, primarily driven by the continued growth of our Yelp Fusion and Yelp Knowledge programs.

Trends and Uncertainties of Net Revenue. Net revenue in the year ended December 31, 2023 increased by 12% year over year, as our execution of our strategic initiatives drove strong advertiser demand in both our Services and RR&O categories. Although we anticipate that net revenue in the first quarter of 2024 will decrease slightly from the fourth quarter of 2023, reflecting typical seasonality in Services and macroeconomic challenges facing our RR&O categories, we also expect that net revenue will grow in the first quarter and full year of 2024 compared to the prior-year periods as our 2024 strategic initiatives gain traction.

Costs and Expenses

Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of 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 and credit card processing fees.

Cost of revenue increased in 2023 compared to 2022, primarily as a result of:

•an increase in merchant credit card processing fees of $2.9 million, primarily due to the increase in advertising revenue;

•an increase in advertising fulfillment costs of $2.7 million largely attributable to the expansion of Yelp Audiences; and

•an increase in website infrastructure expense of $2.1 million, primarily as a result of higher labor costs associated with maintaining and improving our infrastructure.

We expect cost of revenue to increase on an absolute dollar basis in 2024 compared to 2023.

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 increased in 2023 compared to 2022, primarily due to an increase of $54.5 million in employee costs resulting from higher average sales headcount, higher commissions and bonuses due to the increased productivity of our Local sales team, and higher cost of labor.

This increase was partially offset by a decrease of $7.0 million in marketing and advertising costs, primarily related to business owner and consumer marketing, and a decrease of $5.8 million in workplace operating costs from reductions in our leased office space. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements for further detail.

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We expect sales and marketing expenses to increase in 2024 compared to 2023 as sales and marketing headcount remains stable but more tenured. However, we expect sales and marketing expenses to decrease as a percentage of net revenue in 2024 compared to 2023.

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 increased in 2023 compared to 2022, primarily due to an increase in employee costs of $26.8 million as a result of higher average headcount and higher cost of labor.

We expect product development expenses to increase in 2024 compared to 2023 to support our product initiatives. We expect product development expenses as a percentage of net revenue to remain relatively consistent in 2024 compared to 2023.

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 increased in 2023 compared to 2022, primarily due to:

•an increase in our provision for doubtful accounts of $15.7 million due to higher customer delinquencies and higher advertising revenue;

•an increase in impairment charges of $13.1 million related to our leased office spaces. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements for further detail;

•a litigation settlement loss contingency of $11.0 million incurred in 2023 in connection with the agreement to settle a class action lawsuit asserting claims under the California Invasion of Privacy Act (the “CIPA Action”). See Note 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements for further detail; and

•an increase in employee costs of $10.6 million, primarily driven by higher cost of labor.

We expect general and administrative expenses to decrease in 2024 compared to 2023 as the expenses in 2023 included a litigation settlement expense and impairment charges that we do not expect to recur in 2024. Adjusting for these non-recurring items in 2023, we expect general and administrative expenses to increase in 2024 compared to 2023 to support the continued growth of our business and remain relatively consistent as a percentage of net revenue in 2024 compared to 2023.

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 decreased in 2023 compared to 2022, primarily due to a decrease in depreciation expense of leasehold improvements, furniture and fixtures from asset retirements related to lease abandonment and expirations as well as certain other assets becoming fully depreciated since the prior-year period.

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 increased in 2023 compared to 2022, primarily driven by $12.4 million of higher interest income due to increased federal interest rates.

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Provision for Income Taxes

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.

The decrease in the provision for income taxes in 2023 compared to the prior year was primarily due to a tax benefit related to 2022 federal and state tax provision to return adjustments. This benefit was primarily the result of IRS guidance published in the third quarter of 2023 that reduced the amount of research and development expenses required to be capitalized under the Tax Act.

As of December 31, 2023, we had approximately $119.4 million in net deferred tax assets (“DTAs”). As of December 31, 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 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 2024 and beyond will be in the range of 24% to 28%. However, our GAAP tax rate is impacted by a number of factors that are not in our direct control and that are subject to quarterly variability, which limits our visibility into the applicable rate for future fiscal periods. Unless there is a material change, we do not plan to provide regular updates to the above range given the uncertainty inherent in it as a result of these factors.

Non-GAAP Financial Measures

Our consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA, adjusted EBITDA margin and free cash flow, each of which is a non-GAAP financial measure. We have included adjusted EBITDA, adjusted EBITDA margin and free cash flow because they are key measures used by our management and Board to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, to develop short- and long-term operational plans, and to assess our sources of liquidity. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations, while free cash flow provides information about the quality of our earnings. Accordingly, we believe that adjusted EBITDA, adjusted EBITDA margin and free cash flow provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board.

Adjusted EBITDA and free cash flow have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, adjusted EBITDA and free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures 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;

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•free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and

•other companies, including those in our industry, may calculate adjusted EBITDA and free cash flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider adjusted EBITDA, adjusted EBITDA margin and free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities 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.

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

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 the periods presented (in thousands, except percentages):

(1)Recorded within general and administrative expenses on our consolidated statements of operations.

(2) Represents the loss contingency recorded in connection with our 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 13, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements in this Annual Report for additional information.

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Free Cash Flow. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.

The following is a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

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 December 31, 2023, we had cash and cash equivalents of $313.9 million and marketable securities of $127.5 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of three month or less. Our cash held internationally as of December 31, 2023 was $43.9 million. As of December 31, 2023, we also had $7.5 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 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 the Credit Agreement, 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., 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 December 31, 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 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 December 31, 2023.

For additional details regarding the 2023 credit facility, see Note 13, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

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” in this Annual 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 2024 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— Provision for Income Taxes” above; and purchases of property, equipment and

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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 $35.4 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 from 2024 to 2031. Our cash requirements related to these lease agreements are $94.9 million, of which $42.7 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 $27.1 million. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements 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 $214.5 million, of which approximately $90.1 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 presented (in thousands):

Operating Activities. Net cash provided by operating activities during the year ended December 31, 2023 increased by $114.0 million compared to 2022, primarily as a result of an increase of $133.3 million in cash collected from customers, mainly due to an increase in revenue, and a decrease of $19.8 million in 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 $59.1 million in the amount 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 year ended December 31, 2023 decreased compared to 2022 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 on our cash position.

Financing Activities. Net cash used in financing activities during the year ended December 31, 2023 increased compared to 2022 primarily due to 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 year ended December 31, 2023 compared to 2022.

Stock Repurchase Program

As of December 31, 2023, our Board had authorized us to repurchase up to an aggregate of $1.45 billion of our outstanding common stock since it initially authorized our stock repurchase program in July 2017. During the year ended December 31, 2023, we repurchased 5,626,851 shares on the open market for an aggregate purchase price of $200.0 million.

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On February 13, 2024, our Board authorized a $500.0 million increase to our stock repurchase program, bringing the total amount of repurchases authorized under our stock repurchase program since its inception to $1.95 billion. We repurchased $27.0 million of shares subsequent to December 31, 2023, resulting in approximately $554.7 million remaining available for future repurchases on February 20, 2024.

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.

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

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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.

We consider the estimates discussed below to be critical as we believe that the assumptions and estimates associated with these policies have the greatest potential impact on our consolidated financial statements. For further information on these and our other significant accounting estimates, see Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Revenue Recognition—We generate revenue from the sale of advertising products, transactions with consumers and other revenue sources, which correspond to our major product lines. We recognize revenue by applying the following steps: the contract with the customer is identified; the performance obligations in the contract are identified; the transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We apply the portfolio practical expedient to account for contracts with customers in each category of revenue. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the amount of revenue we recognize is equal to the amount we have a right to invoice.

We perform estimates and apply judgment when determining the amount of revenue to be recognized and may accept lower consideration than what is agreed to in the relevant contract. We refer to the difference between the agreed upon consideration amount and the actual consideration estimated to be received as variable consideration; types of variable consideration include cash based incentives, credits and refunds that are estimated based on historical information as well as considering economic conditions, which constrain the revenue. For all contracts with customers, estimates and assumptions include determining variable consideration and identifying the nature and timing of satisfaction of performance obligations. We believe that there will not be significant changes to our estimates of variable consideration. To date, actual amounts of consideration received have been materially consistent with the provisions we have made based on our historical estimates. For contracts satisfied over time, we apply the invoice practical expedient to depict the value transferred to the customer and measure of progress towards completion of its obligations. We consider the right to receive consideration from a customer to correspond directly with the value to the customer of our performance completed to date. We do not consider the effects of the time value of money as substantially all of our contracts are invoiced on a monthly basis, one month in arrears.

For revenue generated from arrangements that involve third parties, considerable judgment may be required in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider whether we obtain control of the specified goods or services before they are transferred to the customer as well as other indicators, such as whether we are the party primarily responsible for the fulfillment, inventory risk and discretion in establishing price. The assessment of whether we are considered the principal or agent in a transaction could impact our revenue and cost of revenue recognized on our consolidated statements of operations. Changes in judgments with respect to assumptions and estimates could impact the amount of revenue recognized.

