Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
☒ |
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
|
|
|
|
|
For the Fiscal Year
Ended December 31, 2014 |
OR
☐ |
|
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
|
|
|
|
|
For the
Transition period
from
|
to |
Commission file number:
001-35444
YELP
INC. (Exact name of
Registrant as specified in its charter) |
Delaware |
20-1854266 |
(State or other jurisdiction of incorporation
or organization) |
(I.R.S. Employer Identification
No.) |
140 New Montgomery
Street, 9th Floor
San Francisco,
California 94105
(Address
of principal executive offices) (Zip Code)
Registrants telephone
number, including area code: (415) 908-3801
Securities registered
pursuant to Section 12(b) of the Act:
Title of Each
Class |
|
Name of Each
Exchange on Which Registered |
Class A Common Stock, par value $0.000001
per share |
|
New York Stock Exchange
LLC |
Securities registered
pursuant to Section 12(g) of the Act:
None
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YES ☒ NO ☐
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. YES ☐ NO ☒
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES ☒ NO ☐
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YES ☒ NO ☐
Table of Contents
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting
company in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ☒ |
Accelerated filer ☐ |
Non-accelerated filer (Do not check if a smaller reporting company)
☐ |
Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
The aggregate market value of
the voting and non-voting common equity held by non-affiliates of the registrant
was approximately $4,716,654,432 as of June 30, 2014, the last day of the registrants most recently
completed second fiscal quarter,
based upon the closing sale price of the registrant's Class A common stock on the New York Stock Exchange LLC reported
for June 30, 2014. Excludes an aggregate of 195,660 shares of the registrants Class A common stock
and an aggregate of 10,288,701 shares
of the registrants Class B common
stock held by officers, directors, affiliated stockholders and The Yelp Foundation. For purposes of determining
whether a stockholder was an affiliate of the registrant at June 30, 2014, the
registrant assumed that a stockholder was an affiliate of the registrant if such
stockholder (i) beneficially owned
10% or more of the registrants capital stock, as determined based on public
filings, and/or (ii) was an executive
officer or director, or was affiliated with an executive officer or director, of
the registrant at June 30, 2014. Exclusion of such shares should not be
construed to indicate that any such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of the
registrant or that such person is controlled by or under common control with the
registrant.
As of February 20, 2015, there were 64,890,244 shares of registrants Class A Common Stock, par
value $0.000001 per share, issued and
outstanding and 9,592,748
shares of registrants Class B Common
Stock, par value $0.000001 per share,
issued and outstanding.
DOCUMENTS INCORPORATED BY
REFERENCE
Portions of the registrants
definitive Proxy Statement for the
2015 Annual Meeting of Stockholders to be filed with the U.S. Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this Annual Report on Form 10-K are
incorporated by reference in Part III, Items 10-14 of this Annual Report on Form
10-K.
Table of Contents
YELP INC.
2014
ANNUAL REPORT ON
FORM 10-K
____________________
Unless the context suggests
otherwise, references in this Annual Report on Form 10-K, or Annual Report, to
Yelp, the Company, we, us,
and our refer to Yelp Inc. and, where appropriate, its
subsidiaries.
Yelp, Yelp Inc., the Yelp logo, Eat24, SeatMe and other trade names, trademarks or service marks of Yelp
appearing in this Annual Report are the property of Yelp. Trade names, trademarks and service marks of other
companies appearing in this Annual Report are the property of their respective holders.
Unless the content otherwise
indicates, where we refer in this Annual Report to our mobile application or
mobile app, we refer to all of our applications for mobile-enabled
devices; references to our mobile platform refer to both our mobile app and the versions of our website dedicated to
mobile-based browsers. Similarly, references
to our website refer to both the U.S. and international versions of our
website, as well as the versions of our website dedicated to mobile-based browsers.
i
Table of Contents
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This Annual Report contains
forward-looking statements that involve risks and uncertainties, as well as
assumptions that, if they never materialize or prove incorrect, could cause our
results to differ materially from those expressed or implied by such
forward-looking statements. The statements contained in this Annual Report that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Forward-looking statements are often identified by the use of
words such as, but not limited to, anticipate, believe, can, continue, could, estimate,
expect, intend, may, might, plan, project, seek, should,
target, will, would and similar expressions or variations intended to
identify forward-looking statements.
These statements are based on the beliefs and assumptions of our management
based on information currently available to management. Such forward-looking
statements are subject to risks, uncertainties and other important factors that
could cause actual results and the timing of certain events to differ materially
from future results expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled Risk Factors included under Part I, Item 1A below. Furthermore, such forward-looking
statements speak only as of the date of this report. Except as required by law,
we undertake no obligation to update any forward-looking statements to reflect
events or circumstances after the date of such statements.
ii
Table of Contents
PART I
Item 1.
Business.
Company
Overview
Yelp connects people with
great local businesses by bringing word of mouth online and providing a platform for
businesses and consumers to engage and transact. With a total of approximately
71.2 million cumulative reviews of almost every type of local business in 29
countries as of December 31, 2014, we
are one of the worlds leading local business review
sites.
Our platform provides value to consumers and businesses alike by connecting consumers with great local
businesses at the critical moment when they are deciding where to spend their money. The key strengths of our
platform include:
●Discovery. Our platform is transforming the way people discover local businesses. Each day, millions of
consumers visit our website or use our mobile app to find great local businesses to meet their everyday
needs. Our strong brand and the quality of the content on our platform have enabled us to attract this large
audience with minimal organic traffic acquisition costs.
●Engagement. Yelp provides a platform for consumers to share their everyday local business experiences,
through reviews, tips, photos and videos, and engage directly with businesses, through reviews and our
Message the Business feature. Our platform also provides businesses of all sizes with a variety of free and
paid services that help them engage with consumers. Businesses can register a business account for free
and claim the Yelp business page for each of their locations, allowing them to enhance the page with
additional information about their business and respond to reviews, among other features.
●
Advertising. Businesses that want to reach our large audience
of consumers can also pay for premium services to promote themselves through
targeted search advertising, discounted offers and further enhancements to their
business page. We also offer display advertising and brand sponsorships for
national brands that want to improve their local presence. We generate revenue
primarily from the sale of advertising on our website and mobile app to these
businesses. During the year ended December 31, 2014, we generated net revenue of
$377.5 million, representing 62% growth over 2013, a net profit of $36.5
million and an adjusted EBITDA of $70.9 million. For information on how we
define and calculate adjusted EBITDA and a reconciliation of adjusted EBITDA to
net profit, see Selected Consolidated Financial and Other
Data in this Annual Report.
●Transactions. In 2013, we introduced the Yelp Platform, which allows consumers to transact with local
businesses in new ways directly on Yelp. In addition to providing consumers with a continuous experience
from discovery to completion of transactions such as ordering food through a local delivery service and
booking hotel rooms, the Yelp Platform creates an additional point of consumer engagement for local
businesses.
At the heart of our
business are the vibrant communities of contributors across the world that
contribute the content on our platform. These contributors provide rich,
firsthand information about local businesses in the form of reviews and ratings,
tips, photos and videos. Each review, tip, photo and video expands the breadth
and depth of the content on our platform, which drives a powerful network
effect: the expanded content draws in more consumers and more prospective
contributors. This increase in content and consumer traffic in turn improves our value
proposition to local businesses as they seek easy-to-use and effective
advertising solutions. For this reason, we foster and support communities of
contributors and make the consumer experience our highest priority.
Of the approximately 71.2
million cumulative reviews our contributors had submitted through December 31,
2014, approximately 50.0 million were recommended and available on business
profile pages; approximately 16.3 million were not recommended and available
on secondary pages; and approximately 4.9 million had been removed from our platform. Although they do not factor
into a businesss overall star rating, we provide access to reviews that are not recommended because they
provide additional perspectives and information on reviewed businesses, as well
as transparency of the efficacy of our automated recommendation software.
1
Table of Contents
The reviews contributed to our platform cover a wide set of local business categories, including restaurants, shopping, beauty and fitness, arts, entertainment and events, home and local services, health, nightlife, travel
and hotel, auto and other categories. We highlight below the breakdown by industry of local businesses that have received reviews on our platform and the breakdown by industry of reviews contributed to our platform through December 31,
2014.
|
Reviewed
Businesses*
![](yelp_10k1x7x1.jpg)
Reviews*
![](yelp_10k1x7x2.jpg)
|
* |
|
The charts
above include information based upon all contributed reviews and include
some businesses that have only received reviews that are not recommended
or have been removed. |
We believe that the concentration of reviews in the restaurant and shopping categories in particular is primarily due to the frequency with which individuals visit specific businesses or engage in certain activities versus
others. For example, an individual may eat at a restaurant three times in one week or go shopping once a week, but the same individual is unlikely to visit a mechanic, get a haircut or use a home or local service with the same frequency.The top five
industry categories accounted for an aggregate of 76% of our local advertising revenue for the quarter ended December 31, 2014, broken down as follows: Home & Local Services, 26%; Restaurants, 15%; Beauty & Fitness, 13%; Health, 11%; and
Shopping, 11%.
2
Table of Contents
Our
Products
Local
Advertising
We provide both free and
paid business listing products to businesses of all sizes. In addition, we
enable businesses to deliver targeted search advertising to large local
audiences through our website and mobile app. We recognize revenue from these
products as local advertising revenue.
Free Online
Business Account |
|
We enable businesses to create a free online business account and claim the page for each of their business locations. With their free
business accounts, businesses can view trends (e.g. statistics and charts
of the performance of their pages on our platform), use the Revenue
Estimator tool (e.g. to quantify the revenue opportunity Yelp provides),
message customers (e.g. to reply to reviews either publicly or privately),
update information (e.g. address, hours of operation) and offer Yelp
Deals and Gift Certificates (as described below). |
|
|
|
Enhanced Profile
|
|
Our enhanced profile solution eliminates search advertising from a businesss
profile page and allows the business to incorporate a video clip or photo slide
show on the page. Businesses can also promote a desired transaction of their
choosing such as scheduling an appointment or printing a coupon directly
on their business listing pages with our Call to Action feature. This feature
takes consumers directly from a businesss listing page to the businesss own
website to complete the action. |
|
|
|
Branded Profile |
|
For businesses with ten or more locations, our branded profile solution offers the ability to incorporate a video clip or photo slide show, as well as a Call to Action Button, on each locations business listing page.
|
|
|
|
Search and Other Ads |
|
We allow businesses
to promote themselves as a sponsored search result on our platform and on
the listing pages of related businesses. We sell ads on either a
per-impression or per-click basis. |
|
|
|
Online
Reservations |
|
We provide restaurants, nightlife and certain other venues with the ability to
offer online reservations directly from their Yelp business listing pages through
our SeatMe feature, which also offers front-of-house management tools. We
also offer Yelp Reservations, a free tool with basic reservation functionality for
businesses in the restaurant and nightlife categories. |
Brand
Advertising
We offer advertising
solutions for national brands that want to improve their local presence in the
form of display advertisements and brand sponsorships. Our national advertisers
include leading brands in the food and restaurant, automobile, financial
services, logistics, consumer goods and health and fitness industries. We
recognize revenue from these products as brand advertising revenue.
Traditional
Display Advertising |
|
We offer both graphic
and text display advertisements on our website and mobile app. We
typically sell these ads on a per-impression basis. We offer businesses
display advertising opportunities on our mobile app through display ads
that are optimized for the mobile experience, on our home page and on
individual web pages.
|
3
Table of Contents
Brand Sponsorships
|
|
Our fixed-price
brand sponsorships provide businesses with exclusivity over a section or
advertisement placement on Yelp for a fixed period of time. Brand
sponsorships are generally associated with a particular platform
desktop, mobile web or mobile app
and are short in duration.
|
Other
Services
In addition to our business
listing and advertising products, we also offer several features and
consumer-interactive tools to facilitate transactions between consumers and the
local businesses they find on Yelp. We recognize revenue from these sources as
other services revenue.
Yelp Platform
|
|
The Yelp Platform allows consumers to transact directly on Yelp. Through
partnerships with companies including Eat24 (which we acquired in February
2015), Booker, Hipmunk and CellarPass, consumers are currently able to
complete food delivery transactions, book spa and salon appointments, and
make hotel bookings and winery reservations, all without leaving Yelp. |
|
|
|
Yelp Deals
|
|
Our Yelp Deals
product allows local business owners to create promotional discounted
deals for their products and services, which are marketed to consumers
through our platform. Yelp Deals typically have a fee structure based
solely on transaction volume with no upfront costs, and we typically earn
a fee based on the discounted price of each deal sold. We process all
customer payments and remit to the business the revenue share of any Yelp
Deal purchased. |
|
|
|
Gift Certificates
|
|
Our Gift Certificates
product allows local business owners to sell full-price gift certificates
directly to customers through their business profile pages. The business
chooses the price point to offer (from $10 to $500), and the buyer may
purchase Gift Certificates denominated in such amounts. We earn a fee
based on the amount of the Gift Card sold. We process all consumer payments and remit to the business the revenue share of any Gift Certificate
purchased. |
The following table
provides a breakdown of our revenue by product for the years indicated:
|
|
Year Ended
December
31, |
|
|
2014 |
|
2013 |
|
2012 |
Percentage of total net revenue by
product: |
|
|
|
|
|
|
|
|
|
Local advertising |
|
85 |
% |
|
83 |
% |
|
79 |
% |
Brand
advertising |
|
9 |
|
|
12 |
|
|
15 |
|
Other services |
|
6 |
|
|
5 |
|
|
6 |
|
Total |
|
100 |
% |
|
100 |
% |
|
100 |
% |
Our
Strategy
Our mission is to connect people with great local businesses. We focus on the following key strategies to grow
our business, audience of consumers and advertiser base:
4
Table of Contents
Accelerate Network
Effect
● |
Expand Content. We believe that as the amount of content on
our platform grows, our platform will become more widely known and
relevant to broader audiences, thus attracting new consumers to use our
service. Accordingly, we will continue to explore ways to expand our
content and further enable contributors to share their local experiences
through detailed reviews, photos, tips and other forms of content
contribution across our platform. For example, in the fourth quarter of
2014, we acquired Restaurant Kritik, a German review website, and Cityvox,
a French review website. We plan to migrate the content from those sites
to the Yelp platform in 2015, thereby increasing the depth and breadth of
our European content. In 2014, we also entered into a strategic
partnership with YP the company formerly
known as Yellow Pages pursuant to which YP business
owner profile data will appear on our platform. |
● |
Increase
Traffic. As we continue to grow our contributor and consumer footprint within Yelp communities,
we expect to benefit from accelerating network effect dynamics, further driving the growth of reviews,
consumers and local business activity. In the first quarter of 2014, we entered into a partnership with
Yahoo! to use Yelp content to power Yahoo Search in the United States, which we believe will increase our
brand recognition and enable us to reach a larger audience. In addition, we expect to redirect traffic from
the Restaurant Kritik and Cityvox websites following our planned migration of the content from those sites
in 2015. We also plan to continue to invest in the development of our mobile platform to take advantage of
the growing number of consumers accessing Yelp through their mobile devices. |
● |
Increase
Engagement. By continuing to expand our community engagement efforts and providing a more
feature-rich experience, we believe we can increase the number of visits and searches per user. In 2014, we
added a number of new features aimed at increasing user engagement, including mobile review
translations, our Message the Business feature, which allows consumers to contact local businesses
directly, and the ability for consumers to upload short videos. In 2014, we also introduced Community
Ambassadors a part-time position similar to Community Managers to foster and support contributors
in certain of our smaller communities.
