Yelp Inc.

Good afternoon and welcome to the Yelp Inc Q4 2023 earnings conference call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, simply press star one again. Thank you. I will now turn the call over to James Milne, Senior Vice President, FP&A and Investor Relations. You may begin your conference.

Good afternoon, everyone, and thanks for joining us on Yelp's fourth quarter and full year 2023 earnings conference call. Joining me today are Yelp's Chief Executive Officer, Jeremy Stoppelman, Chief Financial Officer, David Schwarzbach, and Chief Operating Officer, Jed Nockman. We published a shareholder letter on our investor relations website and with the SEC and hope everyone had a chance to read it. We'll provide some brief opening comments and then turn to your questions. Now I'll read our safe harbor statement. We'll make certain statements today that are forward looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. In addition, we are subject to a number of risks that may significantly impact our business and financial results. Please refer to our SEC filings as well as our shareholder letter for a more detailed description of the risk factors that may affect our results. During our call today, we may discuss adjusted EBITDA, adjusted EBITDA margin, and free cash flow, which are non-GAAP financial measures. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with generally accepted accounting principles. In our shareholder letter released this afternoon and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP financial measures, as well as historical reconciliations of GAAP net income to both adjusted EBITDA and adjusted EBITDA margin, and a historical reconciliation of GAAP cash flows from operating cash flows to free cash flow. And with that, I will turn the call over to Jeremy.

Thanks James and welcome everyone. Yelp delivered one of the strongest financial performances in our company's history in 2023. We set multiple records as local advertisers continued to see the value of Yelp's high intent audience. Net revenue increased by 12% year over year to a record $1.34 billion in 2023. Net income nearly tripled year over year to $99 million, and adjusted EBITDA grew to $330 million, delivering a strong 7% net income margin and a record 25% adjusted EBITDA margin. These results demonstrate the quality of execution by our teams as they delivered against our product-led strategy. We rolled out nearly 60 new features and updates over the last 12 months to help consumers more effortlessly connect with the best local businesses. Our initiatives to grow quality leads and monetization in services continued to pay off in 2023 as advertising revenue from services businesses grew 14% year over year to a record $793 million. We believe that Yelp gained market share in 2023 by continuing to differentiate the product experience to better connect consumers with trusted pros, which enabled us to deliver more valuable leads to services businesses. We monetized approximately 30% of leads in services, an increase of approximately 5 percentage points from 2022. The home services category remained particularly strong in 2023, with year-over-year revenue growth of approximately 20%. Since 2019, revenue from this category has compounded at an annual growth rate of nearly 20%. We also saw improved consumer demand in the fourth quarter with request to quote requests growing by approximately 5% year over year. Advertising revenue from restaurants, retail and other businesses increased by 10% year over year to a record $483 million. Average revenue per location grew every quarter throughout 2023 to reach a record level in the fourth quarter, driven by increased spend across our breadth of offerings up and down the funnel. David will talk more about fourth quarter results in RR&O, where we saw weakness in the back half of December due to macro impacts that have continued into the new year. In 2024, we plan to invest more in our services categories where we see a greater near-term opportunity, particularly within home services. In 2023, we work to enhance the consumer experience with new discovery, review, and services features. We introduced AI-powered visual search, a more engaging and interactive review writing experience, and Yelp Guaranteed, which helps consumers confidently connect with trusted service pros. While our overall traffic levels remained about flat in 2023, we continued to grow the trusted content that attracts our large and valuable audience. Yelp users contributed 22 million new reviews in the year to reach a total of 287 million cumulative reviews, up 8% from 2022. Our ad system continued to deliver valuable clicks to advertisers in 2023 by efficiently matching consumers with advertisers. Ad clicks returned to year over year growth, increasing 5% as we executed against our roadmap of ad system initiatives. Average cost per click increased by 9% year over year as a result of robust advertiser demand for Yelp's valuable high intent clicks. We were encouraged by the combination of increasing ad clicks and moderating CPCs in the second half of the year, which typically has a positive impact on retention. We also made progress on our initiative to drive sales through the most efficient channels, self-serve and multi-location. Together, these channels represented approximately 50% of advertising revenue in 2023. Self-serve revenue increased by approximately 20% year over year and multi-location revenue grew by approximately 15% year over year. Investments in our strategic initiatives have established Yelp as a leading resource for consumers to confidently search for and discover great local businesses across a broad range of categories. And we plan to build on this position by investing in a portfolio of product and marketing initiatives designed to drive deeper engagement and profitable growth. In 2024, the services category will be the major focus of our product-led strategy. We believe we have an opportunity to build Yelp into the best place for consumers to connect with trusted service pros. While we've made great progress already, we plan to evolve our product offerings by further reducing friction for consumers and pros so they can more seamlessly coordinate throughout the hiring journey. By investing in our robust product roadmap and services, we plan to continue to enhance the experience for consumers while driving more quality leads to advertisers, both on Yelp and through search engine marketing. Over the coming quarters, we expect to scale our SEM efforts across all home services categories and believe they have the potential to accelerate overall project growth over the long term and drive more valuable leads to service pros. In addition to continuing to raise the bar on services product innovation, we plan to execute on our strategic initiatives to deliver even more value to both consumers and advertisers across Yelp's broad set of categories. Our advertising teams are actively testing ways to more effectively monetize our motivated down funnel local audience, both on the Yelp platform as well as increasingly off Yelp. We also plan to continue to drive profitable growth through our most efficient channels, self-serve, and multi-location. Our team has repeatedly shown that our focus on our product-led strategy can drive durable growth, and we plan to build upon this momentum in 2024. With that, I'd like to turn it over to David.