Website and Internal-Use Software Development Costs—Costs related to website and internal-use software are primarily related to our website and mobile app, including support systems. We capitalize our costs to develop software when:

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preliminary development efforts are successfully completed; management has authorized and committed project funding; and it is probable that the project will be completed and the software will be used as intended. We use judgment to determine which projects will be capitalized and the estimated useful life over which the related asset will be amortized. Costs incurred for enhancements that are expected to result in additional material functionality are capitalized and amortized over the estimated useful life of the upgrades. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is generally three years. This estimated useful life of three years has not historically changed and actual useful lives have been materially consistent with our estimates. While we do not believe that there is a reasonable likelihood of material change in our estimates, factors including obsolescence, the pace of changes in technology, changes in the expected use of the software, competition and other economic factors could require us to change the estimated useful life, which would result in a change to the amount of amortization that we record on our consolidated statements of operations.

Income Taxes—Significant judgment is required to determine our provision for (benefit from) for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles, complex tax laws, or variances between our actual and anticipated operating results. Therefore, actual income taxes could materially vary from these estimates.

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments or changes in the tax law or rates. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Valuation allowances are provided to reduce deferred tax assets to the amount that is more likely than not to be realized. In determining the need for a valuation allowance, the weight given to positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. The determination of future taxable income requires significant judgment and relies on various estimates and assumptions using forecasted amounts. Changes in various factors, including economic and political conditions, could drive actual results in future years to differ from our current assumptions, judgments and estimates. We evaluate the ability to realize net deferred tax assets and the related valuation allowance on a quarterly basis.

We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide for tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, relative tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual 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 and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

The following section also includes information regarding 2022 and 2021, year-over-year comparisons between these periods and certain information regarding 2020. A full discussion of 2020 items and year-over-year comparisons between 2021 and 2020 can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

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 through the sale of performance-based advertising products, which our advertising platform matches to individual consumers through auctions priced on a CPC basis. In the year ended December 31, 2022, our net revenue was $1.19 billion, up 16% from the year ended December 31, 2021 and 37% from the year ended December 31, 2020, and we recorded net income of $36.3 million and adjusted EBITDA of $269.8 million. For information on how we define and calculate adjusted EBITDA and a reconciliation of this non-GAAP financial measure to net income (loss), see “—Non-GAAP Financial Measures” below.

In 2022, we delivered another year of record annual revenue and profitable growth through the consistent execution of our product-led strategic initiatives:

Grow Quality Leads and Monetization in Our Services Categories

•After significantly increasing the percentage of monetized leads in our Services categories — home, local, auto, professional, pets, events, real estate and financial services — in recent years to approximately 25%, in 2022 we shifted our primary focus to improving lead quality and the projects experience while preserving our lead monetization gains. We continued to improve the Request-a-Quote flow and underlying matching technology to create an even more seamless experience. We launched Request-a-Call, which helps reduce initial friction in the hiring process by allowing users to easily request a phone call directly from Services businesses. We also expanded our project-specific search filters, redesigned the Yelp for Business inbox, and introduced a new projects experience in the Yelp app to help consumers more easily view and manage all of their services projects. These efforts contributed to our record advertising revenue from Services businesses in 2022.

Drive Sales through Our Self-Serve and Multi-location Channels

•By prioritizing investments in our Self-serve and Multi-location channels, we have significantly shifted our go-to-market mix toward our most efficient channels in recent years. Our product and marketing efforts drove record Self-serve customer acquisition in 2022, which contributed to annual revenue growth of approximately 25% year over year in this channel. As a result, revenue from our Self-serve channel increased as a percentage of advertising revenue to 19% in 2022 from 17% in 2021.

•Multi-location channel revenue also increased by approximately 25% year over year in 2022 as our sales team leveraged our portfolio of ad products and attribution solutions, both on and off Yelp, to make inroads with these larger advertisers. We continued to expand our offerings, including new iterations of themed and spotlight ad formats. We also enhanced our measurement capabilities through improvements to our first-party attribution solution, Yelp Store Visits. As a result of these efforts, Multi-location channel revenue increased as a percentage of total advertising revenue to 30% in 2022 from 27% in 2021.

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Deliver More Value to Advertisers

•Since transitioning to flexible non-term contracts, we have been able to increase our pace of product innovation and better align our business with our advertisers. In 2022, we continued to deliver value to our advertisers in the form of higher performing clicks by optimizing our ad system to better match consumers with the right advertisers at the right time. For example, we improved the lead-through rate, an important quality indicator, converting a greater percentage of ad clicks to leads on average in 2022 compared to 2021. Despite the macroeconomic challenges of 2022, average CPC increased by 27% from 2021 as advertiser demand remained robust.

Enhance the Consumer Experience

•After several years of substantial monetization progress, we were able to allocate more resources towards enhancing the consumer experience in 2022 and made early progress over the course of the year. We reduced friction in the review-writing process and leveraged smart notifications to prompt more review contributions. We also introduced a more visual, vertical home feed and updated the map view search experience for our Android app to bring it more in-line with the high quality of our iOS app. Together, these efforts contributed to improved new user retention and an 18% increase in the click-through rate of Android ads.

Looking ahead, we believe these strategic initiatives continue to provide opportunities for growth and plan to expand on our progress in 2022 by continuing to invest in each of them. We expect that our expenses will increase modestly year over year in 2023 as we invest in these initiatives and maintain approximately the same headcount we ended 2022 with, following an increase in expenses from the fourth quarter of 2022 to the first quarter of 2023. We also expect that our revenue will grow year over year in 2023 as the benefits of our initiatives build; however, we expect revenue in the first quarter of 2023 to be flat to slightly down sequentially, reflecting seasonal trends.

Factors Affecting Our Performance

Macroeconomic Conditions. There is currently an uncertain and inflationary economic environment in the United States, partially as a result of the COVID-19 pandemic and efforts to contain it and manage its impacts, which have created significant macroeconomic disruption and volatility. These challenging macroeconomic conditions have had, and may continue to have, a significant adverse impact on our business and results of operations. For example, adverse macroeconomic conditions have had, and may continue to have, a negative impact on the ability and willingness of advertisers to spend on our products and services. While our business has now surpassed its pre-pandemic performance in many areas and advertiser demand was strong in 2022, many businesses continue to face supply chain issues, rising commodity prices, and inventory and labor shortages, which has negatively impacted their advertising spending with us.

Changes in consumer behavior due to adverse economic conditions have also had, and may continue to have, a negative impact our business. For example, in 2022 economic uncertainty and inflationary pressures, ongoing concerns related to COVID-19 and its variants, and the non-renewal of government stimulus programs contributed to consumer traffic to our platform remaining below pre-pandemic 2019 levels. Because traffic to and user engagement on our platform together impact the number of ads we are able to show as well as the value of those ads to businesses, such negative impacts on consumer activity may also make it more difficult to convince existing and prospective advertisers that our products offer them a material benefit and generate a competitive return relative to other alternatives. Strong advertiser demand combined with less robust consumer activity has significantly increased our average CPC in 2022 compared to 2021; if the value our products provide to advertisers does not keep pace with any further price increases, our revenue and results of operations could be harmed.

It is not possible for us to predict the remaining duration of the ongoing adverse macroeconomic conditions or of the pandemic, the severity of future COVID-19 variants and resulting restrictions, or the duration or magnitude of any resulting adverse impact on our business. Adverse macroeconomic conditions have historically been particularly challenging for the SMBs on which we rely and any protracted economic downturn would have significant negative effects on our business.

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Investment in Growth. In 2023, we plan to invest heavily in our strategic initiatives to grow quality leads and monetization of our Services categories, expand our Self-serve and Multi-location channels, deliver more value to advertisers and enhance the consumer experience. These initiatives will require substantial investments that may not prioritize short-term financial results, depend on our ability to develop innovative, relevant and useful products in a timely manner, and involve significant risks and uncertainties. For example, new products may fail to generate sufficient revenue, operating margin or other value to justify the investments we made in them, which is a particular risk for new products that are unproven or that are outside of our historical core business. While we believe these initiatives will ultimately drive revenue growth, our investments in them will increase our operating expenses, and any increase in revenue resulting from these product innovations will likely trail the increase in expenses.

Our Ability to Attract, Retain and Engage Consumers. We generate substantially all of our revenue based on our users’ engagement with the ads that we display. Because traffic to our platform and user engagement on our platform together determine the number of ads we are able to show, affect the value of those ads to businesses and support the content creation that drives further traffic, our ability to attract, retain and engage visitors on our platform is critical to our business and financial success. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Our Ability to Attract and Retain Advertisers. Our revenue growth is driven by our ability to attract and retain advertising customers. To do so, we must deliver tailored advertising products at a competitive price in a highly competitive market. A substantial portion of our advertisers have the ability to cancel their advertising campaigns at any time. Their decisions to renew depend on the degree of satisfaction with our products as well as a number of factors that are outside of our control, including their ability to continue their operations and spending levels. Although the opportunity presented by our Multi-location channel is a strategic priority, we continue to rely heavily on SMBs that often have limited advertising budgets, may view online advertising products like ours as experimental and unproven, and are disproportionately impacted by macroeconomic conditions.