|
Enhance Monetization
● |
Attract More Businesses. As of December 31, 2014, we were
recognizing revenue from approximately 93.7 thousand local businesses
accounts; with approximately 62.4 million local businesses on our platform
as of that date, we believe there is significant opportunity to increase
the number of local businesses advertising on Yelp. In particular, we
believe that the continued expansion of the Yelp Platform, new business
owner products and comprehensive tools to measure the effectiveness of our
products will encourage businesses to advertise on our platform. For
example, in 2014, we launched a Yelp for Business Owners app, designed to make it easier for
business owners to engage consumers, and Yelp Reservations, a free tool
that allows businesses in the restaurant and nightlife categories to start
taking online reservations. |
● |
Expand Our Sales
Efforts. We plan to continue to grow our sales force and explore sales partnerships so
we can reach more businesses. During 2014, we continued to invest aggressively in sales resources. We
believe this ongoing investment in our sales force will drive an increase in local businesses advertising on
Yelp. In addition, we will continue to explore partnerships, such as our YP partnership, for the sale of our
products. |
● |
Expand Our
Portfolio of Revenue-Generating Products. We plan to continue to grow and develop
advertising and e-commerce products and partner arrangements that provide incremental value to our
advertisers and business partners to encourage them to increase their advertising budgets allocated towards
our platform. In 2014, we continued to expand the Yelp Platform to provide consumers with a continuous
experience from discovery to completion of transactions across new verticals. For example, we added the
ability for consumers to book spa and salon appointments through Booker, make hotel bookings through Hipmunk and make winery reservations through CellarPass. However, as we explore opportunities to
monetize our products, we remain dedicated to adhering to high standards of user experience. We will not
incorporate advertising or other products or solutions that we believe may excessively degrade the user
experience and potentially alienate users, even if they might result in increased short-term monetization. |
● |
Expand Our Reach.
We also plan to continue to innovate and introduce our content and solutions on new
platforms and distribution channels such as automobile navigation systems, web-enabled televisions and
voice-enabled mobile devices. For example, in 2014, we brought Yelp content to wearable devices,
such as Intels MICA intelligent bracelet. In addition, we continue to have relationships with several
companies such as Microsoft Corporation and Apple Inc., under which we make our content and solutions
available on their website and consumer devices, respectively. |
5
Table of Contents
Marketing
Community
Management
We have a team of Community
Managers and Community Ambassadors based across the United States and in 28
countries internationally, whose primary goals are to support and grow their
local communities of contributors, raise brand awareness and engage with their
surrounding communities through:
● |
planning and
executing fun and engaging events for the community, such as parties,
outings and activities at restaurants, museums, hotels and other local
places of interest; |
● |
getting to know
community members and helping them get to know one another as a way to
foster an offline community experience that can be transferred
online; |
● |
promoting Yelp,
including guest appearances on local television and radio, and at local
events such as concerts and street fairs; and |
● |
writing weekly e-mail
newsletters to share information with the community about local
businesses, events and activities. |
Through these activities, we believe our community management team helps us increase awareness of our
platform and grow avid communities who are willing to contribute content to our platform. These active
contributors to our platform may be invited to attend sponsored social events, but do not receive compensation for
their contributions. This community growth drives the network effect whereby contributed reviews expand the
breadth and depth of our content base. This expansion draws an increasing number of consumers to access the
content on our platform, thus inspiring new and existing contributors to create additional reviews that can be shared
with this growing audience.
There are currently active
Yelp communities in Argentina, Australia, Austria, Belgium, Brazil, Canada,
Chile, the Czech Republic, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Mexico, The Netherlands, New Zealand, Norway, Poland,
Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, the United Kingdom and
the United States.
Community Development
The Yelp communities that
we have established to date have generally followed a similar development path:
a pre-launch content development phase, followed by the hiring of a Community
Manager, leading to review growth and consumer activity, which, at scale,
supports our sales efforts to local businesses.
We select new locations
based on a number of different location-specific criteria, including, but not
limited to, population size, local gross domestic product, pre-existing base of
reviews on our platform, Internet and wireless penetration, proximity to
existing markets, number of local businesses and local ad market growth.
Before launching in any
country, we license business listing information from third-party data providers
and create individual pages for each business location in the entire country.
During this pre-launch preparation phase, we sometimes hire temporary local employees, called scouts, to provide
additional rich content, such as reviews, photos and hours of operation. To bolster the integrity of the content
they provide, we closely monitor their contributions to the platform, prohibit
them from reviewing businesses with which they have a conflict of interest and
identify them in their public profiles as paid contributors. At launch,
consumers can read and write reviews about any business on our platform and
contribute information about businesses that are not already listed.
6
Table of Contents
After launch, we focus on
attracting a community of contributors, consumers and local businesses to our
platform by hiring a Community Manager to raise brand awareness and foster local
engagement as described above. At scale, our platform reaches a critical mass of
reviews, consumers and claimed local business accounts, and we begin an active
sales effort with local businesses. Thereafter, our largest expense is related
to sales efforts to attract local business advertising customers. In Yelp
communities that have attained this level of development, we expect to achieve
economies of scale and operating cost leverage.
To further illustrate the
development of Yelp communities as they scale, we highlight below our review and
revenue metrics for three cohorts of Yelp communities in the United States: the
Yelp communities that we launched in 2005-2006; the Yelp communities that we
launched in 2007-2008; and the Yelp communities that we launched in 2009-2010.
U.S. Market Cohort |
|
Number of Yelp Communities(1) |
|
Average Cumulative Reviews as of December 31, 2014(2) |
|
Year-Over- Year Growth in Average Cumulative Reviews(3) |
|
Average Local Advertising Revenue in Q4 2014(4) |
|
Year-Over- Year Growth in Average Local Advertising Revenue(5) |
2005
2006 Cohort |
|
6 |
|
4,728 |
|
31 |
% |
|
$ |
6,532 |
|
52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
2008 Cohort |
|
14 |
|
1,026 |
|
34 |
% |
|
$ |
1,802 |
|
63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
2010 Cohort |
|
18 |
|
344 |
|
43 |
% |
|
$ |
470 |
|
78 |
% |
____________________
(1) |
|
A Yelp community, which we previously referred to as a Yelp market, is defined as a city or region in which we
have hired a Community Manager. |
|
|
|
(2) |
|
Average
cumulative reviews is defined as the total cumulative reviews of the
cohort as of December 31, 2014 (in thousands), including the reviews that
were not recommended or had been removed from our platform, divided by the
number of Yelp communities in the cohort. |
|
(3) |
|
Year-over-year growth in average cumulative reviews compares the
average cumulative reviews as of December 31, 2014 with the average
cumulative reviews as of December 31, 2013. |
|
(4) |
|
Average
local advertising revenue is defined as the total local advertising revenue from
businesses in the cohort for the quarter ended December 31, 2014 (in
thousands), divided by the number of Yelp communities in the
cohort. |
|
(5) |
|
Year-over-year growth in average local advertising revenue compares
local advertising revenue for the quarter ended December 31, 2014 with
local advertising revenue for the quarter ended December 31,
2013. |
In general, the Yelp
communities in our earlier U.S. community cohorts are more populous than those
in later cohorts, and we have already entered many of the largest cities in the
United States. For these and other reasons, launching additional communities in
the United States may not yield results similar to those of our existing U.S.
communities.
Advertising
We have not historically spent significantly on marketing programs, but have focused instead on organic and
viral growth driven by our community development efforts as described above. However, we believe there may be
significant opportunity to increase our traffic and brand awareness through targeted advertising programs and we
began selectively testing advertising to consumers through various online and offline channels in the second half of 2014. We plan to continue
our selective advertising efforts in 2015. Our marketing expenses may increase if we significantly expand these
efforts to attract additional consumers.
7
Table of Contents
Sales
We sell our products directly through our sales force, indirectly through partners and online through our website. Our sales force consisted of 1,547 employees as of December 31, 2014 and is located in San Francisco,
California; Scottsdale, Arizona; New York, New York; Dublin, Ireland; and Hamburg, Germany. A new sales office in Chicago, Illinois is expected to open in the first quarter of 2015.
Direct Sales.
A large majority of our sales
force is dedicated to selling our local advertising products. A smaller
component of our sales force is responsible for selling display advertisements
and brand sponsorships to national advertisers. Local sales representatives are
primarily responsible for generating qualified sales leads by identifying and
contacting local businesses through direct engagement, direct marketing
campaigns and weekly e-mails to claimed local businesses. Although we see
opportunity to deepen our relationships with existing customers, to date our
sales force has focused on increasing revenue by adding new local
advertising accounts. Sales representatives are typically compensated on the basis
of revenue booked over a given period.
Sales Partnerships.
In 2014, we entered into a
partnership with YP under which YP sells certain of our local advertising
products as part of a package with its own advertising products to its
advertiser base. The products covered by this arrangement include our enhanced
profile and Call to Action products. We continue to explore additional
partnerships for the sale or bundling of our products.
Self-Service Ads.
Our online, or self-service,
sales channel allows businesses to purchase local advertising solutions directly
from our website. Businesses can purchase performance-based cost-per-click
sponsored search advertising directly through this channel.
Technology
Product development and
innovation are core pillars of our strategy. We aim to delight our users and
business partners with our products. We provide our web-based and mobile
services using a combination of in-house and third-party technology solutions
and products.
● |
Search and Ranking
Technology. We leverage the
data stored on our platform and our proprietary indexing and ranking
techniques to provide our users with contextual, relevant and up-to-date
results to their search queries. For example, a consumer desiring
environmentally friendly carpet cleaners does not have to call individual
cleaners to inquire about their use of chemical-based cleaning solutions.
Instead, the consumer can
search for environmentally-friendly carpet
cleaners on Yelp and discover cleaners with the best service and green
cleaning products that serve a specific neighborhood. |
● |
Recommendation
Software. We employ our
proprietary automated recommendation software to analyze and screen all
reviews submitted to our platform. We believe our recommendation
technology is one of the key contributors to the quality and integrity of
the reviews on our platform and the success of our service. See Consumer
Protection Efforts below
for additional details regarding our recommendation
software. |
● |
Mobile
Solutions. As mobile device usage has grown over the past several years, we have invested
significant resources into the development of a comprehensive mobile platform for consumers supporting
the major smartphone operating systems available today, including iOS, Android and Windows
Mobile. Over time, we have enhanced the functionality of our mobile platform, such that it provides
similar and, in some areas, greater functionality than our website. Some of the innovations we introduced
through our mobile platform include check-ins, tips, comments, Nearby and Monocle, our
augmented reality feature. Mobile devices accounted for approximately 65% of all searches on our platform
in the quarter ended December 31, 2014, and approximately 43% of our unique visitors in the quarter ended
December 31, 2014 were to our mobile website. In December 2014, we also launched a mobile app for
business owners, designed to make it easier for them to engage with their customers and manage their Yelp
profiles. The Yelp for Business Owners app is currently available for iOS and Android. |
8
Table of Contents
● |
Advertising Technologies. We use proprietary ad targeting and delivery technologies designed to provide
relevant local advertisements. Our proprietary ad delivery system leverages our unique repository of data
to provide useful ads to users and high value leads to advertisers. |
● |
Infrastructure. Our web and mobile platforms are currently hosted from multiple locations. The primary
and secondary locations are within shared data center environments in California and Virginia. We also
host parts of our infrastructure through Amazon Web Services, as well as with third-party leased server
providers. Our web and mobile platforms are designed to have high availability, from the Internet
connectivity providers we choose, to the servers, databases and networking hardware that we deploy. We
design our systems such that the failure of any individual component is not expected to affect the overall
availability of our platform. We also leverage other third-party Internet-based (cloud) services such as
rich-content storage, map-related services, ad serving and bulk processing. |
● |
Network Security. Computer viruses, malware, phishing attacks, denial-of-service and other attacks and similar disruptions from unauthorized use of computer systems have become more prevalent in our industry, have occurred on our systems in the past, and we expect them to occur periodically on our systems in the future. For this reason, our platform includes a host of encryption, antivirus, firewall and patch-management technologies designed to help protect and maintain the systems located at data centers as well as other systems and computers across our business. |
Consumer Protection
Efforts
Our success depends on our
ability to maintain consumer trust in our solutions and in the quality and
integrity of the user content and other information found on our platform. We
dedicate significant resources to the goal of maintaining and enhancing the
quality, authenticity and integrity of the reviews on our platform, primarily
through the following methods:
Automated Recommendation
Software. We use proprietary
software to analyze the reliability and utility of each review submitted to our
platform. The software applies the same objective standards to each review based
on a wide range of data associated with each review and reviewer
regardless of the business being reviewed. The results of this analysis can
change over time as the software factors in new information, which may result in
reviews that were previously recommended becoming not recommended, and reviews
that were previously not recommended being restored to recommended status.
Reviews that the software deems to be the most useful and reliable are published
directly on business listing pages, though neither we nor the software purport
to establish whether or not any individual review is authentic. As of December
31, 2014, our software was recommending approximately 70% of the reviews
submitted to our platform. Reviews that are not recommended are published on
secondary pages and do not factor
into a businesss overall star rating. As of December 31, 2014, 23% of the reviews submitted to our platform
were not recommended but still accessible on our platform.
