Yelp Inc.

Thank you for standing by. My name is Brianna and I will be your conference operator today. At this time, I'd like to welcome everyone to the Yelp third quarter 2024 earnings conference call. Please note that this call is being recorded. At this time, all participants are in a listen only mode. 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, press star one again. I will now turn the conference over to Kate Krieger, Director of Investor Relations. Please go ahead.

Good afternoon, everyone, and thanks for joining us on Yelp's third quarter 2024 earnings conference call. Joining me today are Yelp's Chief Executive Officer, Jeremy Stoppelman, Chief Financial Officer, David Schwarzbach, and Chief Operating Officer, Jed Nachman. 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 the Dave Harper 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 investor relations website, you will find additional disclosures regarding these non-GAAP financial measures, as well as historical reconciliations of GAAP net income or loss to both adjusted EBITDA and adjusted EBITDA margin, and a historical reconciliation of GAAP cash flows from operating activities to free cash flow. And with that, I will turn the call over to Jeremy.

Thanks, Kate, and welcome everyone. Yelp delivered record net revenue and strong profitability in the third quarter. Led by strengths in services categories, net revenue increased by 4% year over year to $360 million. We also delivered an 11% net income margin and 28% adjusted EBITDA margin through disciplined expense management. We continue to see a divergence in category performance in the third quarter. Businesses in our restaurant, retail, and other categories have faced a challenging operating environment this year, and RRO revenue declined by 6% year-over-year in the quarter as a result. At the same time, our services business, where we focused our product efforts, saw continued momentum. Services revenue increased by 11% year-over-year, making it the 14th consecutive quarter of double-digit year-over-year growth. We saw even stronger performance in the home services category where revenue increased by approximately 15% year over year. Requests to quote projects increased by approximately 25% year over year, primarily as a result of improvements to the request flow. We achieved this strong growth even as we narrowed the focus of our paid project acquisition initiative and reduced our paid search spend by half from the second quarter. Zooming in on this initiative, we narrowed the focus in the quarter to target businesses with fewer reviews that often experience difficulty competing with more established advertisers for leads. We continue to see strong top of funnel metrics in the third quarter, including more projects, ad clicks, and lower CPCs than in the year-ago quarter. At the bottom of the funnel, while we continue to see positive signals, they were not sufficient to warrant continued investment at the current level. We will use our learnings to continue iterating on this initiative, and in 2025, we anticipate spending at more modest levels. We also see an additional opportunity to deliver leads to multi-location advertisers who have the capacity to ingest substantial lead volumes. This aligns with our approach to capture more demand for multi-location services businesses, where we have recently increased our product focus and sales efforts. More broadly, our product and engineering teams continued to leverage AI to further optimize advertisers' budgets by displaying the most relevant ad content to consumers. In the third quarter, ad clicks increased by 2% year-over-year. At the same time, average CPC increased by 3% year-over-year, reflecting a mixed shift towards services clicks, which tend to have higher CPCs than RRNO clicks. We also rolled out a number of user experience and backend improvements to make our search experience even more efficient. Over the last several years, our focus on delivering the best home services experience for consumers and service crows has driven significant growth in services revenue. Looking ahead, we see an opportunity to drive additional growth by investing in other key services categories. Today, we announced that we've agreed to acquire auto services platform repair pal for approximately 80Million dollars in cash. We believe this acquisition will accelerate our efforts and services by expanding our offerings in the multi billion dollar us auto services advertising vertical in the 3rd quarter advertising revenue from our auto services category had an annual run rate of approximately 90Million dollars. In summary, Our focus on services continues to strengthen our business, and we remain excited by the opportunities ahead to drive profitable growth and shareholder value over the long term. With that, I'll turn it over to David.