Our Ability to Attract and Retain Talent. Our ability to execute on our strategic initiatives depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we expect to continue to face significant competition from other companies in hiring such personnel, particularly for technical roles. In 2022, we made substantial investments in our engineering, sales and marketing organizations, which has required us to effectively integrate, develop and motivate a large number of new employees in a remote environment while maintaining the beneficial aspects of our company culture. Our employee operations are complex and place substantial demands on management and our operational infrastructure, particularly in our fully remote work environment. We believe our decision to maintain distributed operations will provide even greater flexibility to our employees, who now have the opportunity to relocate within the countries where we operate so they can live where they want to live and work where they will feel most effective, will allow us to access and attract great talent from a more diverse pool of candidates across the United States, Canada and in Europe.

Stock Repurchases. Since July 2017, our board of directors has authorized us to repurchase up to an aggregate of $1.45 billion of our outstanding common stock, $254.7 million of which remained available as of February 17, 2023 and which does not have an expiration date. During the year ended December 31, 2022, we repurchased on the open market 6,195,093 shares for an aggregate purchase price of $200.0 million. The actual timing and amount of repurchases remain subject to a variety of factors, including liquidity, cash flow and market conditions. In addition, the terms of our Credit Agreement with Wells Fargo Bank, National Association, which we entered into in May 2020 (the “Credit Agreement”), impose limitations on our ability to repurchase shares during the term of our revolving credit facility. We have funded the repurchases, and expect to fund future repurchases under the stock repurchase program, with cash available on our balance sheet. As a result, this program could diminish our cash reserves and reduce our ability to invest in our business, in addition to affecting the trading price and volatility of our stock.

Corporate Development Activities. As part of our business strategy, we may decide to expand our product offerings and grow our business through the acquisition of complementary businesses or technologies, as well as through partnerships. In addition to diverting our management’s attention and otherwise disrupting our operations, our corporate development activities will affect our future financial results due to factors such as expenses incurred in identifying, investigating and pursuing transactions, whether or not they are consummated, possible dilutive issuances of equity securities or the incurrence of debt, unidentified liabilities and the amortization of acquired intangible assets. Maintaining relationships with partners also requires significant time and resources, as does integrating their data, services and technologies onto our platform. We may not realize the full benefits of synergies, innovation and operational efficiencies that may be possible from a corporate transaction;

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similarly, if our relationships with partners deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with our content or services.

Seasonality and Cyclicality. Our business is affected by seasonal fluctuations in Internet usage and advertising spending. Based on historical trends, our revenue is typically lowest in the first quarter and increases through the year to its highest level in the fourth quarter. Multi-location ad budgets are generally lowest at the beginning of the year and peak in the fourth quarter, though our SMB customers tend to decrease their spending at that time. Our traffic is also typically weakest in the fourth quarter of the year in connection with year-end holidays.

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

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.

Because we generate revenue primarily from the sale of performance-based ads, our revenue depends in large part on our ability to deliver ad clicks, which in turn depends on the level of consumer activity on our platform. We report the year-over-year percentage change in ad clicks on a quarterly and annual basis as a measure of our success in monetizing more of our consumer traffic and delivering more value to advertisers. Although ad clicks decreased in the three months and year ended December 31, 2022 compared to the prior-year periods — which benefited from reopening tailwinds following the widespread availability of the COVID-19 vaccine as well as elevated consumer spending — revenue increased year over year in both periods as a result of increases in average CPC, as discussed below.

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

Average CPC

We define average CPC 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 quarterly or annual period.

Average CPC, when viewed together with ad clicks, provides 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.

We believe that average CPC and ad clicks together reflect one of the largest dynamics affecting our advertising revenue performance. These metrics reflect, among other things, the interplay of advertiser demand and consumer behavior on our platform, each of which is currently subject to complex macroeconomic pressures that we expect to continue to cause volatility in these metrics in the near term. For example, despite ad clicks decreasing year over year in the three months and year ended December 31, 2022, advertiser demand remained strong and average CPC increased year over year in both periods. We believe this was because we delivered more value to advertisers in 2022 in the form of higher performing clicks — rather than simply a greater number of clicks as in certain previous periods — contributing to a record retention rate of non-term advertisers’ budgets in 2022 despite a modest increase in churn in the second half of the year.

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

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 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 presented (in thousands):

Paying Advertising Locations

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 twelve-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 on a quarterly basis 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 ongoing concerns about COVID-19 and its variants as well as 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 for the periods presented (in thousands):

Reviews, Traffic and Active Claimed Local Business Locations

We report our reviews, traffic and active claimed local business locations metrics on an annual basis as measures of the volume of our content, the size of our audience and the scope of our business, respectively.

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Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. Users can access the reviews that are not currently recommended, as well as the star rating and other information about reviews that were removed for violation of our terms of service, through a link on the business’s page.

As of December 31, 2022, 265.3 million reviews had been submitted to our platform, of which 243.0 million reviews were available on business pages, including 48.0 million reviews that were not recommended, and 22.3 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of the dates indicated (in thousands):

Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, visitors to our non-mobile optimized website, which we refer to as our desktop website, and visitors to our mobile-optimized website, which we refer to as our mobile website. App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize, and we expect that traffic to our website will fluctuate and generally decline over time. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Since the early stages of the COVID-19 pandemic in 2020, traffic levels, particularly in our RR&O categories, have fluctuated as consumer confidence levels changed in response to the pandemic and COVID-19 variants, as well as other macroeconomic conditions. As a result, although our traffic recovered in 2021 compared to the prior year, it remained below our pre-pandemic 2019 traffic. Similarly, subsequent increases in economic uncertainty and inflationary pressures, ongoing concerns related to COVID-19 and its variants, and the non-renewal of government stimulus programs continued to negatively impact consumer traffic in 2022 compared to 2019. We cannot predict the remaining duration of these conditions, or the duration or magnitude of any resulting adverse impacts on our traffic, and we expect that our traffic levels will continue to fluctuate with consumers’ level of confidence.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. We calculate app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given twelve-month period. Under this method of calculation, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

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The following table presents app unique devices for the periods indicated (in thousands):

Desktop and Mobile Website Unique Visitors. We calculate desktop unique visitors as the number of “users,” as measured by Google Analytics, who have visited our desktop website at least once in a given month, averaged over a given twelve-month period. Similarly, we calculate mobile website unique visitors as the number of “users” who have visited our mobile website at least once in a given month, averaged over a given twelve-month period.

Google Analytics, a product from Google Inc. that provides digital marketing intelligence, measures “users” based on unique identifiers. Because the numbers of desktop unique visitors and mobile website unique visitors are therefore based on unique identifiers, an individual who accesses our desktop website or mobile website from multiple devices with different identifiers may be counted as multiple desktop unique visitors or mobile website unique visitors, as applicable, and multiple individuals who access our desktop website or mobile website from a shared device with a single identifier may be counted as a single desktop unique visitor or mobile website unique visitor.

The following table presents our web traffic for the periods indicated (in thousands):

We have discovered in the past, and expect to discover in the future, that portions of our desktop traffic, as measured by Google Analytics, have been attributable to robots and other invalid sources. Because traffic from such sources does not represent valid consumer traffic, our reported desktop unique visitor metric for impacted periods reflects an adjustment to the Google Analytics measurement of our traffic to remove traffic that we have identified as originating from invalid sources to provide greater accuracy and transparency. However, we cannot assure you that we will be able to identify all such traffic for any particular period. For additional information, please see the risk factor included under Part I, Item 1A under the heading “We rely on data from both internal tools and third parties to calculate certain of our performance metrics. Real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

Active Claimed Local Business Locations

The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The table set forth below presents the number of active claimed local business locations as of the dates presented (in thousands).

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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.

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We consider the estimates discussed below to be critical as we believe that the assumptions and estimates associated with these policies have the greatest potential impact on our consolidated financial statements. For further information on these and our other significant accounting estimates, see Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Revenue Recognition—We generate revenue from the sale of advertising products, transactions with consumers and other revenue sources, which correspond to our major product lines. We recognize revenue by applying the following steps: the contract with the customer is identified; the performance obligations in the contract are identified; the transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We apply the portfolio practical expedient to account for contracts with customers in each category of revenue. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the amount of revenue we recognize is equal to the amount we have a right to invoice.

We perform estimates and apply judgment when determining the amount of revenue to be recognized and may accept lower consideration than what is agreed to in the relevant contract. We refer to the difference between the agreed upon consideration amount and the actual consideration estimated to be received as variable consideration; types of variable consideration include cash based incentives, credits and refunds that are estimated based on historical information as well as considering economic conditions, which constrain the revenue. For all contracts with customers, estimates and assumptions include determining variable consideration and identifying the nature and timing of satisfaction of performance obligations. We believe that there will not be significant changes to our estimates of variable consideration. To date, actual amounts of consideration received have been materially consistent with the provisions we have made based on our historical estimates. For contracts satisfied over time, we apply the invoice practical expedient to depict the value transferred to the customer and measure of progress towards completion of its obligations. We consider the right to receive consideration from a customer to correspond directly with the value to the customer of our performance completed to date. We do not consider the effects of the time value of money as substantially all of our contracts are invoiced on a monthly basis, one month in arrears.

For revenue generated from arrangements that involve third parties, considerable judgment may be required in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider whether we obtain control of the specified goods or services before they are transferred to the customer as well as other indicators, such as whether we are the party primarily responsible for the fulfillment, inventory risk and discretion in establishing price. The assessment of whether we are considered the principal or agent in a transaction could impact our revenue and cost of revenue recognized on our consolidated statements of operations. Changes in judgments with respect to assumptions and estimates could impact the amount of revenue recognized.