Sting Operations.
We routinely conduct sting operations to identify businesses and individuals who offer or
receive cash, discounts or other benefits in exchange for reviews. For example, we may respond to advertisements
offering to pay for reviews that are posted on Craigslist, Facebook and other platforms. We also receive and
investigate tips from our users about potential paid reviews. If we identify or confirm any such issues through our
investigations and operations, we typically pursue one or more of the courses of action described below (each of
which we may also employ on a stand-alone basis).
Consumer Alerts Program.
We issue consumer alert warnings
on business listing pages from time to time when we encounter suspicious
activity that we believe is indicative of attempts to deceive or mislead
consumers. For example, we may issue a consumer alert if we encounter a business
attempting to purchase favorable reviews or a large number of favorable reviews
submitted from the same Internet Protocol address. Consumer alerts generally
remain in effect for 90 days, or longer if the deceptive practices continue.
9
Table of Contents
Coordination with Law
Enforcement. We regularly
cooperate with law enforcement and consumer protection agencies to investigate
and identify businesses and individuals who may be engaged in false advertising
or deceptive business practices relating to reviews. For example, in 2013, we
assisted the New York Attorney General with Operation Clean Turf, an undercover investigation targeting review
manipulation that resulted in 19
companies agreeing to pay more than $350,000 in fines to the State of New York.
Legal
Action. Our terms of service
prohibit the buying and selling of reviews, as well as writing fake reviews. In
egregious cases, we take legal action against businesses we believe to be
engaged in deceptive practices based on these prohibitions.
Removal of
Reviews. We regularly remove
reviews from our platform that we believe violate our terms of service,
including, without limitation: fake or defamatory reviews; content that has been
bought, sold or traded; threatening, harassing or lewd content, as well as hate
speech and other displays of bigotry; and content that violates the rights of
any third party or any applicable law. Users can access information about
reviews that we have removed for a
particular business by clicking on a link on the businesss listing page.
As of December 31, 2014, 7% of the
reviews submitted to our platform had been removed.
Intellectual
Property
We rely on federal, state,
common law and international rights, as well as contractual restrictions, to
protect our intellectual property. We control access to our proprietary
technology and algorithms by entering into confidentiality and invention
assignment agreements with our employees and contractors, as well as
confidentiality agreements with third parties.
In addition to these
contractual arrangements, we also rely on a combination of trade secrets,
copyrights, trademarks, service marks and domain names to protect our
intellectual property. We pursue the registration of our copyrights, trademarks,
service marks and domain names in the United States and in certain locations
internationally. Our registration efforts have focused on gaining protection of
our trademarks for Yelp and the Yelp burst logo, among others. These marks are
material to our business and essential to our brand identity as they enable
others to easily identify us as the source of the services offered under these
marks.
Circumstances outside our
control could pose a threat to our intellectual property rights. For example,
effective intellectual property protection may not be available in the United
States or other countries in which we operate. Also, the efforts we have taken
to protect our proprietary rights may not be sufficient or effective. Any
significant impairment of our intellectual property rights could harm our
business or our ability to compete. Protecting our intellectual property rights
is also costly and time-consuming. Any unauthorized disclosure or use of our
intellectual property could make it more expensive to do business and harm our
operating results.
Companies in the Internet,
technology and media industries own large numbers of patents and other
intellectual property rights, and frequently request license agreements,
or threaten or enter into litigation based on allegations of infringement or other
violations of such rights. We do not own any patents and, therefore, may be
unable to deter competitors or others from pursuing patent or other intellectual
property infringement claims against us. From time to time, we receive notice
letters from patent holders alleging that certain of our products and services
infringe their patent rights. We are also currently subject to, and expect to
face in the future, allegations that we have infringed the trademarks,
copyrights, patents and other intellectual property rights of third parties,
including our competitors and non-practicing entities. As we face increasing
competition and as our business grows, we will likely face more claims of
infringement.
10
Table of Contents
Competition
The market for information
regarding local businesses and advertising is intensely competitive and rapidly
changing. We compete for consumer traffic with traditional, offline local
business guides and directories as well as other online providers of local and web search. We also compete for a
share of local businesses overall advertising budgets with traditional, offline media companies
and other Internet marketing providers. Our competitors include the following
types of businesses:
● |
Offline. Competitors include offline media companies
and service providers, many of which have existing relationships with
local businesses. Services provided by competitors range from yellow pages
listings to direct mail campaigns to advertising and listing services in
local newspapers, magazines, television and
radio. |
● |
Online. Competitors also include Internet search
engines, such as Google, Yahoo! and Bing, review and social media websites as well as various other online
service providers. These include
regional websites that may have strong positions in particular markets.
|
Our competitors may enjoy
competitive advantages, such as greater name recognition, longer operating
histories, substantially greater market share, established marketing
relationships with, and access to, large existing user bases and substantially
greater financial, technical and other resources. These companies may use these
advantages to offer products similar to ours at a lower price, develop different
products to compete with our current solutions and respond more quickly and
effectively than we do to new or changing opportunities, technologies, standards
or client requirements. Certain competitors could also use strong or dominant
positions in one or more markets to gain competitive advantage against us in
markets in which we operate.
We compete on the basis of a number of factors. We compete for consumer traffic on the basis of factors
including: the reliability of our content; the breadth, depth and timeliness of information; and the strength and
recognition of our brand. We compete for local businesses advertising budgets on the basis of factors including: the
size of our consumer audience; the effectiveness of our advertising solutions; our pricing structure; and recognition
of our brand.
Government
Regulation
As a company conducting
business on the Internet, we are subject to a variety of laws in the United
States and abroad that involve matters central to our business, including laws
regarding privacy and data retention, distribution of user-generated content,
consumer protection and data protection, among others. For example:
● |
Privacy. Because we receive, store and process
personal information and other user data, including credit card
information in certain cases, we are subject to numerous federal, state
and local laws around the world regarding privacy and the storing,
sharing, use, processing, disclosure and protection of personal
information and other user data. |
● |
Liability for Third-Party Action.
We rely on laws limiting
the liability of providers of online services for activities of their
users and other third parties. |
● |
Advertising. We are subject to a variety of laws,
regulations and guidelines that regulate the way we distinguish paid
search results and other types of advertising from unpaid search
results. |
● |
Information Security and Data Protection.
The laws in several states
require companies to implement specific information security controls to
protect certain types of information. Likewise, all but a few states have
laws in place requiring companies to notify users if there is a security
breach that compromises certain categories of their
information. |
11
Table of Contents
Many of these laws and
regulations are still evolving and could be interpreted in ways that harm our
business. The application and interpretation of these laws and regulations are
often uncertain, particularly in the new and rapidly evolving industry in which
we operate. They may be interpreted and applied inconsistently from country to
country and inconsistently with our current policies and practices. For example,
regulatory frameworks for privacy issues are currently in flux worldwide, and
are likely to remain so for the foreseeable future. Similarly, laws providing
immunity to websites that publish user-generated content are currently being
tested by a number of claims, including actions based on invasion of privacy and
other torts, unfair competition, copyright and trademark infringement and other
theories based on the nature and content of the materials searched, the ads
posted or the content provided by users. Changes in existing laws or regulations
or their interpretations, as well as new legislation or regulations, could
increase our administrative costs and make it more difficult for consumers to
use our platform, resulting in less traffic and revenue. Such changes could also
make it more difficult for us to provide effective advertising tools to
businesses on our platform, resulting in fewer advertisers and less revenue.
As our business grows and
evolves and our solutions are used in a greater number of countries, we will
also become subject to laws and regulations in additional jurisdictions. Foreign
data protection, privacy and other laws and regulations can be more restrictive
than those in the United States. Any failure on our part to comply with these
laws may subject us to significant liabilities.
Our Culture and
Employees
We take great pride in our
company culture and consider it to be one of our competitive strengths. Our
culture is at the foundation of our success, and it continues to help drive our
business forward as a pivotal part of our everyday operations. It allows us to
attract and retain a talented group of employees, create an energetic work
environment and continue to innovate in a highly competitive market. As of
December 31, 2014, we had 2,711 full-time employees globally.
Our culture extends beyond our offices and into the local communities in which people use Yelp. Our
community management teams responsibilities include supporting the sharing of experiences by consumers in the
local markets that they serve and increasing brand awareness. We organize events several times a year to recognize
our most important contributors, facilitating face-to-face interactions, building the Yelp brand and fostering the
sense of true community in which we believe so strongly. We also engage with small businesses. For example, in
2010, we created the Yelp Small Business Advisory Council as a way to interact with and get feedback from our core community of local business owners. We have also worked with the U.S. Small Business Administration and
other partners to educate small business owners across the United States on best practices for online marketing.
In addition, The Yelp Foundation, a non-profit organization established by our board of directors in November
2011, or the Foundation, directly supports consumers and local businesses in the communities in which we
operate. In the quarter ended December 31, 2011, our board of directors approved the contribution and issuance to
the Foundation of 520,000 shares of our common stock, of which the Foundation had sold 100,000 shares as of
December 31, 2014. The Foundation uses the proceeds from the sale of its shares of our common stock to make
grants to local non-profit organizations that are actively engaged in supporting community and small business
growth. At December 31, 2014, the foundation held 420,000 shares of Class B common stock, representing less than 1% of our
outstanding capital stock.
Information About
Segment and Geographic Revenue
Information about segment
and geographic revenue is set forth in Note 16 of the Notes to Consolidated
Financial Statements included elsewhere in this Annual Report.
Seasonality
Our business is affected both by cyclicality in business activity and by seasonal fluctuations in Internet usage
and advertising spending. We believe our rapid growth has masked most of the cyclicality and seasonality of our
business. As our revenue growth rate slows, we expect that the cyclicality and seasonality in our business may
become more pronounced, causing our operating results to fluctuate. In particular, we expect traffic numbers to be
weakest in the fourth quarter of the year.
12
Table of Contents
Corporate and Available
Information
We were incorporated in
Delaware on September 3, 2004 under the name Yelp, Inc. We changed our name to
Yelp! Inc. in late September 2004 and to Yelp Inc. in February 2012. Our
principal executive offices are located at 140 New Montgomery Street, San
Francisco, California 94105, and our telephone number is (415) 908-3801. Our
website is located at www.yelp.com, and our investor relations website is
located at www.yelp-ir.com.
We file or furnish
electronically with the U.S. Securities and Exchange Commission, or SEC, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act. We make copies of these reports available
free of charge through our investor relations website as soon as reasonably
practicable after we file or furnish them with the SEC.
We webcast our earnings
calls and certain events we participate in or host with members of the
investment community on our investor relations website. Additionally, we provide
notifications of news or announcements regarding our financial performance,
including filings with the SEC, investor events, press and earnings releases,
and blogs as part of our investor relations website. Investors and others can
receive notifications of new information posted on our investor relations
website in real time by signing up for email alerts and RSS feeds.
Information contained on or
accessible through our websites is not incorporated into, and does not form part
of, this Annual Report or any other report or document we file with the SEC, and
any references to our websites are intended to be inactive textual references
only.
Item 1A. Risk Factors.
Our operations and
financial results are subject to various risks and uncertainties, including
those described below, which could adversely affect our business, financial
condition, results of operations, cash flows and the trading price of our Class
A common stock. You should carefully consider the risks and uncertainties
described below before making an investment decision. Additional risks not
presently known to us or that we currently believe are immaterial may also
significantly impair our business operations.
Risks Related to Our
Business and Industry
If we are unable to
increase traffic to our website and mobile app, or user engagement on our
platform declines, our revenue, business and operating results may be
harmed.
We derive substantially all
of our revenue from the sale of advertising, primarily through impression- and
click-based advertising.
Because traffic to our platform determines the number of ads we are able to
show, affects the value of those ads to businesses and influences the content
creation that drives further traffic, slower growth rates may harm our business
and financial results. As a result, our ability to grow our business depends
on our ability to increase traffic to and user engagement on our platform. Our traffic could be adversely affected by factors
including:
● |
Reliance on Internet Search Engines. As discussed in greater detail below, we rely on Internet search
engines to drive traffic to our platform. However, the display, including rankings, of unpaid search results
can be affected by a number of factors, many of which are not in our direct control, and may change
frequently. For example, a search engine may change its ranking algorithms, methodologies or design
layouts. As a result, links to our website may not be prominent enough to drive traffic to our website, and
we may not be in a position to influence the results. Although Internet search engine results have allowed
us to attract a large audience with minimal organic traffic acquisition costs to date, if they fail to drive
sufficient traffic to our platform in the future, we may need to increase our marketing expenses, which
could harm our operating results. |
|
|
● |
Increasing Competition. The market for information regarding local businesses is intensely competitive
and rapidly changing. If the popularity, usefulness, ease of use, performance and reliability of our products
and services do not compare favorably to those of our competitors, traffic may decline. |
|
|
● |
Review Concentration. Our
restaurant and shopping categories together accounted for approximately
42% of the businesses that had been reviewed on our platform and
approximately 58% of the cumulative reviews through December 31, 2014. If
the high concentration of reviews in these categories generates a
perception that our platform is primarily limited to these categories, traffic may not increase or may
decline. |
13
Table of Contents
● |
Our Recommendation
Software. If our automated
software does not recommend helpful content or recommends unhelpful
content, consumers may reduce or stop their use of our platform. While we
have designed our technology to avoid recommending content that we believe
to be unreliable or otherwise unhelpful, we cannot guarantee that our
efforts will be successful. |
● |
Content Scraping. From time to time, other companies copy
information from our platform, through website scraping, robots or other
means, and publish or aggregate it with other information for their own
benefit. This may make them more competitive and may decrease the likelihood
that consumers will visit our platform to find the local businesses and information they seek. Though we strive to detect and prevent
this third-party conduct, we may not be able to detect it in a timely manner
and, even if we could, may not be able to prevent it. In some cases,
particularly in the case of websites operating outside of the United
States, our available remedies may be inadequate to protect us against
such conduct. |
● |
Internet Access. The adoption of any laws or regulations that
adversely affect the growth, popularity or use of the Internet, including
laws impacting Internet neutrality, could decrease the demand for our
services. Similarly, any
actions by companies that provide Internet access that degrade, disrupt or
increase the cost of user access to our platform could
undermine our operations and result in the loss of
users. |
● |
Macroeconomic Conditions. Consumer purchases of discretionary items
generally decline during recessions and other periods in which
disposable income is adversely affected. As a result, adverse economic
conditions may impact consumer spending, particularly with respect to local businesses, which in turn could adversely
impact the number of consumers visiting our platform.
|
We also anticipate that our traffic growth rate will continue to slow over time, and potentially decrease in
certain periods, as our business matures and we achieve higher penetration rates. In particular, the number of major
geographic markets, especially within the United States, we have not yet entered is declining; further expansion in
smaller markets may not yield similar results or sustain our growth. That our traffic growth has slowed in recent
quarters even as we have expanded our international presence is a reflection of this trend. As our traffic growth rate
slows, our success will become increasingly dependent on our ability to increase levels of user engagement on our
platform. This dependence may increase as the portion of our revenue derived from performance-based
advertising increases. A number of factors may negatively affect our user engagement, including if:
● |
users engage with
other products, services or activities as an alternative to our
platform; |
● |
there is a decrease
in the perceived quality of the content contributed by our
users; |
● |
we fail to introduce
new and improved products or features, or we introduce new products or
features that do not effectively address consumer needs or otherwise alienate consumers; |
● |
technical or other
problems negatively impact the availability and reliability of our
platform or otherwise affect the user
experience; |
● |
users have difficulty
installing, updating or otherwise accessing our platform as a result of
actions by us or third parties that we rely on to distribute our
products; |
● |
users believe that
their experience is diminished as a result of the decisions we make with
respect to the frequency, relevance and prominence of the advertising we
display; and |
● |
we do not maintain
our brand image or our reputation is damaged.
|
14
Table of
Contents
We rely on Internet
search engines and application marketplaces to drive traffic to our platform,
certain providers of which offer products and services that compete directly
with our solutions. If links to our website and applications are not displayed
prominently, traffic to our platform could decline and our business would be
adversely affected.
