Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yelp Inc (YELP, Financial) delivered record net revenue of $360 million, a 4% increase year over year.
- The company achieved an 11% net income margin and a 28% adjusted EBITDA margin through disciplined expense management.
- Services revenue increased by 11% year over year, marking the 14th consecutive quarter of double-digit growth.
- Home services category saw a 15% revenue increase year over year, with request-to-quote projects up by 25%.
- Yelp Inc (YELP) announced the acquisition of RepairPal, expected to enhance its offerings in the auto services vertical.
Negative Points
- Revenue from the restaurant, retail, and other categories declined by 6% year over year due to a challenging operating environment.
- Overall paying advertising locations declined by 7% year over year.
- The company reduced its paid search spend by half, indicating challenges in achieving desired returns from this investment.
- Yelp Inc (YELP) no longer expects RNO revenue to increase in the fourth quarter due to persistent operating challenges.
- The company faced macroeconomic headwinds impacting the restaurant, retail, and other categories, with no clear timeline for recovery.
Q & A Highlights
Q: What opportunity does Yelp see in the auto services vertical, and why is now the time to push more heavily into this area?
A: Jeremy Stoppelman, CEO, explained that auto services is one of Yelp's top categories within services, with a $90 million annual run rate. The acquisition of RepairPal, experts in the auto industry, will bring deep knowledge and relationships that can enhance Yelp's offerings, particularly in products like Request a Quote and Yelp Assistant. This acquisition aligns with Yelp's strategy to leverage its audience and SEO capabilities to grow in the auto services vertical.
Q: Are there any new developments in the restaurant, retail, and other (RRO) categories, or is it a continuation of existing trends?
A: Joseph Nachman, COO, noted that the challenges in the RRO categories have been consistent throughout 2024, with businesses facing macroeconomic headwinds such as elevated input costs and consumer inflation. Despite these challenges, Yelp believes this is a cyclical moment and is maintaining strong relationships to capture opportunities when conditions improve.
Q: Can you provide more details on the guidance for the rest of the year and the measures being taken to manage expenses?
A: David Schwarzbach, CFO, stated that while Yelp no longer expects seasonal increases in RRO revenue, services continue to show strength. The company is focused on expense discipline, holding headcount flat, and optimizing marketing spend. Adjustments in paid search spending and other efficiencies have allowed Yelp to increase its EBITDA guidance for the year.
Q: How has the investment in paid search and top-of-funnel growth for Request a Quote performed?
A: Jeremy Stoppelman, CEO, mentioned that while Yelp successfully drove project volume through paid search, the expected advertiser behavior changes did not materialize at the desired scale. As a result, Yelp has reduced its paid search spend but continues to iterate on the initiative, focusing on improving ROI and leveraging learnings for future efforts.
Q: What are the expectations for RepairPal's integration and its impact on Yelp's margin profile?
A: David Schwarzbach, CFO, indicated that RepairPal, with a $30 million revenue run rate, is expected to benefit from Yelp's traffic-driving capabilities and expertise in SEO and SEM. The integration aims to enhance both companies' offerings, particularly in the auto services category, and further details will be provided in future earnings calls.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