Website and Internal-Use Software Development Costs—Costs related to website and internal-use software are primarily related to our website and mobile app, including support systems. We capitalize our costs to develop software when: preliminary development efforts are successfully completed; management has authorized and committed project funding; and it is probable that the project will be completed and the software will be used as intended. We use judgment to determine which projects will be capitalized and the estimated useful life over which the related asset will be amortized. Costs incurred for enhancements that are expected to result in additional material functionality are capitalized and amortized over the estimated useful life of the upgrades. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is generally three years. This estimated useful life of three years has not historically changed and actual useful lives have been materially consistent with our estimates. While we do not believe that there is a reasonable likelihood of material change in our estimates, factors including obsolescence, the pace of changes in technology, changes in the expected use of the software, competition and other economic factors could require us to change the estimated useful life, which would result in a change to the amount of amortization that we record on our consolidated statements of operations.

Income Taxes—Significant judgment is required to determine our provision (benefit) for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles, complex tax laws, or variances between our actual and anticipated operating results. Therefore, actual income taxes could materially vary from these estimates.

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments or changes in the tax law or rates. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Valuation

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allowances are provided to reduce deferred tax assets to the amount that is more likely than not to be realized. In determining the need for a valuation allowance, the weight given to positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. The determination of future taxable income requires significant judgment and relies on various estimates and assumptions using forecasted amounts. Changes in various factors, including economic and political conditions, could drive actual results in future years to differ from our current assumptions, judgments and estimates. We evaluate the ability to realize net deferred tax assets and the related valuation allowance on a quarterly basis.

We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide for tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, relative tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

Results of Operations

The following tables set forth our results of operations for 2022 and 2021 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.

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

(2) Percentage change is not meaningful.

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Years Ended December 31, 2022 and 2021

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 increased in 2022 compared to 2021 driven by higher aggregate customer spend and an increase in paying advertising locations.

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 increased in 2022 compared to 2021, primarily due to an increase in the per-order transaction fee that we receive from Grubhub following the renewal of our partnership in March 2022. This increase was partially offset by a lower volume of food takeout and delivery orders compared to the prior year; food order volume decreased year over year in both 2021 and 2022 as public health restrictions and concerns related to COVID-19 and its variants eased, resulting in more dine-in options.

Other Revenue. We generate revenue through our subscription services, which include 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 increased in 2022 compared to 2021, primarily reflecting higher revenue from the continued growth of our Yelp Fusion program. The increase also reflects lower COVID-19 relief incentives, mainly in the form of waived subscription fees, for our subscription product customers in the current year.

Trends and Uncertainties of Net Revenue. Net revenue in the year ended December 31, 2022 increased by 16% year over year, driven by strong advertiser demand in both our Services and RR&O categories despite a challenging macroeconomic environment. Although we anticipate that net revenue in the first quarter of 2023 will decrease from or remain relatively consistent with the fourth quarter of 2022, reflecting historical seasonal trends, we also expect that net revenue will grow in the first quarter and full year of 2023 compared to the prior-year periods as our initiatives continue to drive growth.

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 increased in 2022 compared to 2021, primarily as a result of:

•an increase in website infrastructure expense of $12.1 million as a result of investments in maintaining and improving our infrastructure;

•an increase in advertising fulfillment costs of $11.1 million largely attributable to the expansion of Yelp Audiences; and

•an increase in merchant credit card processing fees of $3.4 million primarily due to a higher volume of transactions associated with the increase in advertising revenue.

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

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business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.

Sales and marketing expenses increased in 2022 compared to 2021, primarily due to:

•an increase of $54.0 million in employee costs due to higher average sales headcount; and

•an increase in marketing and advertising costs of $16.4 million primarily reflecting our investment in business owner and consumer marketing.

These increases were partially offset by a decrease of $9.7 million in workplace operating costs from reductions in our leased office space. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements for further detail.

We expect sales and marketing expenses to increase in 2023 compared to 2022 as we continue to invest in our marketing initiatives. 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 increased in 2022 compared to 2021, primarily due to an increase in employee costs of $31.1 million as a result of higher average headcount.

We expect product development expenses to increase in 2023 compared to 2022 as we invest 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 workplace and other supporting overhead costs.

General and administrative expenses increased in 2022 compared to 2021, primarily due to:

•an increase in employee costs of $15.1 million resulting from higher average headcount;

•an increase in our provision for doubtful accounts of $10.4 million due to the higher advertising revenue in 2022 and the release of COVID-19-related bad debt reserves in 2021; and

•a net gain of $3.7 million recognized in 2021 as a result of the termination of an office lease, which did not recur in 2022. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements 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 software development costs, and amortization of purchased intangible assets.

Depreciation and amortization expense decreased in 2022 compared to 2021, primarily due to a decrease in depreciation expense of leasehold improvements from asset retirements related to lease terminations and expirations and, to a lesser extent, lower amortization expense resulting from intangible assets that had become fully amortized since prior year.

Restructuring. In April 2020, we announced the Restructuring Plan to help manage the near-term financial impacts of the COVID-19 pandemic, followed by an additional workforce reduction announced in July 2020. We incurred $3.9 million in restructuring costs during the year ended December 31, 2020, which consisted of severance, payroll taxes and related benefits

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costs for terminated employees. We incurred an immaterial amount of restructuring costs in 2021 and no restructuring costs during the year ended December 31, 2022. We do not expect to incur any additional restructuring costs related to the Restructuring Plan and subsequent workforce reduction in July 2020.

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, amortization of debt issuance costs, credit facility fees and foreign exchange gains and losses.

Other income, net increased in 2022 compared to 2021, primarily driven by higher interest income from our investments in money market funds due to increasing federal interest rates and net accretion on our investments in marketable securities, which we began purchasing in July 2022.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) 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.

The change from a (benefit from) income taxes in 2021 to a provision for income taxes in 2022 was primarily due to an increase in profit before tax and the capitalization of research and development expenses, which became mandatory under section 174 of the Tax Act in 2022. The mandatory capitalization of Section 174 expenses under the Tax Act requires us to capitalize research and experimental expenditures and amortize them on the U.S. tax return over five or fifteen years based on where research is conducted. This required capitalization resulted in an overall increase in provision for income taxes and in deferred tax assets (“DTAs”).

As of December 31, 2022, we had approximately $97.4 million in net DTAs. At this time, we consider it more likely than not that we will have sufficient taxable income in the future to 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 to reduce our U.S. DTAs may be required, which materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our 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.

Non-GAAP Financial Measures

Our 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. We have included adjusted EBITDA and adjusted EBITDA margin because they are key measures used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of 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;

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•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 restructuring costs, impairment charges and net gain on lease termination; 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 (expense), net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items, such as restructuring costs, impairment charges and net gain on lease termination.

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

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):

(1)Recorded within general and administrative expenses on our consolidated statements of operations.

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 December 31, 2022, we had cash and cash equivalents of $306.4 million and marketable securities of $94.2 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of three month or less. Our cash held internationally as of December 31, 2022 was $31.7 million. As of December 31, 2022, 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 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.

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We have the ability to access backup liquidity to fund working capital and other capital requirements, as needed, through a three-year, $75.0 million senior unsecured revolving credit facility (including a $25.0 million letter of credit sub-limit) as part of our Credit Agreement with Wells Fargo. As of December 31, 2022, we had $20.5 million of letters of credit under the sub-limit related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $54.5 million remained available under the revolving credit facility as of that date. The commitments under the Credit Agreement expire on May 5, 2023; however, we expect to refinance the credit facility prior to maturity, subject to market conditions.

The Credit Agreement requires us to comply with a maximum consolidated total leverage ratio and minimum consolidated interest coverage ratio. The Credit Agreement also contains customary limitations on our ability to: create, incur, assume or be liable for indebtedness; dispose of assets outside the ordinary course; acquire, merge or consolidate with or into another person or entity; create, incur or allow any lien on any of our property; make investments; or pay dividends, make distributions or repurchase shares. Such limitations are subject to certain exceptions. In addition, the Credit Agreement provides for certain events of default such as nonpayment of principal and interest when due, breaches of representations and warranties, noncompliance with covenants, acts of insolvency and default on indebtedness held by third parties (subject to certain limitations and cure periods). As of December 31, 2022, we were in compliance with all covenants and there were no loans outstanding under the Credit Agreement.

Material Cash Requirements

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under the heading “Risk Factors” in this Annual Report. We believe that our existing cash and cash equivalents, 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, primarily due to the requirement to amortize certain research and development expenses under the Tax Act; 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 exhaust our available cash and cash equivalents earlier than presently anticipated. We are not able to reasonably estimate the timing of future cash flows related to $31.0 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 from 2023 to 2031. Our cash requirements related to these lease agreements are $139.6 million, of which $45.3 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 $42.9 million. See Note 9, “Leases,” of the Notes to Consolidated Financial Statements 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 $33.0 million, of which approximately $31.4 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 and cash equivalents will not be impacted by adverse conditions in the financial markets.

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Cash Flows

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

Operating Activities. Net cash provided by operating activities during the year ended December 31, 2022 decreased compared to 2021 primarily due to higher income taxes and employee costs paid as well as the timing of payments to vendors. These movements were partially offset by an increase in cash provided by customers due to higher revenue.