Our success depends in part on our ability to attract users through unpaid Internet search results on search
engines like Google and Bing. The number of users we attract from search engines to our website (including our
mobile website) is due in large part to how and where information from and links to our website are displayed on
search engine result pages. The display, including rankings, of unpaid search results can be affected by a number of
factors, many of which are not in our direct control, and may change frequently. For example, a search engine may
change its ranking algorithms, methodologies or design layouts. As a result, links to our website may not be
prominent enough to drive traffic to our website, and we may not know how or otherwise be in a position to
influence the results. Beginning in the second quarter of 2014, for example, Google made changes to its algorithms
and methodologies that may be contributing to the recent slowing of our traffic growth rate and decline in traffic in
the fourth quarter of 2014. We cannot predict the long-term impact of these changes. Although traffic to our mobile
app is less reliant on search results than traffic to our website, growth in mobile device usage may not decrease our
overall reliance on search results if mobile users use our mobile website rather than our mobile app. In fact, growth
in mobile device usage may exacerbate the risks associated with how and where our website is displayed in search
results because mobile device screens are smaller than personal computer screens and therefore display fewer search
results.
We also rely on application marketplaces, such as Apples App Store and Googles Play, to drive downloads of
our applications. In the future, Apple, Google or other marketplace operators may make changes to their
marketplaces that make access to our products more difficult. For example, our applications may receive
unfavorable treatment compared to the promotion and placement of competing applications, such as the order in
which they appear within marketplaces. Similarly, if problems arise in our relationships with providers of
application marketplaces, our user growth could be harmed.
In some instances, search engine companies and application marketplaces may change their displays or rankings
in order to promote their own competing products or services or the products or services of one or more of our
competitors. For example, Google has integrated its local product offering, Google + Local, with certain of its
products, including search. The resulting promotion of Googles own competing products in its web search results
has negatively impacted the search ranking of our website. Because Google in particular is the most
significant source of traffic to our website, accounting for more than half of the visits to our website from Internet
searches during the three months ended December 31, 2014, our success depends on our ability to maintain a
prominent presence in search results for queries regarding local businesses on Google. As a result, Googles promotion of its own competing products or similar actions by Google in the future that have the effect of reducing our prominence or ranking on its search results could have a substantial negative effect on our business and results of operations.
Consumers are increasingly using mobile devices to access online services. If our mobile platform and mobile advertising products are not compelling, or if we are unable to operate effectively on mobile devices, our business could be adversely affected.
The number of people who access information about local businesses through mobile devices, including
smartphones, tablets and handheld computers, has increased dramatically over the past few years and is expected to
continue to increase. Although many consumers access our platform both on their mobile devices and through
personal computers, we have seen substantial growth in mobile usage as we have developed our mobile solutions.
We anticipate that growth in use of our mobile platform will be the driver of our growth for the foreseeable future
and that usage through personal computers may continue to decline worldwide. As a result, we must continue to
drive adoption of and user engagement on our mobile platform, and our mobile app in particular. If we are unable to
drive continued adoption of and engagement on our mobile app, our business may be harmed and we may be unable
to decrease our reliance on traffic from Google and other search engines.
In order to attract and retain engaged users of our mobile platform, the mobile products and services we
introduce must be compelling. However, the ways in which users engage with our platform and consume content has
changed over time, and we expect it will continue to do so as users increasingly engage via mobile. This may make
it more difficult to develop mobile products that consumers find useful or provide them with the information they
seek, and may also negatively affect our content if users do not continue to contribute high quality content on their
mobile devices. In addition, building an engaged base of mobile users may also be complicated by the frequency
with which users change or upgrade their mobile services. In the event users choose mobile devices that do not
already include or support our mobile app or do not install our mobile app when they change or upgrade their devices, our traffic and
user engagement may be harmed.
15
Table of
Contents
Our success is also dependent on the interoperability of our mobile products with a range of mobile
technologies, systems, networks and standards that we do not control, such as mobile operating systems like
Android and iOS. We may not be successful in developing products that operate effectively with these technologies,
systems, networks and standards or in creating, maintaining and developing relationships with key participants in the
mobile industry, some of which may be our competitors. Any changes that degrade the functionality of our mobile
products, give preferential treatment to competitive products or prevent us from delivering advertising could
adversely affect mobile usage and monetization. As new mobile devices and platforms are released, it is difficult to
predict the problems we may encounter in developing products for these alternative devices and platforms, and we
may need to devote significant resources to the creation, support and maintenance of such products. If we
experience difficulties in the future integrating our mobile app into mobile devices, or we face increased costs to
distribute our mobile app, our user growth and operating results could be harmed.
In addition, if our mobile advertising products prove ineffective, our advertisers may stop or reduce their
advertising with us. Although we currently deliver advertising on our mobile app and mobile website, the mobile
advertising market remains a new and evolving market; as new devices and platforms are released, users may begin
consuming content in a manner that is more difficult to monetize. Given our limited experience in monetizing our
mobile products, we may not be able to generate meaningful revenue from our mobile products despite the expected
growth in mobile usage. For example, we may be unable to attract new advertisers if our mobile advertising
products are not compelling or we fail to continue to innovate and introduce enhanced mobile solutions. Similarly,
if we incur excessive expenses in these efforts or our products are insufficiently profitable, our ability to grow
revenue would be negatively affected. However, if our mobile solutions alienate our user base our business may
also suffer. Accordingly, we must also balance these considerations against our commitment to prioritizing the
quality of user experience over short-term monetization, which we may not do effectively.
If our users fail to
contribute high quality content or their contributions are not valuable to other
users, our traffic and revenue could be negatively affected.
Our success in attracting
users depends on our ability to provide consumers with the information they
seek, which in turn depends on the quantity and quality of the content
contributed by our users. We believe that as the depth and breadth of the
content on our platform grow, our platform will become more widely known and
relevant to broader audiences, thereby attracting new consumers to our service.
However, if we are unable to provide consumers with the information they seek, they may
stop or reduce their use of our platform, and traffic to our website and on our
mobile app will decline. If our user traffic declines, our advertisers may stop
or reduce the amount of advertising on our platform and our business could be
harmed. Our ability to provide consumers with valuable content may be harmed:
● |
if our users do not
contribute content that is helpful or reliable; |
|
|
● |
if our users remove
content they previously submitted; |
|
|
● |
as a result of user
concerns that they may be harassed or sued by the businesses they review,
instances of which have occurred in the past and may occur again in the
future; and |
|
|
● |
as users increasingly
contribute content through our mobile platform, because content contributed through mobile devices tends to be shorter than desktop contributions. |
Similarly, if our platform does not provide current information about local businesses or users do not perceive
reviews on our platform as relevant, our brand and business could be harmed. For example, we do not phase out or
remove dated reviews, and consumers may view older reviews as less relevant, helpful or reliable than more recent
reviews.
16
Table of
Contents
If we fail to
maintain and expand our base of advertisers, our revenue and our business will
be harmed.
Our ability to grow our
business depends on our ability to maintain and expand our advertiser base. To
do so, we must convince existing and prospective advertisers alike that our
advertising products offer a material benefit and can generate a competitive
return relative to other alternatives. Our ability to do so depends on factors
including:
● |
Acceptance of
Online Advertising. We believe
that the continued growth and acceptance of our online advertising
products will depend on the perceived effectiveness and the acceptance of
online advertising models generally, which is outside of our control. Many
advertisers still have limited experience with online advertising and, as
a result, may continue to devote significant portions of their advertising
budgets to traditional, offline advertising media, such as newspapers or
print yellow pages directories. |
|
|
● |
Competitiveness of
Our Products. We must deliver ads
in an effective manner and provide accurate analytics and measurement
solutions that demonstrate the value of our advertising products compared to those of our
competitors. Similarly, if the pricing of our advertising products does not compare
favorably to those of our competitors, advertisers may reduce their
advertising with us or choose not to advertise with us at
all. |
|
|
● |
Traffic
Quality. The success of our
advertising program depends on delivering positive results to our
advertising customers. Low-quality or invalid traffic, such as robots,
spiders and the mechanical automation of clicking, may be detrimental to
our relationships with advertisers and could adversely affect our
advertising pricing and revenue. If we fail to detect and prevent click
fraud or other invalid clicks on ads, the affected advertisers may
experience or perceive a reduced return on their investments, which could
lead to dissatisfaction with our products, refusals to pay, refund demands
or withdrawal of future business. |
|
|
● |
Perception of Our
Platform. Our ability to compete
effectively for advertiser budgets depends on our reputation and perceptions
regarding our platform. For example, we may face challenges expanding our
advertiser base in businesses outside the restaurant and shopping
categories if businesses believe that consumers perceive the utility of
our platform to be limited to finding businesses in these categories. The
ratings and reviews that businesses receive from our users may also affect
their advertising decisions. Favorable ratings and reviews, on the one
hand, could be perceived as obviating the need to advertise. Unfavorable
ratings and reviews, on the other, could discourage businesses from
advertising to an audience that they perceive as hostile or cause them to
form a negative opinion of our products and user base. |
|
|
● |
Macroeconomic
Conditions. Adverse macroeconomic conditions can have a negative impact on the demand for advertising, particularly with respect to online advertising products. We rely heavily on small and medium-sized businesses, which often have limited advertising budgets and may be disproportionately affected by economic downturns. In addition, such business may view online advertising as lower priority than offline advertising.
|
As is typical in our
industry, our advertisers generally do not have long-term obligations to
purchase our products. 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. Small and medium-sized local businesses in particular have
historically experienced high failure rates. As a result, we may experience
attrition in our advertisers in the ordinary course of business resulting from
several factors, including losses to competitors, declining advertising budgets,
closures and bankruptcies. To grow our business, we must continually add new
advertisers to replace advertisers who choose not to renew their
advertising, or who go out of business or otherwise fail to fulfill their
advertising contracts with us, which we may not be able to do.
If we fail to expand
our operations effectively, including in international markets where we have
limited operating experience and may be subject to increased risks, our revenue
and business will be harmed.
We intend to expand our
operations into new markets, both domestically and abroad. Our expansion into
new markets places us in competitive environments with which we are unfamiliar
and involves various challenges, such as expanding our sales force and community
management personnel to reach those new markets, and encountering different and potentially lower levels of user
engagement or advertiser demand in some or all of these markets. Our current and
future expansion plans will require significant resources and management
attention, and the returns on such investments may not be achieved for several
years, or at all.
17
Table of
Contents
Because we have already
entered many of the largest markets in the United States and further expansion
in smaller markets may not yield similar results, our continued growth depends
on our ability to expand effectively in international markets. We have a limited
operating history in international markets, which makes it difficult to evaluate
our future prospects and may increase the risk that we will not be successful.
If the markets we have targeted for international expansion do not develop as we
expect, or if we fail to address the needs of those markets, our business will
be harmed. Expanding internationally may also subject us to risks that we have
not faced before or that increase our exposure to risks that we currently face,
including risks associated with:
● |
operating a rapidly growing business in an
environment of multiple languages, cultures, customs, legal systems,
regulatory systems and commercial infrastructures; |
|
|
● |
recruiting and
retaining qualified, multi-lingual employees, including sales
personnel; |
|
|
● |
increased competition
from local websites and guides, and potential preferences by local
populations for local providers; |
|
|
● |
our ability to achieve
prominent display of our content in unpaid search results, which may be
more difficult in newer markets where we may have less content and more
competitors than in more established markets; |
|
|
● |
providing solutions in
different languages for different cultures, which may require that we
modify our solutions and features to ensure that they are culturally
relevant in different countries; |
|
|
● |
compliance with
applicable foreign laws and regulations, including different privacy,
censorship and liability standards; |
|
|
● |
the enforceability of
our intellectual property rights; |
|
|
● |
credit risk and higher
levels of payment fraud; |
|
|
● |
currency exchange rate
fluctuations; |
|
|
● |
compliance with
anti-bribery laws, including but not limited to the Foreign Corrupt
Practices Act and the U.K. Bribery Act; |
|
|
● |
foreign exchange
controls that might prevent us from repatriating cash earned outside the
United States; |
|
|
● |
political and economic
instability in some countries; |
|
|
● |
double taxation of our
international earnings and potential adverse tax consequences due to
changes in the tax laws of the United States or foreign jurisdictions in
which we operate; and |
|
|
● |
higher costs of doing
business internationally. |
We may acquire other companies or technologies, which could divert our managements attention, result in
additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results. We
may also be unable to realize the expected benefits and synergies of any acquisitions.
