Yelp Reveals Strong Q4 Despite Ad Revenue Headwinds

yelp revenue

Amidst an economic downturn that continues to fluctuate and show mixed signals, Yelp comes forward with some positive news. Its Q4 earnings highlight revenue growth in several key areas, during a time when the company’s peers in the ad-supported tech world continue to move in the other direction.

Specifically, revenue grew 13 percent year-over-year in Q4 to $309 million. And for the full year 2022, revenue grew 16 percent to $1.2 billion. That latter is a record milestone for Yelp and consists primarily of ad revenue. This comes as other ad-centric businesses like Snap diversify into non-ad revenue sources.

Panning back, this is the second piece of good news from Yelp in as many weeks. As we examined in a recent article and episode of This Week in Local, Yelp reported record new SMB openings in 2022. Indeed, that’s the growing addressable market that fuels Yelp’s Q4 and FY 2022 performance.

Overall, these signs point to a healthy SMB sector, which is often considered the heartbeat of the U.S. economy. Of course, there’s lots of bloodletting elsewhere in the economy including, again, ad-supported tech giants. But Yelp’s ongoing reporting and recent milestones offer some hope.

Yelp: 2022 Set Record for Business Openings

Highlight Reel

Going deeper into Yelp’s Q4 and FY 2022 earnings, we’ll leave you with a list of highlights…

Q4 22 Results

– In the fourth quarter 2022, Net revenue was $309 million, up 13% from the fourth quarter of 2021 and near the high end of the outlook range, driven primarily by growth in advertising revenue

– Net income was $20 million, or $0.28 per diluted share, compared to Net income of $23 million, or $0.30 per diluted share, in the fourth quarter of 2021.

– Fourth quarter Adjusted EBITDA was $80 million, an increase of $12 million, or 18%, compared to the fourth quarter of 2021 and at the midpoint of the outlook range. Adjusted EBITDA margin increased one percentage point to 26% from the fourth quarter of 2021.

– Cash provided by operating activities was $44 million during the fourth quarter, and it ended the quarter with cash, cash equivalents, and marketable securities of $401 million.

– In the fourth quarter, Yelp repurchased approximately 1.6 million shares at an aggregate cost of $50 million.

FY 22 Results

– Net revenue grew 16 percent year over year to a record $1.2 billion, near the high end of the outlook range provided in November, and $14 million above the high end of the initial outlook range provided in February 2022.

– Net income decreased by approximately $3 million year over year to a positive $36 million, which includes an impairment charge of $10 million related to subleasing a portion of Yelp’s New York office space.

– Adjusted EBITDA grew 10% year over year to a record $270 million, at the midpoint of Yelp’s outlook ranges provided in February and November 2022, representing a 23% adjusted EBITDA margin.

– In 2022, Yelp repurchased $200 million worth of shares at an average purchase price of $32.28, including the aforementioned $50 million worth of shares repurchased in the fourth quarter. At year-end, it had $282 million remaining under existing repurchase authorization.

Yelp expects 2023 net revenue to be in the range of $1.29 billion to $1.31 billion; and Adjusted EBITDA in the range of $290 million to $310 million.

Product highlights

– In Services, Yelp demonstrated consistent year-over-year growth throughout 2022, resulting in a record $694 million of advertising revenue from Services businesses for the year. The company reported the 10th consecutive quarter of growth in average revenue per location in these categories. Advertiser demand was particularly robust in the Home Services category, where annual revenue increased by approximately 20% year over year and at a compound annual growth rate of nearly 20% from 2019.

– Advertising revenue from Restaurants, Retail & Other businesses increased by 17% year over year to $441 million, primarily driven by growth in paying advertising locations.

– Advertising revenue from each of Yelp’s most efficient channels, Self-serve and Multi-location, grew by approximately 25% year over year in 2022.

– Ad clicks for the year decreased by 8% from 2021, a year that benefited from reopening tailwinds and elevated consumer spending. Average CPC for the year increased by 27% as advertiser demand for Yelp’s valuable, high-intent clicks was robust, demonstrated by records in both paying advertising locations and average revenue per location for the year.

– On the consumer side of Yelp’s business, demand remained below pre-pandemic levels as consumers visited many types of businesses less frequently. In 2022, app unique devices were flat compared to 2021. The company also reported an increase in average review submission frequency among users, who contributed 21 million new reviews in 2022, up 3% from the prior year. This resulted in more than 265 million cumulative reviews as of December 31, up 9% year over year.

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