Investing Activities. Net cash used in investing activities during the year ended December 31, 2022 increased compared to 2021 primarily due to the purchase 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 for our cash position. This increase in cash used was partially offset by cash provided by the sales and maturities of marketable securities.

Financing Activities. Net cash used in financing activities during the year ended December 31, 2022 decreased compared to 2021 primarily due to a decrease in repurchases of common stock pursuant to our stock repurchase program.

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, $254.7 million of which remained available as of February 17, 2023.

We may purchase 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 year ended December 31, 2022, we repurchased 6,195,093 shares on the open market for an aggregate purchase price of $200.0 million.

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

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual 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 and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual 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 220 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 through the sale of performance-based advertising products, which our advertising platform matches to individual consumers through auctions priced on a CPC basis. In the year ended December 31, 2021, our net revenue was $1.0 billion, up 18% from the year ended December 31, 2020 and 2% from the year ended December 31, 2019, and we recorded net income of $39.7 million and adjusted EBITDA of $246.3 million. In the year ended December 31, 2020, our net revenue was $872.9 million, which represented a decrease of 14% from the year ended December 31, 2019, and we recorded a net loss of $19.4 million and adjusted EBITDA of $140.3 million. For information on how we define and calculate adjusted EBITDA and a reconciliation of this non-GAAP financial measure to net income (loss), see “—Non-GAAP Financial Measures” below.

In 2021, we delivered record annual revenue and profitable growth despite a difficult operating environment through consistent execution of our strategic initiatives and an elevated pace of product innovation:

•we built increasingly differentiated product experiences for both consumers and businesses in our Services categories through the launch of new products and features that help better match consumers with the right Services businesses, resulting in an increase in the percentage of monetized leads and record average revenue per paying advertising location in our Services categories;

•improvements to the claim and ad purchase flows as well as marketing improvements drove record customer acquisition and strong retention in our Self-serve channel; revenue from this channel grew 45% year over year to reach a new record in 2021 and also increased as a percentage of our total advertising revenue;

•our Multi-location sales team’s efforts to strengthen customer relationships as well as our introduction of new Multi-location ad products, expansion of our attribution solution and full launch of our off-platform solution drove record revenue from our Multi-location channel, which increased by approximately 30% year over year and also increased as a percentage of our total advertising revenue;

•we delivered more value to advertisers through many new ad formats as well as improvements to our advertising system, resulting in ad clicks increasing by 24% and average CPC decreasing by 5% year over year, even as our consumer traffic remained impacted by ongoing concerns about COVID-19 and its variants; and

•the savings from our smaller local sales force, efficiencies resulting from our growth initiatives and our decision to remain working on a distributed basis permanently helped us achieve positive net income and a record annual adjusted EBITDA margin in 2021.

Our performance in 2021 demonstrates that the initiatives we began in 2019 successfully transformed Yelp into a stronger, more efficient and product-led business. In 2022, we plan to build on the structural improvements to our business by continuing to invest in our key strategic initiatives as set forth below, as well as expanding our focus to include the consumer experience:

•Grow quality leads and monetization of our Services categories. We continue to believe that differentiating the Services experience will allow us to both monetize more of our consumer traffic and convert more Services businesses into

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advertisers. In addition to differentiating the product experience, we plan to explore opportunities to improve lead quality as well as the distribution of leads to match more consumers with the right Services businesses for their projects.

•Drive sales through our most efficient channels. In 2022, we are continuing to explore ways to drive businesses through our fully digital Self-serve channel by marketing and a more streamlined ads purchase flow, offering new tools to drive business owner engagement and providing businesses with more control over their ad campaigns. We also plan to further expand our Multi-location product offerings and attribution solutions as well as leverage our strengthened customer relationships to both acquire new Multi-location customers and expand our business with existing customers.

•Deliver more value to advertisers. In 2022, we plan to continue improving the relevance and value of our ads by introducing new formats as well as by driving efficiency through ad system optimizations and improved matching.

•Enhance the consumer experience. We plan to invest in a broad set of consumer product and marketing initiatives designed to drive consumer engagement and content contributions. We are also investing in product initiatives to further differentiate the experience between categories and increase engagement, as well as bring the consumer experience on our Android app in line with our iOS app.

We expect that our expenses will remain relatively flat throughout the year following an increase from the fourth quarter of 2021 to the first quarter of 2022 as we invest in our strategic initiatives. We also expect that revenue will grow relatively consistently on an absolute basis throughout the year as the benefits of our initiatives build following a slight decrease from the fourth quarter of 2021 to the first quarter of 2022, reflecting seasonal trends.

Factors Affecting Our Performance

COVID-19. The COVID-19 pandemic has had, and may to continue to have, a significant adverse impact on our business and results of operations. Although vaccines are currently available and some public health restrictions have eased, the number of COVID-19 cases has continued to fluctuate, negatively impacting consumer confidence and user activity on our platform in turn. User activity in our Restaurants, Retail and Other categories has been particularly sensitive to changes in consumer confidence and, as a result, traffic and revenue in these categories remained below their pre-pandemic 2019 levels in 2021. While the positive trends we have seen in user activity during periods of higher consumer confidence and looser public health restrictions give us confidence that traffic will return organically as the pandemic recedes, it is not possible for us to predict the remaining duration of the pandemic, the severity of future COVID-19 variants and resulting restrictions, or the duration or magnitude of the adverse impact on our business. Even after the COVID-19 pandemic has subsided, health measures taken by governments and private industry in response to the pandemic may have a long-term adverse effect on the economy. Adverse macroeconomic conditions have historically been particularly challenging for the SMBs on which we rely and any protracted economic downturn would have significant negative effects on our business.

Investment in Growth. In 2022, we plan to invest heavily in our strategic initiatives to grow quality leads and monetization of our Services categories, expand our Self-serve and Multi-location channels, deliver more value to advertisers and enhance the consumer experience. These initiatives will require substantial investments that may not prioritize short-term financial results, depend on our ability to develop innovative, relevant and useful products in a timely manner, and involve significant risks and uncertainties. For example, new products may fail to generate sufficient revenue, operating margin or other value to justify the investments we made in them, which is a particular risk for new products that are unproven or that are outside of our historical core business. While we believe these initiatives will ultimately drive revenue growth, our investments in them will increase our operating expenses, and any increase in revenue resulting from these product innovations will likely trail the increase in expenses.

Our Ability to Attract, Retain and Engage Consumers. We generate substantially all of our revenue based on our users' engagement with the ads that we display. Because traffic to our platform and user engagement on our platform together determine the number of ads we are able to show, affect the value of those ads to businesses and support the content creation that drives further traffic, our ability to attract, retain and engage visitors on our platform is critical to our business and financial success. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

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Our Ability to Attract and Retain Advertisers. Our revenue growth is driven by our ability to attract and retain advertising customers. To do so, we must deliver tailored advertising products at a competitive price in a highly competitive market. A substantial portion of our advertisers have the ability to cancel their advertising campaigns at any time. Their decisions to renew depend on the degree of satisfaction with our products as well as a number of factors that are outside of our control, including their ability to continue their operations and spending levels. Although the opportunity presented by our Multi-location channel is a strategic priority, we continue to rely heavily on SMBs that often have limited advertising budgets, may view online advertising products like ours as experimental and unproven, and are disproportionately impacted by macroeconomic conditions.

Our Ability to Attract and Retain Talent. Our ability to execute on our strategic initiatives depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we expect to continue to face significant competition from other companies in hiring such personnel, particularly for technical roles. In 2021, we made substantial investments in our engineering, sales and marketing organizations, which has required us to effectively integrate, develop and motivate a large number of new employees in a remote environment while maintaining the beneficial aspects of our company culture. Our employee operations are complex and place substantial demands on management and our operational infrastructure, particularly in the primarily remote work environment that we plan to maintain. For example, our ongoing efforts to hire technical employees outside of the United States has resulted in the expansion of our international operations, which adds complexity and may be disruptive to our product development efforts. We believe our decision to remain working on a distributed basis permanently will provide even greater flexibility to our employees, who now have the opportunity to relocate within the countries where we operate so they can live where they want to live and work where they will feel most effective, will result in improved employee retention as well as allow us to access and attract great talent from a more diverse pool of candidates across the United States, Canada and Europe.

Stock Repurchases. Since July 2017, our board of directors has authorized us to repurchase up to an aggregate of $1.2 billion of our outstanding common stock, $194.7 million of which remained available as of February 18, 2022 and which does not have an expiration date. During the year ended December 31, 2021, we repurchased on the open market 6,995,170 shares for an aggregate purchase price of $262.9 million. During the year ended December 31, 2020, we repurchased on the open market 803,691 shares for an aggregate purchase price of $24.4 million. During the year ended December 31, 2019, we repurchased on the open market 14,190,409 shares for an aggregate purchase price of $481.0 million. The actual timing and amount of repurchases remain subject to a variety of factors, including liquidity, cash flow and market conditions. In addition, the terms of our Credit Agreement with Wells Fargo Bank, National Association, which we entered into in May 2020 (the "Credit Agreement"), impose limitations on our ability to repurchase shares during the term of our revolving credit facility. We have funded the repurchases, and expect to fund future repurchases under the stock repurchase program, with cash available on our balance sheet. As a result, this program could diminish our cash reserves and reduce our ability to invest in our business, in addition to affecting the trading price and volatility of our stock.