Our success will depend, in
part, on our ability to expand our product offerings and grow our business in
response to changing technologies, user and advertiser demands and competitive
pressures. In some circumstances, we may determine to do so through the
acquisition of complementary businesses or technologies rather than through
internal development. For example, in February 2015, we acquired Eat24 to obtain an online food
ordering solution. We have limited experience as a company in the complex
process of acquiring other businesses and technologies. The pursuit of potential
future acquisitions may divert the attention of management and cause us to incur
expenses in identifying, investigating and pursuing acquisitions, whether or not
they are consummated.
18
Table of
Contents
Acquisitions that are
consummated could result in dilutive issuances of equity securities or the
incurrence of debt, which could adversely affect our results of operations or
our ability to maintain profitability. The incurrence of debt in particular
could result in increased fixed obligations or include covenants or other
restrictions that would impede our ability to manage our operations. In
addition, any acquisitions we announce could be viewed negatively by users,
businesses or investors. We may also discover liabilities or deficiencies
associated with the companies or assets we acquire that we did not identify in
advance, which may result in significant unanticipated costs. The effectiveness
of our due diligence review and our ability to evaluate the results of such due
diligence are dependent upon the accuracy and completeness of statements and
disclosures made by the companies we acquire or their representatives, as well
as the limited amount of time in which acquisitions are executed. We may also
fail to accurately forecast the financial impact of an acquisition transaction,
including tax and accounting charges.
In order to realize the
expected benefits and synergies of any acquisition that is consummated, we must
meet a number of significant challenges that may create unforeseen operating
difficulties and expenditures, including:
● |
integrating operations, strategies, services, sites and technologies of the acquired
company; |
|
|
● |
managing the combined
business effectively; |
|
|
● |
retaining and
assimilating the employees of the acquired company; |
|
|
● |
retaining existing
customers and strategic partners and minimizing disruption to existing
relationships as a result of any integration of new
personnel; |
|
|
● |
difficulties in the
assimilation of corporate cultures; |
|
|
● |
implementing and
retaining uniform standards, controls, procedures, policies and
information systems; and |
|
|
● |
addressing risks
related to the business of the acquired company that may continue to
impact the business following the
acquisition. |
Any inability to integrate
services, sites and technologies, operations or personnel in an efficient and
timely manner could harm our results of operations. Transition activities are
complex and require significant time and resources, and we may not manage the
process successfully, particularly if we are managing multiple integrations
concurrently. Our ability to integrate complex acquisitions is unproven,
particularly with respect to companies that have significant operations or that
develop products with which we do not have prior experience. For example, Eat24
is larger and more complex than previous companies we have acquired. In addition, Eat24 operates a business that is new to us, and we do not currently have significant experience or structure in place to support this business. We plan
to invest resources to support this and any future acquisitions, which will result in ongoing
operating expenses and may divert resources and management attention from other
areas of our business. We cannot assure you that these investments will be
successful. Even if we are able to integrate the operations of any acquired
company successfully, these integrations may not result in the realization of
the full benefits of synergies, cost savings, innovation and operational
efficiencies that may be possible from the combination of the businesses, or we may not
achieve these benefits within a reasonable period of time.
We rely on
third-party service providers and strategic partners for many aspects of our
business, and any failure to maintain these relationships could harm our
business.
We rely on
relationships with various third parties to grow our business, including
strategic partners and technology and content providers. For example, we rely on
third parties for data about local businesses, mapping functionality and
administrative software solutions. We also rely on partners for various transactions
available through the Yelp Platform, including Booker for spa and salon
appointments, Locu for menu data and Hipmunk for hotel bookings, among others.
Identifying, negotiating and maintaining relationships with third parties
require significant time and resources, as does integrating their data, services
and technologies onto our platform. It is possible that these third parties may not be able to devote the
resources we expect to the relationships. We may also have competing interests
and obligations with respect to our partners in particular, which may make it
difficult to maintain, grow or maximize the benefit for each partnership. Our
focus on integrating additional partners to expand
the Yelp Platform may exacerbate this risk.
19
Table of
Contents
If our relationships with
our partners and providers deteriorate, we could suffer increased costs and
delays in our ability to provide consumers and advertisers with content or
similar services. We have had, and may in the future have, disagreements or
disputes with our partners about our respective contractual obligations, which
could result in legal proceedings or negatively affect our brand and reputation.
In addition, we exercise limited control over our third-party partners and vendors,
which makes us vulnerable to any errors, interruptions or delays in their
operations. If these third parties experience any service disruptions, financial
distress or other business disruption, or difficulties meeting our requirements
or standards, it could make it difficult for us to operate some aspects of our
business. Similarly, upon expiration or termination of any of our agreements with
third-party providers, we may not be able to replace the services provided to us
in a timely manner or on terms that are favorable to us, if at all, and a
transition from one partner or provider to another could subject us to
operational delays and inefficiencies.
We face competition
for both local business directory traffic and advertiser spending, and expect
competition to increase in the future.
The market for information
regarding local businesses and advertising is intensely competitive and rapidly
changing. With the emergence of new technologies and market entrants,
competition is likely to intensify in the future. We compete for consumer
traffic with traditional, offline local business guides and directories, Internet search engines, such as Google and Bing, review and social media websites and various other online service
providers. These competitors may
include regional review websites that may have strong positions in particular
countries. We also compete with these companies for the content of contributors,
and may experience decreases in both traffic and user engagement if our
competitors offer more compelling environments.
Although advertisers are allocating an increasing amount of their overall marketing budgets to online
advertising, such spending lags behind growth in Internet and mobile usage generally, making the market for online
advertising intensely competitive. We compete for a share of local businesses overall advertising budgets with
traditional, offline media companies and service providers, as well as Internet marketing providers. Many of these
companies have established marketing relationships with local businesses, and certain of our online competitors
have substantial proprietary advertising inventory and web traffic that may provide a significant competitive
advantage.
Certain competitors could
use strong or dominant positions in one or more markets to gain competitive
advantage against us in areas in which we operate, including by: integrating review
platforms or features into products they control, such as search engines, web
browsers or mobile device operating systems; making acquisitions; changing their
unpaid search result rankings to promote their products; refusing to enter into
or renew licenses on which we depend; limiting or denying our access to
advertising measurement or delivery systems; limiting our ability to target or
measure the effectiveness of ads; or making access to our platform more
difficult. This risk may be exacerbated by the trend in recent years toward
consolidation among online media companies, potentially allowing our larger
competitors to offer bundled or integrated products that feature alternatives to
our platform.
Our competitors may also
enjoy competitive advantages, such as greater name recognition, longer operating
histories, substantially greater market share, large existing user bases and
substantially greater financial, technical and other resources. Traditional
television and print media companies, for example, have large established
audiences and more traditional and widely accepted advertising products. These
companies may use these advantages to offer products similar to ours at a lower
price, develop different products to compete with our current solutions and
respond more quickly and effectively than we do to new or changing
opportunities, technologies, standards or
client requirements. In particular, major Internet companies, such as Google,
Facebook, Yahoo! and Microsoft, may be more successful than us in developing and
marketing online advertising offerings directly to local businesses, and may
leverage their relationships based on other products or services to gain
additional share of advertising budgets.
20
Table of
Contents
To compete effectively, we
must continue to invest significant resources in product development to enhance
user experience and engagement, as well as sales and marketing to expand our
base of advertisers. However, there can be no assurance that we will be able to
compete successfully for users and advertisers against existing or new
competitors, and failure to do so could result in loss of existing users,
reduced revenue, increased marketing expenses or diminished brand strength, any
of which could harm our business.
Our business depends
on a strong brand, and any failure to maintain, protect and enhance our brand
would hurt our ability to retain and expand our base of users and advertisers,
as well as our ability to increase the frequency with which they use our
products.
We have developed a strong brand that we believe has contributed significantly to the success of our business.
Maintaining, protecting and enhancing the Yelp brand are critical to expanding our base of users and advertisers
and increasing the frequency with which they use our solutions. Our ability to do so will depend largely on our
ability to maintain consumer trust in our solutions and in the quality and integrity of the user content and other
information found on our platform, which we may not do successfully. We dedicate significant resources to these
goals, primarily through our automated recommendation software, sting operations targeting the buying and selling
of reviews, our consumer alerts program, coordination with consumer protection agencies and law enforcement, and,
in certain egregious cases, taking legal action against business we believe to be engaged in deceptive activities. We
also endeavor to remove content from our platform that violates our terms of service.
Despite these efforts, we
cannot guarantee that each of the 71.2 million reviews on our platform that have
been recommended and that have not been removed as of December 31, 2014 is
useful or reliable, or that consumers will trust the integrity of our content.
For example, if our recommendation software does not recommend helpful content
or recommends unhelpful content, consumers and businesses alike may stop or
reduce their use of our platform and products. Some consumers and businesses
have alternately expressed concern that our technology either recommends too
many reviews, thereby recommending some reviews that may not be legitimate, or
too few reviews, thereby not recommending some reviews that may be legitimate.
If consumers do not believe our recommended reviews to be useful and reliable,
they may seek other services to obtain the information for which they are
looking, and may not return to our platform as often in the future, or at all.
This would negatively impact our ability to retain and attract users and
advertisers and the frequency with which they use our platform.
Consumers may also believe that the reviews, photos and other user content contributed by our Community
Managers or other employees are influenced by our advertising relationships or are otherwise biased. Although we
take steps to prevent this from occurring by, for example, identifying Community Managers as Yelp employees on
their account profile pages and explaining their role on our platform, the designation does not appear on the page for
each review contributed by the Community Manager and we may not be successful in our efforts to maintain
consumer trust. Similarly, the actions of our partners may affect our brand if users do not have a positive experience
on the Yelp Platform. If others misuse our brand or pass themselves off as being endorsed or affiliated with us, it
could harm our reputation and our business could suffer. Our website and mobile app also serve as a platform for
expression by our users, and third parties or the public at large may also attribute the political or other sentiments
expressed by users on our platform to us, which could harm our reputation.
21
Table of
Contents
In addition, negative publicity about our company, including our technology, sales practices, personnel,
customer service, litigation or political activities could diminish confidence in our brand and the use of our products.
Certain media outlets have previously reported allegations that we manipulate our reviews, rankings and ratings in
favor of our advertisers and against non-advertisers. In order to demonstrate that our automated recommendation
software applies in a nondiscriminatory manner to both advertisers and non-advertisers, we allow users to access
reviews that are both recommended and not recommended by our software. We have also allowed businesses to
comment publicly on reviews so that they can provide a response. Nevertheless, our reputation and brand, the traffic
to our website and mobile app and our business may suffer if negative publicity about our company persists or if
users otherwise perceive that our content is manipulated or biased. Allegations and complaints regarding our business practices, and any resulting negative publicity, may also result in increased regulatory scrutiny of our
company. In addition to requiring management time and attention, any regulatory inquiry or investigation could
itself result in further negative publicity regardless of its merit or outcome.
Maintaining and enhancing
our brand may also require us to make substantial investments, and these
investments may not be successful. For example, our trademarks are an important
element of our brand. We have faced in the past, and may face in the future,
oppositions from third parties to our applications to register key trademarks in
foreign jurisdictions in which we expect to expand our presence. If we are
unsuccessful in defending against these oppositions, our trademark applications
may be denied. Whether or not our trademark applications are denied, third
parties may claim that our trademarks infringe their rights. As a result, we
could be forced to pay significant settlement costs or cease the use of these
trademarks and associated elements of our brand in certain jurisdictions. Doing
so could harm our brand recognition and adversely affect our business. If we
fail to maintain and enhance our brand successfully, or if we incur excessive
expenses in this effort, our business and financial results may be adversely
affected.
If we fail to manage
our growth effectively, our brand, results of operations and business could be
harmed.
We have experienced rapid
growth in our headcount and operations, including through our acquisitions of
other businesses, such as SeatMe in 2013 and Eat24 in February 2015, which places substantial demands on management
and our operational infrastructure. Most of our employees have been with us for
fewer than two years; to manage the expected growth of our operations, we will
need to continue to increase the productivity of our current employees and hire,
train and manage new employees. In particular, we intend to continue to make
substantial investments in our engineering, sales and marketing and community
management organizations. As a result, we must effectively integrate, develop
and motivate a large number of new employees, including employees in
international markets and from any acquired businesses, while maintaining the
beneficial aspects of our company culture.
To manage this growth, we
may need to improve our operational, financial and management systems and
processes, which may require significant capital expenditures and allocation of
valuable management and employee resources, as well as subject us to the risk of
over-expanding our operating infrastructure. However, if we fail to scale our
operations successfully and increase productivity, the quality of our platform
and efficiency of our operations could suffer, which could harm our brand,
results of operations and business.
We make the consumer
experience our highest priority. Our dedication to making decisions based
primarily on the best interests of consumers may cause us to forgo short-term
gains and advertising revenue.
We base many of our
decisions on the best interests of the consumers who use our platform. In the
past, we have forgone, and we may in the future forgo, certain expansion or
revenue opportunities that we do not believe are in the best interests of
consumers, even if such decisions negatively impact our results of operations in
the short term. Our approach of putting consumers first may
negatively impact our relationship with existing or prospective
advertisers. For example, unless we believe that a review violates our terms of service, such as reviews
that contain hate speech or bigotry, we will allow the review to remain on our
platform, even if the business disputes its accuracy. Certain advertisers may therefore perceive us as an impediment
to their success as a result of negative reviews and ratings. This practice
could result in a loss of advertisers, which in turn could harm our results of
operations. However, we believe that this approach has been essential to our
success in attracting users and increasing the frequency with which they use our platform. As a result, we believe this approach has served the
long-term interests of our company and our stockholders and will continue to do
so in the future.
22
Table of
Contents
We rely on the
performance of highly skilled personnel, and if we are unable to attract, retain
and motivate well-qualified employees, our business could be harmed.
We believe our success has
depended, and continues to depend, on the efforts and talents of our employees,
including our senior management team, software engineers, marketing
professionals and advertising sales staff. The loss of any of our senior
management or key employees could materially adversely affect our ability to
execute our business plan, and we may not be able to find adequate replacements.
All of our officers and other U.S. employees are at-will employees, which means
they may terminate their employment relationship with us at any time, and their
knowledge of our business and industry would be extremely difficult to
replace.
Our future depends on our
continuing ability to attract, develop, motivate and retain highly qualified and
skilled employees. Qualified individuals are in high demand, and we may incur
significant costs to attract them before we can validate their productivity. The
significant increase in the price of our Class A common stock since we became a
public company in 2012 may make it more difficult or costly in the future to use
equity compensation to motivate, incentivize and retain our employees. If we do
not succeed in attracting well-qualified employees or retaining and motivating
existing employees, our business could be harmed.
Risks Related to Our
Technology
Our business is
dependent on the uninterrupted and proper operation of our technology and
network infrastructure. Any significant disruption in our service could damage
our reputation, result in a potential loss of users and engagement and adversely
affect our results of operations.
It is important to our
success that users in all geographies be able to access our platform at all
times. We have previously experienced, and may experience in the future, service
disruptions, outages and other performance problems. Such performance problems
may be due to a variety of factors, including infrastructure changes, human or
software errors and capacity constraints due to an overwhelming number of users
accessing our platform simultaneously. Our products and services
are highly technical and complex, and may contain errors or vulnerabilities that
could result in unanticipated downtime for our platform and harm to our
reputation and business. Users may also use our products in unanticipated ways
that may cause a disruption in service for other users attempting to access our
platform. We may encounter such difficulties more frequently as we acquire
companies and incorporate their technologies into our service. It may also
become increasingly difficult to maintain and improve the availability of our
platform, especially during peak usage times, as our solutions become more
complex and our user traffic increases.
In some instances, we may
not be able to identify the cause or causes of these performance problems within
an acceptable period of time. If our platform is unavailable when users attempt
to access it or it does not load as quickly as they expect, users may seek other
services to obtain the information for which they are looking, and may not
return to our platform as often in the future, or at all. This would negatively
impact our ability to attract users and advertisers and increase the frequency
with which they user our platform. We expect to continue to make significant
investments to maintain and improve the availability of our platform and to
enable rapid releases of new features and products. To the extent that we do not
effectively address capacity constraints, upgrade our systems as needed and
continually develop our technology and network architecture to accommodate
actual and anticipated changes in technology, our business and operating results
may be harmed.
23
Table of
Contents
Our systems are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes,
fires, floods, power losses, telecommunications failures, terrorist attacks and similar events. Our U.S. corporate
offices and one of the facilities we lease to house our computer and telecommunications equipment are located in
the San Francisco Bay Area, a region known for seismic activity. In addition, acts of terrorism, which may be
targeted at metropolitan areas that have higher population densities than rural areas, could cause disruptions in our
or our local business advertisers businesses or the economy as a whole. We may not have sufficient protection or
recovery plans in certain circumstances, such as natural disasters affecting the San Francisco Bay Area, and our
business interruption insurance may be insufficient to compensate us for losses that may occur. Our disaster
recovery program contemplates transitioning our platform and data to a backup center in the event of a catastrophe.
Although this program is functional, if our primary data center shuts down, there will be a period of time that our
services will remain shut down while the transition to the back-up data center takes place. During this time, our
platform may be unavailable in whole or in part to our users.
If our security
measures are compromised, or if our platform is subject to attacks that degrade
or deny the ability of users to access our content, users may curtail or stop
use of our platform.
Our platform involves the storage and transmission of user and business information, some of which may be
private, and security breaches could expose us to a risk of loss of this information, which could result in potential
liability and litigation. Computer viruses, break-ins, malware, phishing attacks, attempts to overload servers with
denial-of-service or other attacks and similar disruptions from unauthorized use of computer systems have become
more prevalent in our industry, have occurred on our systems in the past and are expected to occur periodically on
our systems in the future. We may be a particularly compelling target for such attacks as a result of our brand
recognition. User and business owner accounts and profile pages could be hacked, hijacked, altered or
otherwise claimed or controlled by unauthorized persons. For example, we enable businesses to create free online
accounts and claim the business profile pages for each of their business locations. Although we take steps to
confirm that the person setting up the account is affiliated with the business, our verification systems could fail to
confirm that such person is an authorized representative of the business, or mistakenly allow an
unauthorized person to claim the businesss profile page. In addition, we face risks associated with security
breaches affecting our third-party partners and service providers. A security breach at any such third party could be
perceived by consumers as a security breach of our systems and result in negative publicity, damage to our
reputation and expose us to other losses.
Although none of the
disruptions we have experienced to date have had a material effect on our
business, any future disruptions could lead to interruptions, delays or website
shutdowns, causing loss of critical data or the unauthorized disclosure or use
of personally identifiable or other confidential information. Even if we
experience no significant shutdown or no critical data is lost, obtained or
misused in connection with an attack, the occurrence of such attack or the
perception that we are vulnerable to such attacks may harm our reputation, our
ability to retain existing users and our ability to attract new users. Although
we have developed systems and processes that are designed to protect our data
and prevent data loss and other security breaches, the techniques used to
obtain unauthorized access, disable or degrade service or sabotage systems
change frequently, often are not recognized until launched against a target and
may originate from less regulated and more remote areas around the world. As a
result, these
preventative measures may not be adequate and we cannot assure you that they
will provide absolute security.
Any or all of these issues
could negatively impact our ability to attract new users, deter current users
from returning to our platform, cause existing or potential advertisers to
cancel their contracts or subject us to third-party lawsuits or other
liabilities. For example, we work with third-party vendors to process credit
card payments by users and businesses, and are subject to payment card
association operating rules. If our security measures fail to protect payment
information adequately as a result of employee error, malfeasance or otherwise,
or we fail to comply with the applicable operating
rules, we could be liable to the users and businesses for their losses, as well
as the vendors under our agreements with them, and be subject to fines and
higher transaction fees. In addition, government authorities could also initiate
legal or regulatory actions against us in connection with such incidents, which
could cause us to incur significant expense and liability or result in orders or
consent decrees forcing us to modify our business practices.
24
Table of Contents
Some of our products
contain open source software, which may pose particular risks to our proprietary
software and solutions.
We use open source software
in our products and will use open source software in the future. From time to
time, we may face claims from third parties claiming ownership of, or demanding
release of, the open source software or derivative works that we developed using
such software (which could include our proprietary source code), or otherwise
seeking to enforce the terms of the applicable open source license. These claims
could result in litigation and could require us to purchase a costly license or
cease offering the implicated solutions unless and until we can re-engineer them
to avoid infringement. This re-engineering process could require significant
additional research and development resources. In addition to risks related to
license requirements, use of certain open source software can lead to greater
risks than use of third-party commercial software because open source licensors
generally do not provide warranties or controls on the origin of the software.
Any of these risks could be difficult to eliminate or manage and, if not
addressed, could have a negative effect on our business and operating results.
Failure to protect or
enforce our intellectual property rights could harm our business and results of
operations.
We regard the protection of
our trade secrets, copyrights, trademarks and domain names as critical to our
success. In particular, we must maintain, protect and enhance the Yelp brand.
We pursue the registration of our domain names, trademarks and service marks in
the United States and in certain jurisdictions abroad. We strive to protect our
intellectual property rights by relying on federal, state and common law rights,
as well as contractual restrictions. We typically enter into confidentiality and
invention assignment agreements with our employees and contractors, as well as
confidentiality agreements with parties with whom we conduct business in order
to limit access to, and disclosure and use of, our proprietary information.
However, these contractual arrangements and the other steps we have taken to
protect our intellectual property may not prevent the misappropriation or
disclosure of our proprietary information nor deter independent development of
similar technologies by others.
Effective trade secret,
copyright, trademark and domain name protection is expensive to develop and
maintain, both in terms of initial and ongoing registration requirements and
expenses and the costs of defending our rights. We are seeking to protect our
intellectual property, including trademarks and domain names, in an increasing number of jurisdictions, a process
that is expensive and may not be successful, but have not done so in every
location in which we operate. Litigation may become necessary to enforce our
intellectual property rights, protect our respective trade secrets or determine
the validity and scope of proprietary rights claimed by others. For example, we
may incur significant costs in enforcing our trademarks against those who
attempt to imitate our Yelp brand. Any litigation of this nature, regardless
of outcome or merit, could result in substantial costs and diversion of
management and technical resources, any of which could adversely affect our
business and operating results.
We may be unable to
continue to use the domain names that we use in our business, or prevent third
parties from acquiring and using domain names that infringe on, are similar to,
or otherwise decrease the value of our brand or our trademarks or service marks.
We have registered domain
names for the websites that we use in our business, such as Yelp.com. If we lose
the ability to use a domain name, whether due to trademark claims, failure to
renew the applicable registration or any other cause, we may be forced to market
our products under a new domain name, which could cause us substantial harm or
cause us to incur significant expense in order to purchase rights to the domain
name in question. In addition, our competitors and others could attempt to
capitalize on our brand recognition by using domain names similar to ours.
Domain names similar to ours have been registered by others in the United States and
elsewhere. We may be unable to prevent third parties from acquiring and using
domain names that infringe on, are similar to or otherwise decrease the value of
our brand or our trademarks or service marks. Protecting and enforcing our
rights in our domain names may require litigation, which could result in
substantial costs and diversion of managements
attention.
25
Table of Contents
Risks Related to Our
Financial Statements and Tax Structure
We have a limited
operating history in an evolving industry, which makes it difficult to evaluate
our future prospects and may increase the risk that we will not be successful.
We also expect our operating results to fluctuate on a quarterly and annual
basis, which increases the difficulty in predicting our future performance.
We have a limited operating
history in an evolving industry that may not develop as expected, if at all. As
a result, our historical operating results may not be indicative of our future
operating results, making it difficult to assess our future prospects. You
should consider our business and prospects in light of the risks and
difficulties we may encounter in this rapidly evolving industry, which we may
not be able to address successfully. These risks and difficulties include our
ability to, among other things:
● |
increase the number
of users of our website and mobile app and the number of reviews and other
content on our platform; |
|
|
● |
attract and retain
new advertising clients, many of which may have limited or no online
advertising experience; |
|
|
● |
forecast revenue and
adjusted EBITDA accurately, which may be more difficult as we sell more
performance-based advertising, as well as appropriately estimate and plan
our expenses; |
|
|
● |
continue to earn and
preserve a reputation for providing meaningful and reliable reviews of
local businesses; |
|
|
● |
effectively monetize
our mobile products as usage continues to migrate toward mobile
devices; |
|
|
● |
successfully compete
with existing and future providers of other forms of offline and online
advertising; |
|
|
● |
successfully compete
with other companies that are currently in, or may in the future enter,
the business of providing information regarding local
businesses; |
|
|
● |
expand successfully
in existing markets, enter new markets and manage our international
expansion; |
|
|
● |
successfully develop
and deploy new features and products; |
|
|
● |
manage and integrate
successfully any acquisitions of businesses, solutions or technologies,
such as Eat24; |
|
|
● |
avoid interruptions
or disruptions in our service or slower than expected load
times; |
|
|
● |
develop a scalable,
high-performance technology infrastructure that can efficiently and
reliably handle increased usage globally, as well as the deployment of new
features and products; |
|
|
● |
hire, integrate and
retain talented sales and other personnel; |
|
|
● |
effectively manage
rapid growth in our sales force, other personnel and operations;
and |
|
|
● |
effectively identify, engage and manage third-party partners and service providers.
|
If the demand for information regarding local businesses does not develop as we expect, or if we fail to address
the needs of this demand, our business will be harmed. We may not be able to address successfully these risks and
difficulties or others, including those described elsewhere in these risk factors. Failure to address these risks and
difficulties adequately could harm our business and cause our operating results to suffer.
26
Table of Contents
We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which
may make it difficult to predict our future performance.
Our operating results could vary significantly from period to period as a result of a variety of factors, , many of which may be outside of our control. This volatility
increases the difficulty in predicting our future performance and means
comparing our operating results on a period-to-period basis may not be
meaningful. In addition to the other
risk factors discussed in this section, factors that may contribute to the
volatility of our operating results include:
● |
changes in our
pricing policies and terms of contracts, whether initiated by us or as a
result of competition; |
|
|
● |
cyclicality and
seasonality, which may become more pronounced as our growth rate
slows; |
|
|
● |
the effects of
changes in search engine placement and prominence; |
|
|
● |
the adoption of any
laws or regulations that adversely affect the growth, popularity or use of
the Internet, such as laws impacting Internet neutrality; |
|
|
● |
the success of our
sales and marketing efforts; |
|
|
● |
costs associated with
defending intellectual property infringement and other claims and related
judgments or settlements; |
|
|
● |
interruptions in
service and any related impact on our reputation; |
|
|
● |
the impact of
fluctuations in currency exchange rates; |
|
|
● |
changes in advertiser budgets or the market acceptance of online advertising solutions; |
|
|
● |
changes in consumer
behavior with respect to local businesses; |
|
|
● |
changes in our tax
rates or exposure to additional tax liabilities; |
|
|
● |
the impact of
worldwide economic conditions, including the resulting effect on consumer
spending at local businesses and the level of advertising spending by
local businesses; and |
|
|
● |
the effects of
natural or man-made catastrophic events. |
We have incurred
significant operating losses in the past, and we may not be able to generate
sufficient revenue to maintain profitability. Our recent growth rate will likely
not be sustainable, and a failure to maintain an adequate growth rate will
adversely affect our business and results of operations.
Since our inception, we
have incurred significant operating losses and, as of December 31, 2014, we had
an accumulated deficit of approximately $34.0 million. Although our revenues
have grown rapidly in the last several years, increasing from $12.1 million in
2008 to $377.5 million in 2014, we expect that our revenue growth rate will
decline as a result of a variety of factors, including the maturation of our
business and the gradual decline in the number of major geographic markets,
especially within the United States, to which we have not already expanded. As a
result, you should not rely on revenue growth of any prior quarterly or annual
period as an indication of our future performance. In addition, historically,
our costs have increased each year and we expect our costs to increase in future
periods as we continue to expend substantial financial resources on:
● |
sales and
marketing; |
|
|
● |
domestic and
international expansion efforts; |
|
|
● |
product and feature
development; |
|
|
● |
our technology
infrastructure; |
|
|
● |
strategic
opportunities, including commercial relationships and acquisitions;
and |
|
|
● |
general
administration, including legal and accounting expenses related to being a
public company. |
These investments may not
result in increased revenue or growth in our business. Our costs may also
increase as we hire additional employees, particularly as a result of the
significant competition that we face to attract and retain technical talent. Our
expenses may grow faster than our revenue and may be greater than we anticipate
in a particular period or over time. If we are unable to maintain adequate
revenue growth and to manage our expenses, we may continue to incur significant
losses in the future and may not be able to maintain profitability.