Corporate Development Activities. As part of our business strategy, we may decide to expand our product offerings and grow our business through the acquisition of complementary businesses or technologies, as well as through partnerships. In addition to diverting our management's attention and otherwise disrupting our operations, our corporate development activities will affect our future financial results due to factors such as expenses incurred in identifying, investigating and pursuing transactions, whether or not they are consummated, possible dilutive issuances of equity securities or the incurrence of debt, unidentified liabilities and the amortization of acquired intangible assets. Maintaining relationships with partners also requires significant time and resources, as does integrating their data, services and technologies onto our platform. We may not realize the full benefits of synergies, innovation and operational efficiencies that may be possible from a corporate transaction; similarly, if our relationships with partners deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with our content or services.

Seasonality and Cyclicality. Our business is affected by seasonal fluctuations in Internet usage and advertising spending. Based on historical trends, our revenue is typically lowest in the first quarter and increases through the year to its highest level in the fourth quarter. Multi-location ad budgets are generally lowest at the beginning of the year and peak in the fourth quarter, though our SMB customers tend to decrease their spending at that time. Our traffic is also typically weakest in the fourth quarter of the year in connection with year-end holidays.

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.

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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. 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 partnership. We do not expect the exclusion of such user interactions to materially affect this metric.

Because we generate revenue primarily from the sale of performance-based ads, our ability to increase our revenue depends largely on our ability to increase ad clicks. We report the year-over-year percentage change in ad clicks on a quarterly basis as a measure of our success in monetizing more of our consumer traffic and delivering more value to advertisers.

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

Average CPC

We define average CPC 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 three-month period.

Average CPC, when viewed together with ad clicks, provides 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 three-month 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. This was the case in the fourth quarter of 2021, when growth in ad clicks outpaced growth in average CPC, helping drive increases in our NTC retention rate and advertising revenue in turn. We believe that average CPC and ad clicks together reflect one of the largest dynamics affecting our advertising revenue performance.

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

Ad 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. Our Services categories consist of home, local, auto, professional, pets, events, real estate and financial services. Our Restaurants, Retail and Other categories consist of restaurants, shopping, beauty & fitness, health and other.

In 2021, we refined our methodology for determining the business category with which advertising revenue is associated to be based on the business category of each advertising location rather than the business category of the business account that paid for the advertising. While business locations associated with a single payment account are generally part of the same business, they may offer a variety or a combination of services that differ by location; accordingly, we believe our new methodology provides a more precise breakdown of our advertising revenue between our Services and Restaurants, Retail and Other categories.

The categorization of business locations can change over time and historical business categories for individual business locations are not available; as a result, it is impracticable to apply our new methodology to prior-year amounts based on the

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business categorizations in effect during the prior-year periods. However, applying our new methodology to 2019 and 2020 advertising revenue based on the current business categories of the associated advertising locations does not result in a materially different breakdown than previously reported for such periods. Due to the differences between the types of business categories comprising our Services and Restaurants, Retail and Other categories, we do not believe a significant number of businesses are re-categorized such that they move from one high-level category grouping to the other, and so do not believe the result would be materially different based on the then-current categorizations.

The following table presents our advertising revenue by category for the periods presented (in thousands):

Paying Advertising Locations

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-month period. We also provide a breakdown of paying advertising locations between our Services categories and Restaurants, Retail and Other categories.

We provide our paying advertising locations on a quarterly basis 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 ongoing concerns about COVID-19 and its variants as well as labor and supply chain challenges, have had a predominant negative impact on Restaurants, Retail and Other 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 for the periods presented (in thousands):

Reviews, Traffic and Active Claimed Local Business Locations

We report our reviews, traffic and active claimed local business locations metrics on an annual basis as measures of the volume of our content, the size of our audience and the scope of our business, respectively.

Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. By clicking on a link on a reviewed business’s page on our website, users can access the reviews that are not currently recommended for the business, as well as the star rating and other information about reviews that were removed for violation of our terms of service.

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As of December 31, 2021, 244.4 million reviews had been submitted to our platform, of which 224.4 million reviews were available on business pages, including 51.4 million reviews that were not recommended, and 20.0 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of the dates indicated (in thousands):

Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, visitors to our non-mobile optimized website, which we refer to as our desktop website, and visitors to our mobile-optimized website, which we refer to as our mobile website. App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize, and we expect that traffic to our website will fluctuate and generally decline over time. While we believe our largest growth opportunity will be to monetize a greater portion of our existing traffic, rather than to grow traffic generally, we are also investing in a broad set of consumer initiatives to support the long-term growth of our traffic and business.

Traffic levels fluctuated in 2021 as consumer confidence levels changed in response to the emergence of COVID-19 variants and the severity of local public health restrictions, particularly in our Restaurants, Retail and Other categories. As a result, although our traffic recovered in 2021 compared to the prior year, it remained below our pre-pandemic 2019 traffic. While we believe that traffic will rebound organically as the pandemic recedes, we cannot predict the remaining duration of the pandemic or the magnitude of its impact on our traffic, and we expect that our traffic levels will continue to fluctuate with consumers’ level of confidence.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. We calculate app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given twelve-month period. Under this method of calculation, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

The following table presents app unique devices for the periods indicated (in thousands):

Desktop and Mobile Website Unique Visitors. We calculate desktop unique visitors as the number of “users,” as measured by Google Analytics, who have visited our desktop website at least once in a given month, averaged over a given twelve-month period. Similarly, we calculate mobile website unique visitors as the number of “users” who have visited our mobile website at least once in a given month, averaged over a given twelve-month period.

Google Analytics, a product from Google Inc. that provides digital marketing intelligence, measures “users” based on unique cookie identifiers. Because the numbers of desktop unique visitors and mobile website unique visitors are therefore based on unique cookies, an individual who accesses our desktop website or mobile website from multiple devices with different cookies may be counted as multiple desktop unique visitors or mobile website unique visitors, as applicable, and multiple individuals who access our desktop website or mobile website from a shared device with a single cookie may be counted as a single desktop unique visitor or mobile website unique visitor.

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The following table presents our web traffic for the periods indicated (in thousands):

We have discovered in the past, and expect to discover in the future, that portions of our desktop traffic, as measured by Google Analytics, have been attributable to robots and other invalid sources. Because traffic from such sources does not represent valid consumer traffic, our reported desktop unique visitor metric for impacted periods reflects an adjustment to the Google Analytics measurement of our traffic to remove traffic that we have identified as originating from invalid sources to provide greater accuracy and transparency. However, we cannot assure you that we will be able to identify all such traffic for any particular period. For additional information, please see the risk factor included under Part I, Item 1A under the heading “We rely on data from both internal tools and third parties to calculate certain of our performance metrics. Real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

Active Claimed Local Business Locations

The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The table set forth below presents the number of active claimed local business locations as of the dates presented (in thousands).

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these 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.

We consider the estimates discussed below to be critical as we believe that the assumptions and estimates associated with these policies have the greatest potential impact on our consolidated financial statements. For further information on these and our other significant accounting estimates, see Note 2, "Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Revenue Recognition—We generate revenue from the sale of advertising products, transactions with consumers and other revenue sources, which correspond to our major product lines. We recognize revenue by applying the following steps: the contract with the customer is identified; the performance obligations in the contract are identified; the transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We apply the portfolio practical expedient to account for contracts with customers in each category of revenue. We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the amount of revenue we recognize is equal to the amount we have a right to invoice.

We perform estimates and apply judgment when determining the amount of revenue to be recognized and may accept lower consideration than what is agreed to in the relevant contract. We refer to the difference between the agreed upon consideration amount and the actual consideration estimated to be received as variable consideration; types of variable consideration include cash based incentives, credits and refunds that are estimated based on historical information as well as considering economic

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conditions, which constrain the revenue. For all contracts with customers, estimates and assumptions include determining variable consideration and identifying the nature and timing of satisfaction of performance obligations. We believe that there will not be significant changes to our estimates of variable consideration. To date, actual amounts of consideration received have been materially consistent with the provisions we have made based on our historical estimates. For contracts satisfied over time, we apply the invoice practical expedient to depict the value transferred to the customer and measure of progress towards completion of its obligations. We consider the right to receive consideration from a customer to correspond directly with the value to the customer of our performance completed to date. We do not consider the effects of the time value of money as substantially all of our contracts are invoiced on a monthly basis, one month in arrears.

For revenue generated from arrangements that involve third parties, considerable judgment may be required in evaluating whether we are the principal, and report revenue on a gross basis, or the agent, and report revenue on a net basis. In this assessment, we consider whether we obtain control of the specified goods or services before they are transferred to the customer as well as other indicators, such as whether we are the party primarily responsible for the fulfillment, inventory risk and discretion in establishing price. The assessment of whether we are considered the principal or agent in a transaction could impact our revenue and cost of revenue recognized on our consolidated statements of operations. Changes in judgments with respect to assumptions and estimates could impact the amount of revenue recognized.

Website and Internal-Use Software Development Costs—Costs related to website and internal-use software are primarily related to our website and mobile app, including support systems. We capitalize our costs to develop software when: preliminary development efforts are successfully completed; management has authorized and committed project funding; and it is probable that the project will be completed and the software will be used as intended. We use judgment to determine which projects will be capitalized and the estimated useful life over which the related asset will be amortized. Costs incurred for enhancements that are expected to result in additional material functionality are capitalized and amortized over the estimated useful life of the upgrades. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is generally three years. This estimated useful life of three years has not historically changed and actual useful lives have been materially consistent with our estimates. While we do not believe that there is a reasonable likelihood of material change in our estimates, factors including obsolescence, the pace of changes in technology, changes in the expected use of the software, competition and other economic factors could require us to change the estimated useful life, which would result in a change to the amount of amortization that we record on our consolidated statements of operations.

Income Taxes—Significant judgment is required to determine our provision (benefit) for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles, complex tax laws, or variances between our actual and anticipated operating results. Therefore, actual income taxes could materially vary from these estimates.

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments or changes in the tax law or rates. In assessing the realization of deferred tax assets, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Valuation allowances are provided to reduce deferred tax assets to the amount that is more likely than not to be realized. In determining the need for a valuation allowance, the weight given to positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. The determination of future taxable income requires significant judgment and relies on various estimates and assumptions using forecasted amounts. Changes in various factors, including economic and political conditions, could drive actual results in future years to differ from our current assumptions, judgments and estimates. We evaluate the ability to realize net deferred tax assets and the related valuation allowance on a quarterly basis.

We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide for tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, relative tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. However, the outcome of tax audits cannot be predicted with certainty. If

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any issues addressed in our tax audits are resolved in a manner not consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

Results of Operations

The following tables set forth our results of operations for 2021, 2020 and 2019 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.

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

(2) Please refer to “—Key Metrics—Ad Revenue by Category” for information on a methodology change adopted in 2021.

(3) Percentage change is not meaningful.

Years Ended December 31, 2021, 2020 and 2019

Net Revenue

Advertising. We generate advertising revenue from the sale of our advertising products — including enhanced business pages and performance and impression-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 remnant advertising inventory through third-party ad networks. We present advertising revenue on a disaggregated basis for our high-level category groupings, Services and Restaurants, Retail and Other.

Advertising revenue increased in 2021 compared to 2020 due to higher customer spend, an increase in paying advertising locations and an improved retention rate of non-term advertiser budgets. The increase in revenue from Restaurants, Retail and Other businesses was also attributable to our reduction of COVID-19 relief incentives as pandemic-related operating restrictions eased and businesses were able to operate at a greater capacity.

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Advertising revenue decreased in 2020 compared to 2019, primarily reflecting lower revenue from businesses in our Restaurants, Retail and Other categories due to the pandemic and related shelter-in-place orders, which forced many of them to either close or reduce their advertising budgets. The decrease was also the result of the relief that we provided in 2020, primarily consisting of $13.5 million of waived advertising fees, which reduced the amount of revenue that we recognized. We also paused certain advertising campaigns that were scheduled to run from April to May 2020 and offered free advertising products during those months with a total value of $14.5 million. All paused advertising campaigns that were not cancelled by the customers resumed by the end of May 2020. Advertising revenue from our Services categories in 2020 remained relatively consistent with 2019.

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 complete food ordering and delivery transactions 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 decreased in 2021 compared to 2020, primarily due to a combination of fewer orders and a lower per-order transaction fee from Grubhub, which took effect in October 2020. Order volume decreased as public health restrictions eased and restaurants increased their dine-in capacity compared to the prior year.

Transactions revenue increased in 2020 compared to 2019, primarily due to an increase in food takeout and delivery orders, particularly from Grubhub, as the pandemic forced many restaurants to eliminate or reduce dine-in services.

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

Other revenue increased in 2021 compared to 2020, primarily reflecting substantially lower COVID-19 relief incentives — mainly in the form of waived fees — for our subscription product customers in 2021. The increase also reflects higher revenue from our Yelp Fusion program, which we introduced in May 2020, as well as the continued growth of our Yelp Knowledge program.

Other revenue decreased in 2020 compared to 2019, primarily as a result of the COVID-19 relief incentives that we began providing customers in early 2020.

Trends and Uncertainties of Net Revenue. Net revenue in the year ended December 31, 2021 increased by 18% year over year and by 2% from 2019, driven by continued momentum in our Services categories and further recovery in our Restaurants, Retail and Other categories, despite the spread of COVID-19 variants as well as ongoing labor and supply chain headwinds. Although we anticipate that net revenue will decrease sequentially from the fourth quarter of 2021 to the first quarter of 2022, reflecting historical seasonal trends, we also expect that net revenue will grow relatively consistently on an absolute basis over the remainder of the year as the benefits of our strategic initiatives build.

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 increased in 2021 compared to 2020, primarily as a result of:

•an increase in advertising fulfillment costs of $10.3 million driven by the expansion of Yelp Audiences;

•an increase in website infrastructure expenses of $7.9 million as a result of higher traffic; and

•an increase in merchant credit card processing fees of $2.6 million associated with increased advertising revenue.

Cost of revenue decreased in 2020 compared to 2019, primarily due to:

•a decrease in website infrastructure expense of $6.0 million as a result of reduced traffic and cost-cutting measures; and

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•a decrease in merchant credit card processing fees of $2.1 million due to lower advertising revenue.

These decreases were partially offset by an increase of $3.4 million in advertising fulfillment costs driven by expanded efforts to syndicate advertising budgets on third-party sites.

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 increased in 2021 compared to 2020, primarily driven by an increase in marketing and advertising costs of $35.8 million, reflecting our investment in targeted business owner acquisition and regional consumer campaigns. This increase was partially offset by:

•a decrease in employee costs of $10.5 million, primarily reflecting our lower average sales headcount compared to the prior year, which we maintained following the terminations and furloughs that took place in 2020 under the restructuring plan we announced on April 9, 2020 ("Restructuring Plan"); and

•a decrease in workplace operating costs of $8.2 million due to reductions in our amount leased office space, which began in the first quarter of 2021 and, to a lesser extent, our office closures, which began at the end of the first quarter 2020.

Sales and marketing expenses decreased in 2020 compared to 2019, primarily driven by:

•a decrease in employee costs of $49.0 million, primarily due to lower sales headcount following the terminations and furloughs associated with the Restructuring Plan; and

•a decrease in allocated workplace costs of $12.5 million due to lower office operating costs as a result of our office closures.

We expect sales and marketing expenses to increase in 2022 as we hire across our sales and marketing teams and invest in marketing initiatives. However, we also expect sales and marketing expenses to decrease as a percentage of revenue compared to 2021 as the composition of our sales force shifts toward more tenured and multi-location sales reps.

Product Development. Our product development expenses primarily consist of employee costs (including 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 increased in 2021 compared to 2020 primarily driven by an increase in employee costs of $41.6 million, which reflects higher headcount and stock-based compensation expenses in 2021 and lower employee costs in the prior-year period. The lower employee costs in 2020 resulted from the reduced-hour work weeks implemented in the second quarter of 2020 under the Restructuring Plan, which remained in place for a portion of the third quarter, and lower headcount in the fourth quarter.

Product development expenses increased slightly in 2020 compared to 2019 primarily due to an increase in employee costs of $3.7 million associated with higher headcount in the three months ended March 31, 2020, partially offset by the impact of the reduced-hour work weeks as part of the Restructuring Plan in the second and third quarters and lower headcount in the fourth quarter.

We expect product development expenses to increase in 2022 as we expand our product and engineering teams and invest to support our product initiatives, but decrease as a percentage of revenue compared to 2021 as our distributed operations provide leverage.

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General and Administrative. Our general and administrative expenses primarily consist of employee costs (including 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 workplace and other supporting overhead costs.

General and administrative expenses increased in 2021 compared to 2020, primarily due to:

•an increase in employee costs of $15.5 million, primarily reflecting an increase in stock-based compensation expense related to performance-based restricted stock units granted during 2021 for which we expect the performance conditions to be met and, to a lesser extent, an increase in headcount; and

•an impairment charge of $11.2 million related to the right-of-use assets and leasehold improvements associated with certain of our office space that we subleased in 2021.

These increases were partially offset by a decrease of $17.7 million in our provision for doubtful accounts due to improvement in collection rates and a release of a portion of our COVID-19-related bad debt reserves following a decline in the rate of customer delinquencies. We also recorded a net gain on lease termination of $3.7 million resulting from the termination of an office lease. See Note 9, "Leases," of the Notes to Consolidated Financial Statements for further detail.

General and administrative expenses decreased in 2020 compared to 2019 primarily due to:

•fees related to shareholder activism of $7.1 million incurred during 2019 that were not repeated in 2020; and

•a decrease in employee and consulting costs of $6.5 million, driven by lower headcount following the terminations and furloughs associated with the Restructuring Plan and other workforce reductions.

These decreases were partially offset by an increase of $9.7 million in our provision for doubtful accounts primarily associated with an increase in the rate of customer delinquencies related to the COVID-19 pandemic, particularly in the first half of the year.

We expect general and administrative expenses to increase year over year in 2022 due to increased headcount to support business growth and an increase in provision for bad debt as a result of continued macroeconomic challenges, partially offset by savings from our office space reductions as we continue to operate on a distributed basis.

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

Depreciation and amortization expense increased in 2021 and 2020 compared to the prior-year periods due to increases in depreciation expense associated with capitalized website and internal use software development costs as we invested in new and enhanced products for business owners and consumers, as well as accelerated depreciation in 2021 for assets related to the termination of an office lease.