27
Table of Contents
Because we recognize
most of the revenue from our advertising products over the term of an agreement,
a significant downturn in our business may not be immediately reflected in our
results of operations.
We recognize revenue from
sales of our advertising products over the terms of the applicable agreements,
which are generally three, six or 12 months. As a result, a significant portion
of the revenue we report in each quarter is generated from agreements entered
into during previous quarters. Consequently, a decline in new or renewed
agreements in any one quarter may not significantly impact our revenue in that
quarter but will negatively affect our revenue in future quarters. In addition,
we may be unable to adjust our fixed costs in response to reduced revenue.
Accordingly, the effect of significant declines in advertising sales may not be
reflected in our short-term results of operations.
If our goodwill or
intangible assets become impaired, we may be required to record a significant
charge to earnings.
We have recorded a
significant amount of goodwill related to our acquisitions to date, and a
significant portion of the purchase price of any companies we acquire in the
future may be allocated to acquired goodwill and other intangible assets. Under
GAAP, we review our intangible assets for impairment when events or changes in
circumstances indicate the carrying value of our goodwill and other intangible assets may not be recoverable. Goodwill is
required to be tested for impairment at least annually. Factors that may be
considered include declines in our stock price, market capitalization and future cash flow
projections. If our acquisitions do not yield expected returns, our stock price
declines or any other adverse change in market conditions occurs, a change to
the estimation of fair value could result. Any such change could result in an
impairment charge to our goodwill and intangible assets, particularly if such
change impacts on of our critical assumptions or estimates, and may have a
negative impact on our financial position and operating results.
We may require
additional capital to support business growth, and such capital might not be
available on acceptable terms, if at all.
We intend to continue to
invest in our business and may require or otherwise seek additional funds to
respond to business challenges, including the need to develop new features and
products, enhance our existing services, improve our operating infrastructure
and acquire complementary businesses and technologies. As a result, we may need
to engage in equity or debt financings to secure additional funds. If we raise
additional funds through future issuances of equity or convertible debt
securities, our existing stockholders could suffer significant dilution, and any
new equity securities we issue could have rights, preferences and privileges
superior to those of our Class A common stock. Any future debt financing we
secure could involve restrictive covenants relating to our capital raising
activities and other financial and operational matters, which may make it more
difficult for us to obtain additional capital and to pursue business
opportunities, including potential acquisitions. We may not be able to obtain
additional financing on terms favorable to us, if at all. If we are unable to
obtain adequate financing or financing on terms satisfactory to us when we
require it, our ability to continue to support our business growth and respond
to business challenges could be significantly impaired, and our business may be
harmed.
The intended tax
benefits of our corporate structure and intercompany arrangements depend on the
application of the tax laws of various jurisdictions and on how we operate our
business.
Our corporate structure and
intercompany arrangements, including the manner in which we develop and use our
intellectual property and the transfer pricing of intercompany transactions, are
intended to reduce our worldwide effective tax rate. For example, our corporate
structure includes legal entities located in jurisdictions with income tax rates
lower than the U.S. statutory tax rate. Our intercompany arrangements allocate
income to such entities in accordance with arms-length principles and
commensurate with functions performed, risks assumed and ownership of valuable
corporate assets. We believe that income taxed in certain foreign jurisdictions
at a lower rate relative to the U.S. statutory rate will have a beneficial
impact on our worldwide effective tax rate.
28
Table of Contents
However, significant
judgment is required in evaluating our tax positions and determining our
provision for income taxes. During the ordinary course of business, there are
many transactions and calculations for which the ultimate tax determination is
uncertain. For example, our effective tax rates could be adversely affected by
earnings being lower than anticipated in countries where we have lower statutory
rates and higher than anticipated in countries where we have higher statutory
rates, by changes in foreign currency exchange rates or by changes in the
relevant tax, accounting and other laws, regulations, principles and
interpretations.
In addition, the
application of the tax laws of various jurisdictions, including the United
States, to our international business activities is subject to interpretation
and depends on our ability to operate our business in a manner consistent with
our corporate structure and intercompany arrangements. The taxing authorities of
jurisdictions in which we operate may challenge our methodologies for valuing
developed technology or intercompany arrangements, including our transfer
pricing, or determine that the manner in which we operate our business does not
achieve the intended tax consequences, which could increase our worldwide
effective tax rate and harm our financial position and results of operations. As
we operate in numerous taxing jurisdictions, the application of tax laws can
also be subject to diverging and sometimes conflicting interpretations by tax
authorities of these jurisdictions. It is not uncommon for taxing authorities in
different countries to have conflicting views, for instance, with respect to,
among other things, the manner in which the arms length standard is applied for
transfer pricing purposes, or with respect to the valuation of intellectual
property.
Changes in tax laws
or tax rulings could materially affect our financial position and results of
operations.
Tax laws are dynamic and
subject to change as new laws are passed and new interpretations of the law are
issued or applied. Our existing corporate structure and intercompany
arrangements have been implemented in a manner we believe is in compliance with
current prevailing tax laws. However, the tax benefits that we intend to
eventually derive could be undermined due to changing tax laws. In particular,
the current U.S. administration and key members of Congress have made public
statements indicating that tax reform is a priority, resulting in uncertainty
not only with respect to the future corporate tax rate, but also the U.S. tax
consequences of income derived from income related to intellectual property
earned overseas in low tax jurisdictions. Certain changes to U.S. tax laws,
including limitations on the ability to defer U.S. taxation on earnings outside
of the United States until those earnings are repatriated to the United States,
as well as changes to U.S. tax laws that may be enacted in the future, could
affect the tax treatment of our foreign earnings. In addition, many countries in
the European Union, as well as a number of other countries and organizations
such as the Organization for Economic Cooperation and Development, are actively
considering changes to existing tax laws that, if enacted, could increase our
tax obligations in many countries where we do business. Due to the expanding
scale of our international business activities, any changes in the taxation of
such activities may increase our worldwide effective tax rate and harm our
financial position and results of operations.
We rely on data from
third parties to calculate certain of our key metrics. Real or perceived
inaccuracies in such metrics may harm our reputation and negatively affect our
business.
Certain of our key metrics the number of our unique visitors and mobile unique visitors are calculated relying
on data from third parties. While these numbers are based on what we believe to be reasonable calculations for the
applicable periods of measurement, there are inherent challenges in measuring usage across our large user base
around the world. For example, because these metrics are based on users with unique cookies, an individual who
accesses our website from multiple devices with different cookies may be counted as multiple unique visitors, and
multiple individuals who access our website from a shared device with a single cookie may be counted as a single
unique visitor. As a result, the calculations of our unique visitors and mobile unique visitors may not accurately
reflect the number of people actually using our platform. In addition, our measures of traffic and other key metrics
may differ from estimates published by third parties (other than those whose data we use to calculate our key
metrics) or from similar metrics of our competitors. We are continually seeking to improve our ability to measure
these key metrics, and regularly review our processes to assess potential improvements to their accuracy. If our
users, advertisers, partners and stockholders do not perceive our metrics to be accurate representations, or if we
discover material inaccuracies in our metrics, our reputation may be harmed.
29
Table of Contents
Risks Related to
Regulatory Compliance and Legal Matters
We are, and may be in
the future, subject to disputes and assertions by third parties that we violate
their rights. These disputes may be costly to defend and could harm our business
and operating results.
We currently face, and we
expect to face from time to time in the future, allegations that we have
violated the rights of third parties, including patent, trademark, copyright and
other intellectual property rights, and the rights of current and former
employees, users and business owners. For example, various businesses have sued
us alleging that we manipulate Yelp reviews in order to coerce them and other
businesses to pay for Yelp advertising. The nature of our business also exposes
us to claims relating to the information that we publish on our platform,
including claims for defamation, libel, negligence and copyright or trademark
infringement, among others. Businesses have in the past claimed, and may in the
future claim, that we are responsible for the defamatory reviews posted by our
users. We expect claims like these to continue, and potentially increase in
proportion to the amount of content on our platform. In some instances, we may
elect or be compelled to remove the content that is the subject
of such claims, or may be forced to pay substantial
damages if we are unsuccessful in our efforts to defend against these claims. If
we elect or are compelled to remove content from our platform, our products and services may become
less useful to consumers and our traffic may decline, which would have a
negative impact on our business.
We are also regularly
exposed to claims based on allegations of infringement or other violations of
intellectual property rights. Companies in the Internet, technology and media
industries own large numbers of patent and other intellectual property rights,
and frequently enter into litigation. Various non-practicing entities that own
patents and other intellectual property rights also often aggressively attempt
to assert their rights in order to extract value from technology companies. From
time to time, we receive notice letters from patent holders alleging that
certain of our products and services infringe their patent rights, and we are
presently involved in numerous patent lawsuits. Each of our ongoing patent
lawsuits involves plaintiffs targeting multiple defendants in the same or
similar suits. We do not own any patents, and may be unable to deter
competitors or others from pursuing intellectual property infringement claims
against us.
We expect other claims to
be made against us in the future, and as we face increasing competition and gain
an increasingly high profile, we expect the number of claims against us to
accelerate. The results of litigation and claims to which we may be subject
cannot be predicted with any certainty. Even if the claims are without merit,
the costs associated with defending against them may be substantial in terms of
time, money and management distraction. In particular, patent and other
intellectual property litigation may be protracted and expensive, and the
results may require us to stop offering certain features, purchase licenses or
modify our products and features while we develop non-infringing substitutes, or
otherwise involve significant settlement costs. The development of alternative
non-infringing technology or practices could require significant effort and
expense or may not be feasible. Even if claims do not result in litigation or
are resolved in our favor without significant cash settlements, such matters,
and the time and resources necessary to resolve them, could harm our business,
results of operations and reputation.
30
Table of Contents
Our business is
subject to complex and evolving U.S. and foreign regulations and other legal
obligations related to privacy, data protection and other matters. Our actual or
perceived failure to comply with such regulations and obligations could harm our
business.
We are subject to a variety
of laws in the United States and abroad that involve matters central to our
business, including laws regarding privacy, data retention, distribution of
user-generated content and consumer protection, among others. For example,
because we receive, store and process personal information and other user data,
including credit card information, we are subject to numerous federal, state and
local laws around the world regarding privacy and the storing, sharing, use,
processing, disclosure and protection of personal information and other user
data. We are also subject to a variety of laws, regulations and guidelines that
regulate the way we distinguish paid search results and other types of
advertising from unpaid search results.
The application and
interpretation of these laws and regulations are often uncertain, particularly
in the new and rapidly evolving industry in which we operate. For example, we rely on laws limiting the
liability of providers of online services for activities of their users and
other third parties. These laws are currently being tested by a number of
claims, including actions based on invasion of privacy and other torts, unfair
competition, copyright and trademark infringement and other theories based on
the nature and content of the materials searched, the ads posted or the content
provided by users. It is difficult to predict how existing laws will be applied
to our business, and if our business grows and evolves and our solutions are
used in a greater number of countries, we will also become subject to laws and
regulations in additional jurisdictions, which may be inconsistent with the laws of the
jurisdictions to which we are currently subject. For example, the risk related to
liability for third-party actions may be greater in certain jurisdictions
outside the United States where our protection from such liability may be
unclear.
It is also possible that
the interpretation and application of various laws and regulations may conflict
with other rules or our practices, such as industry standards to which we
adhere, our privacy policies and our privacy-related obligations to third
parties (including, in certain instances, voluntary third-party certification
bodies such as TRUSTe). Similarly, our business could be adversely affected if
new legislation or regulations are adopted that require us to change our current
practices or the design of our platform, products or features. For example,
regulatory frameworks for privacy issues are currently in flux worldwide, and
are likely to remain so for the foreseeable future due to increased public
scrutiny of the practices of companies offering online services with respect to
personal information of their users. The U.S. government, including the White
House, the Federal Trade Commission, the Department of Commerce and many state
governments are reviewing the need for greater regulation of the collection,
processing, storage and use of information about consumer behavior on the
Internet, including regulation aimed at restricting certain targeted advertising
practices. The European Commission is also in the process of promulgating a new
general data protection regulation, which may result in significantly greater
compliance burdens for companies such as us with users and operations in Europe.
Changes like these could increase our administrative costs and make it more
difficult for consumers to use our platform, resulting in less traffic and
revenue. Such changes could also make it more difficult for us to provide
effective advertising tools to businesses on our platform, resulting in fewer
advertisers and less revenue.
We believe that our
policies and practices comply with applicable laws and regulations. However, if
our belief proves incorrect, if these guidelines, laws or regulations or their
interpretations change or new legislation or regulations are enacted, or if the
third parties with whom we share user information fail to comply with such
guidelines, laws, regulations or their contractual obligations to us, we may be
forced to implement new measures to reduce our legal exposure. This may require
us to expend substantial resources, delay development of new products or
discontinue certain products or features, which would negatively impact our
business. For example, if we fail to comply with our privacy-related obligations
to users or third parties, or any compromise of security that results in the
unauthorized release or transfer of personally identifiable information or other
user data, we may be compelled to provide additional disclosures to our users,
obtain additional consents from our users before collecting or using their
information or implement new safeguards to help our users manage our use of
their information, among other changes. We may also face litigation,
governmental enforcement actions or negative publicity, which could cause our
users and advertisers to lose trust in us and have an adverse effect on our
business. For example, from time to time we receive inquiries from government
agencies regarding our business practices. Although the internal resources
expended and expenses incurred in connection with such inquiries and their
resolutions have not been material to date, any resulting negative publicity
could adversely affect our reputation and brand. Responding to and resolving any
future litigation, investigations, settlements or other regulatory actions may
require significant time and resources, and could diminish confidence in and the
use of our products.
31
Table of Contents
Domestic and foreign
laws may be interpreted and enforced in ways that impose new obligations on us
with respect to Yelp Deals, which may harm our business and results of
operations.