Restructuring. On April 9, 2020, we announced the Restructuring Plan to help manage the near-term financial impacts of the COVID-19 pandemic. On July 13, 2020, we announced an additional workforce reduction. We incurred $3.9 million in restructuring costs during the year ended December 31, 2020, which consisted of severance, payroll taxes and related benefits costs for terminated employees. The additional costs we incurred during the year ended December 31, 2020 to support furloughed employees are excluded from restructuring expenses and are recorded in operating expenses in the consolidated statements of operations. No further material expense in connection with terminations is expected. No goodwill, intangibles or other long-lived assets were impaired as a result of the Restructuring Plan. See Note 19, "Restructuring," of the Notes to Consolidated Financial Statements for further detail.

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, amortization of debt issuance costs, credit facility fees and foreign exchange gains and losses.

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Other income, net decreased in both 2021 and 2020 compared to the prior-year periods, primarily driven by lower interest income as a result of the change in our investment strategy in the first quarter of 2020 to reduce our holdings of marketable securities in favor of holdings that are more liquid, mainly money market funds, which offer lower interest rates. We changed our strategy to preserve liquidity as a result of the uncertainties surrounding the COVID-19 pandemic and its impact on our business. For more information on this change, see Note 5, "Marketable Securities," of the Notes to Consolidated Financial Statements. We do not expect any further impacts to other income, net as a result of this change in investment strategy.

(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; and the realization of net operating loss carryforwards.

Benefit from income taxes decreased in 2021 primarily due to an increase in profit before tax, partially offset by an increase in benefits from stock-based compensation. The benefit from income taxes in the prior-year period also reflected net operating loss carryback benefits allowed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

Benefit from income taxes increased in 2020 (from a recorded provision in 2019 to a recorded benefit in 2020) primarily due to pre-tax losses, income tax credits and benefits from net operating loss carrybacks to 35.0% tax years as permitted under the CARES Act. The CARES Act was enacted on March 27, 2020 in response to the COVID-19 pandemic. See Note 16, "Income Taxes," of the Notes to Consolidated Financial Statements for further details.

As of December 31, 2021, we had approximately $40.5 million in net deferred tax assets ("DTAs"). At this time, we consider it more likely than not that we will have sufficient taxable income in the future to 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 to reduce our U.S. DTAs may be required, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our 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 expect our GAAP tax rate for 2022 to increase to approximately 38%. While a number of factors are expected to contribute to this increase, all of which are subject to variability, a significant driver of this increase is the new requirement under the Tax Act to capitalize and amortize research and development expenses. Although there is pending legislation in Congress to repeal this requirement or defer it to 2026, the outcome of that legislation is uncertain. If this requirement remains effective, it would have a material and adverse impact on our effective tax rate and cash flows in 2022 as well as future years. We will continue to evaluate the impacts and monitor the issuance of additional regulatory or accounting guidance in addition to any executive or legislative updates.

Non-GAAP Financial Measures

Our 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. We have included adjusted EBITDA and adjusted EBITDA margin because they are key measures used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of 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;

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•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 restructuring costs, impairment charges, net gain on lease termination 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 (expense), net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items, such as restructuring costs, impairment charges, net gain on lease termination and fees related to shareholder activism.

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

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

(1)Recorded within general and administrative expenses on our consolidated statements of operations.

Liquidity and Capital Resources

Sources of Cash

As of December 31, 2021, we had cash and cash equivalents of $479.8 million, which consisted of cash and money market funds. Our cash held internationally as of December 31, 2021 was $25.9 million. As of December 31, 2021, we also had $10.0 million of investments in certificates of deposit with minority-owned financial institutions.

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To date, we have been able to finance our operations and our acquisitions through proceeds from private and public financings, including our initial public offering in March 2012 and our follow-on offering in October 2013, cash generated from operations, and, to a lesser extent, cash provided by the exercise of employee stock options and purchases under the Employee Stock Purchase Plan, as amended, as well as proceeds from our sale of Eat24 to Grubhub in October 2017.

We continue to hold the majority of our investments in highly liquid money market funds following the liquidation of our portfolio of marketable securities in the first half of 2020, which we undertook as a result of our change in investment strategy to preserve liquidity in response to the COVID-19 pandemic. Our remaining investments that were not held in money market funds as of December 31, 2021 were held in certificates of deposit. See Note 5, "Marketable Securities," of the Notes to Consolidated Financial Statements for further details about the liquidation of our portfolio of marketable securities.

We have the ability to access backup liquidity to fund working capital and other capital requirements, as needed, through a three-year, $75.0 million senior unsecured revolving credit facility (including a $25.0 million letter of credit sub-limit) as part of our Credit Agreement with Wells Fargo. As of December 31, 2021, we had $21.5 million of letters of credit under the sub-limit related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $53.5 million remained available under the revolving credit facility as of that date. The cost of capital associated with this credit facility was not significantly more than the cost of capital that we would have expected prior to the COVID-19 pandemic.

The Credit Agreement requires us to comply with a maximum consolidated total leverage ratio and minimum consolidated interest coverage ratio. The Credit Agreement also contains customary limitations on our ability to: create, incur, assume or be liable for indebtedness; dispose of assets outside the ordinary course; acquire, merge or consolidate with or into another person or entity; create, incur or allow any lien on any of our property; make investments; or pay dividends, make distributions or repurchase shares. Such limitations are subject to certain exceptions. In addition, the Credit Agreement provides for certain events of default such as nonpayment of principal and interest when due, breaches of representations and warranties, noncompliance with covenants, acts of insolvency and default on indebtedness held by third parties (subject to certain limitations and cure periods). As of December 31, 2021, we were in compliance with all covenants and there were no loans outstanding under the Credit Agreement.

Material Cash Requirements

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under the heading “Risk Factors” in this Annual Report. We believe that our existing cash and cash equivalents, 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 beginning in 2022, primarily due to the new requirement to amortize certain research and development expenses under the Tax Act; 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 exhaust our available cash and cash equivalents earlier than presently anticipated. 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 ongoing impact of the COVID-19 pandemic 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 from 2022 to 2031. Our cash requirements related to these lease agreements are $190.0 million, of which $48.6 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 $43.9 million. See Note 9, "Leases," of the Notes to Consolidated Financial Statements 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 $70.0 million, of which approximately $46.6 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

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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 and cash equivalents 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):

Operating Activities. Net cash provided by operating activities during the year ended December 31, 2021 increased compared to 2020 primarily as a result of an increase in cash inflows from customers due to higher revenue, partially offset by an increase in cash outflows due to higher payments to employees and key vendors as well as the timing of payment of payroll taxes.

Net cash provided by operating activities during the year ended December 31, 2020 decreased compared to 2019 primarily due to a decrease in cash inflows from customers as a result of lower net revenue recognized during the period. This decrease was partially offset by a decrease in cash outflows for employee-related costs as a result of lower headcount following the terminations and furloughs associated with the Restructuring Plan.

Investing Activities. Net cash used in investing activities during the year ended December 31, 2021 primarily reflects purchases of property, equipment and software. Net cash provided by investing activities during the prior-year period primarily reflects the sale of our marketable securities portfolio following the change in our investment strategy to preserve liquidity, which was partially offset by purchases of intangible assets and other investments.

Net cash provided by investing activities during the year ended December 31, 2020 increased compared to 2019 due to the sale of marketable securities discussed above. This increase was partially offset by the purchases of certificates of deposit and intangible assets during 2020 as well as the release of an escrow deposit during 2019 in connection with our sale of Eat24, which did not recur in 2020.

Financing Activities. Net cash used in financing activities during the year ended December 31, 2021 increased compared to 2020 primarily due to an increase in stock repurchases pursuant to our stock repurchase program, which we suspended for a portion of 2020, and, to a lesser extent, an increase in the amount of taxes paid in connection with the settlement of employee tax liabilities upon the vesting of restricted stock units ("RSUs"). The increase in taxes paid primarily resulted from our use of the net share withholding method of settling employee tax liabilities for RSUs in 2021 compared to the sell-to-cover method, which we used during a portion of the year-ago period. Increases in both the number of shares released upon the vesting of RSUs and the average stock price upon release in 2021 also contributed to this increase in taxes paid.

Net cash used in financing activities during the year ended December 31, 2020 decreased compared to 2019 primarily due to the suspension of share repurchases under our stock repurchase program for most of 2020 as well as our use of the sell-to-cover method of settling employee tax liabilities for RSUs during a portion of the year, which reduced the amount of taxes paid during 2020.

Stock Repurchase Program

Since its initial authorization in July 2017, our board of directors has authorized us to repurchase up to an aggregate of $1.2 billion of our outstanding common stock, $194.7 million of which remained available as of February 18, 2022.

We may purchase 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.

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During the year ended December 31, 2021, we repurchased 6,995,170 shares on the open market for an aggregate purchase price of $262.9 million. During the year ended December 31, 2020, we repurchased 803,691 shares on the open market for an aggregate purchase price of $24.4 million, which reflects our suspension of share repurchases under our stock repurchase program between April 2020 and November 2020 to maintain liquidity as a result of the uncertain impact of COVID-19 on our business. During the year ended December 31, 2019, we repurchased 14,190,409 shares on the open market for an aggregate purchase price of $481.0 million.

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