Our Yelp Deals products may
be deemed gift certificates, store gift cards, general-use prepaid cards or
other vouchers, or gift cards, subject to, among other laws, the federal
Credit Card Accountability Responsibility and Disclosure Act of 2009 (the
Credit CARD Act) and similar state and foreign laws. Many of these laws
include specific disclosure requirements and prohibitions or limitations on the
use of expiration dates and the imposition of certain fees. Various companies
that provide deal products similar to ours have been subject to allegations that
their deal products are subject to and violate the Credit CARD Act and various
state laws governing gift cards. Lawsuits have also been filed in other
locations in which we sell or plan to sell our Yelp Deals, such as the Canadian
province of Ontario, alleging similar violations of provincial legislation
governing gift cards.
The application of various
other laws and regulations to our products, and particularly our Yelp Deals and
Gift Certificates, is uncertain. These include laws and regulations pertaining
to unclaimed and abandoned property, partial redemption, refunds,
revenue-sharing restrictions on certain trade groups and professions, sales and
other local taxes and the sale of alcoholic beverages. In addition, we may
become, or be determined to be, subject to federal, state or foreign laws
regulating money transmitters or aimed at preventing money laundering or
terrorist financing, including the Bank Secrecy Act, the USA PATRIOT Act and
other similar future laws or regulations.
If we become subject to
claims or are required to alter our business practices as a result of current or
future laws and regulations, our revenue could decrease, our costs could
increase and our business could otherwise be harmed. In addition, the costs and
expenses associated with defending any actions related to such additional laws
and regulations and any payments of related penalties, fines, judgments or
settlements could harm our business.
The requirements of
being a public company may strain our resources, divert managements attention
and affect our ability to attract and retain qualified board members.
As a public company, we are
subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley
Act, the Dodd-Frank Act, the listing requirements of the New York Stock Exchange
and other applicable securities rules and regulations. Compliance with these
rules and regulations has increased, and will likely continue to increase, our
legal and financial compliance costs, make some activities more difficult,
time-consuming or costly, and place significant strain on our personnel, systems
and resources. In addition, changing laws, regulations and standards relating to
corporate governance and public disclosure are creating uncertainty for public
companies, increasing legal and financial compliance costs and making some
activities more time consuming. These laws, regulations and standards are
subject to varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may evolve over
time. This could result in continuing uncertainty regarding compliance matters,
higher administrative expenses and a diversion of managements time and
attention. Further, if our compliance efforts differ from the activities
intended by regulatory or governing bodies due to ambiguities related to
practice, regulatory authorities may initiate legal proceedings against us and
our business may be harmed. Being a public company that is subject to these
rules and regulations also makes it more expensive for us to obtain and retain
director and officer liability insurance, and we may in the future be required
to accept reduced coverage or incur substantially higher costs to obtain or
retain adequate coverage. These factors could also make it more difficult for us
to attract and retain qualified members of our board of directors and qualified
executive officers.
32
Table of Contents
Risks Related to
Ownership of Our Class A Common Stock
The dual class
structure of our common stock has the effect of concentrating voting control
with those stockholders who held our stock prior to our initial public offering,
including our founders, directors, executive officers and employees and their
affiliates, and limiting our other stockholders ability to influence corporate
matters.
Our Class B common stock
has 10 votes per share and our Class A common stock has one vote per share. As a
result, the holders of our Class B common stock collectively will continue to
control a majority of the combined voting power of our common stock even when
the shares of Class B common stock represent a small minority of all outstanding
shares of our capital stock. The current holders of our Class B common
stock collectively are able to control all matters submitted to
our stockholders for approval even though their stock holdings represent less
than 50% of the outstanding shares of our common stock. As of December 31, 2014,
stockholders who held shares of Class B common stock, including our founders,
directors, executive officers, employees and their affiliates, together
beneficially owned shares representing approximately 61% of the voting power of
our outstanding capital stock. Future transfers by holders of Class B common
stock will generally result in those shares converting to Class A common stock,
which will have the effect, over time, of increasing the relative voting power
of those holders of Class B common stock who retain their shares, which may include existing founders, officers, directors and their
affiliates. This concentrated control will limit our other stockholders ability
to influence corporate matters for the foreseeable future and, as a result, the
market price of our Class A common stock could be adversely affected.
Our share price has
been and will likely continue to be volatile.
The trading price of our
Class A common stock has been, and is likely to continue to be, highly volatile
and could be subject to wide fluctuations in response to various factors, some
of which are beyond our control. During 2014, our Class A common stocks daily closing price ranged from $50.04 to $98.04. In addition the factors
discussed in this Risk Factors section and elsewhere in this Annual Report,
factors that may cause volatility in our
share price include:
● |
actual or anticipated
fluctuations in our financial condition and operating
results; |
|
|
● |
changes in projected
operating and financial results; |
|
|
● |
actual or anticipated
changes in our growth rate relative to our competitors; |
|
|
● |
announcements of
technological innovations or new offerings by us or our
competitors; |
|
|
● |
announcements by us
or our competitors of significant acquisitions, strategic partnerships,
joint ventures or capital-raising activities or
commitments; |
|
|
● |
additions or
departures of key personnel; |
|
|
● |
actions of securities
analysts who cover our company, such as publishing research or forecasts
about our business (and our performance against such forecasts), changing
in the rating of our Class A common stock or ceasing coverage of our
company; |
|
|
● |
investor sentiment
with respect to our competitors, business partners and industry in
general; |
|
|
● |
reporting on our
business by the financial media, including television, radio and press
reports and blogs; |
|
|
● |
fluctuations in the
value of companies perceived by investors to be comparable to
us; |
|
|
● |
changes in the way we
measure our key metrics; |
|
|
● |
sales of our Class A
or Class B common stock; |
|
|
● |
changes in laws or
regulations applicable to our solutions; |
|
|
● |
share price and
volume fluctuations attributable to inconsistent trading volume levels of
our shares; and |
|
|
● |
general economic and
market conditions such as recessions, interest rate changes or
international currency fluctuations. |
33
Table of Contents
Furthermore, the stock
markets have recently experienced extreme price and volume fluctuations that
have affected and continue to affect the market prices of equity securities of
many companies. These fluctuations often have been unrelated or disproportionate
to the operating performance of those companies. In the past, companies that
have experienced volatility in the market price of their stock have been subject
to securities class action litigation. For example, in August 2014, we and
certain of our officers were sued in two similar putative class action lawsuits
alleging violations of the federal securities laws for allegedly making
materially false and misleading statements. We may be the target of additional
litigation of this type in the future as well. Securities litigation against us
could result in substantial costs and divert our managements time and attention
from other business concerns, which could harm our business.
We do not intend to
pay dividends for the foreseeable future, and as a result, our stockholders
ability to achieve a return on their investment will depend on appreciation in
the price of our Class A common stock.
We have never declared or
paid any cash dividends on our common stock and do not intend to pay any cash
dividends in the foreseeable future. We anticipate that we will retain all of
our future earnings for use in the development of our business and for general
corporate purposes. Any determination to pay dividends in the future will be at
the discretion of our board of directors. Accordingly, investors must rely on
sales of their Class A common stock after price appreciation, which may never
occur, as the only way to realize future gains on their investments.
Anti-takeover
provisions in our charter documents and under Delaware law could make an
acquisition of us more difficult, limit attempts by our stockholders to replace
or remove our current management and limit the market price of our Class A
common stock.
Provisions in our
certificate of incorporation and bylaws may have the effect of delaying or
preventing a change in control or changes in our management. Our amended and
restated certificate of incorporation and amended and restated bylaws include
provisions that:
● |
authorize our board
of directors to issue, without further action by the stockholders, up to
10,000,000 shares of undesignated preferred stock; |
|
|
● |
require that any
action to be taken by our stockholders be effected at a duly called annual
or special meeting and not by written consent; |
|
|
● |
specify that special
meetings of our stockholders can be called only by our board of directors,
the Chair of our board of directors or our Chief Executive
Officer; |
|
|
● |
establish an advance
notice procedure for stockholder proposals to be brought before an annual
meeting, including proposed nominations of persons for election to our
board of directors; |
|
|
● |
establish that our
board of directors is divided into three classes, with directors in each
class serving three-year staggered terms; |
|
|
● |
prohibit cumulative
voting in the election of directors; |
|
|
● |
provide that
vacancies on our board of directors may be filled only by a majority of
directors then in office, even though less than a quorum; |
|
|
● |
require the approval
of our board of directors or the holders of a supermajority of our
outstanding shares of capital stock to amend our bylaws and certain
provisions of our certificate of incorporation; and |
|
|
● |
reflect two classes
of common stock, as discussed above. |
34
Table of Contents
These provisions may
frustrate or prevent any attempts by our stockholders to replace or remove our
current management by making it more difficult for stockholders to replace
members of our board of directors, which is responsible for appointment the
members of our management. In addition, because we are incorporated in Delaware,
we are governed by the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation from engaging
in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an interested stockholder.
Future sales of our
Class A common stock in the public market could cause our share price to
decline.
Sales of a substantial
number of shares of our Class A common stock in the public market, particularly
sales by our directors, officers, employees and significant stockholders, or the
perception that these sales might occur, could depress the market price of our
Class A common stock and could impair our ability to raise capital through the
sale of additional equity securities. As of December 31, 2014, we had 63,062,071
shares of Class A common stock and 9,858,511 shares of Class B common stock
outstanding. Although a public market exists for our Class A common stock only,
shares of our Class B common stock are generally convertible into an equivalent
number of shares of Class A common stock at the option of the holder or upon
transfer (subject to certain exceptions).
Item 1B. Unresolved
Staff Comments.
None.
Item 2. Properties.
Our principal executive
offices in North America are currently located at 140 New Montgomery Street, San
Francisco, California, where we lease office space pursuant to a lease agreement
that expires in 2021. We lease additional office space in Palo Alto, California;
San Francisco, California; Scottsdale, Arizona; Chicago, Illinois; and New York,
New York; and currently our international offices are located in Dublin,
Ireland; London, England; and Hamburg, Germany. We believe that our properties
are generally suitable to meet our needs for the foreseeable future. In
addition, to the extent we require additional space in the future, we believe
that it would be readily available on commercially reasonable terms.
Item 3. Legal
Proceedings.
In February and March 2010,
we were sued in two putative class actions on behalf of local businesses
asserting various causes of action based on claims that we manipulated the
ratings and reviews on our platform to coerce local businesses to buy our
advertising products. These cases were subsequently consolidated in an action
asserting claims for violation of the California Business and Professions Code,
extortion and attempted extortion based on the conduct they allege and seeking
monetary relief in an unspecified amount and injunctive relief. In October 2011,
the court dismissed this consolidated action with prejudice. The plaintiffs
appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed the
dismissal of the consolidated action. The plaintiffs submitted a petition to the
Ninth Circuit for a rehearing, which was denied on October 28, 2014.
In August 2014, two putative class action lawsuits alleging violations of federal securities laws were filed in the U.S. District Court for the Northern District of California, naming as defendants us and certain of our officers. The lawsuits allege violations of the Exchange Act by us and our officers for allegedly making materially false and misleading statements regarding our business and operations between October 29, 2013 and April 3, 2014. These cases were subsequently consolidated and, in January 2015, plaintiffs filed a consolidated complaint seeking unspecified monetary damages and other relief. On February 6, 2015, we and the other named defendants filed a motion to dismiss the consolidated complaint, and the court is currently scheduled to have a hearing on the motion on April 16, 2015.
In addition, we are subject
to legal proceedings arising in the ordinary course of business. Although the
results of litigation and claims cannot be predicted with certainty, we
currently do not believe that the final outcome of any of these matters will
have a material adverse effect on our business, financial position, results of
operations or cash flows.
Item 4. Mine Safety
Disclosures.
Not applicable.
35
Table of Contents
PART II
Item 5. Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market
Information
Our Class A common stock,
par value $0.000001 per share, has been listed on the New York Stock Exchange
LLC, or NYSE, under the symbol “YELP”
since March 2, 2012. Prior to that date, there was no public trading market for our Class A
common stock. There is no public trading market for our Class B common stock.
The following table sets forth on a per share basis the high and low intraday
sales prices of our Class A common stock, as reported by the NYSE for the
periods indicated:
|
|
2014 |
|
2013 |
|
|
High |
|
Low |
|
High |
|
Low |
First
Quarter |
|
$ |
101.75 |
|
$ |
66.47 |
|
$ |
25.46 |
|
$ |
19.13 |
Second
Quarter |
|
$ |
81.40 |
|
$ |
49.11 |
|
$ |
36.14 |
|
$ |
22.48 |
Third
Quarter |
|
$ |
86.88 |
|
$ |
64.70 |
|
$ |
71.50 |
|
$ |
33.93 |
Fourth
Quarter |
|
$ |
73.41 |
|
$ |
49.17 |
|
$ |
75.37 |
|
$ |
56.65 |
On February 20, 2015, the last reported sale
price of our Class A common stock was $47.79.
Stockholders
As of the close of business
on February 20, 2015, there were 53 stockholders of record of our Class A common stock and 23 stockholders of
record of our Class B common stock. The actual number of holders of our
common stock is greater than this number of record holders, and includes
stockholders who are beneficial owners, but whose shares are held in street name
by brokers and other nominees. This number of holders of record also does not
include stockholders whose shares may be held in trust by other
entities.
Dividend Policy
We have never declared or
paid, and do not anticipate declaring or paying, any cash dividends on our
capital stock. Any future determination as to the declaration and payment of
dividends, if any, will be at the discretion of our board of directors and will
depend on then-existing conditions, including our financial condition, operating
results, contractual restrictions, capital requirements, business prospects and
other factors that our board of directors may deem relevant.
Performance
Graph
We have presented below the
cumulative total return to our stockholders during the period from March 2, 2012
(the date our Class A common stock commenced trading on the NYSE) through
December 31, 2014 in comparison to the NYSE Composite Index and NYSE Arca Tech
100 Index. All values assume a $100 initial investment and data for the NYSE
Composite Index and NYSE Arca Tech 100 Index assume reinvestment of dividends.
The comparisons are based on historical data and are not indicative of, nor
intended to forecast, the future performance of our Class A common
stock.
36
Table of Contents
![](yelp_10kx4x1.jpg)
Index |
|
3/2/12 |
|
3/31/12 |
|
6/30/12 |
|
9/30/12 |
|
12/31/12 |
|
3/31/13 |
|
6/30/13 |
|
9/30/13 |
|
12/31/13 |
|
3/31/14 |
|
6/30/14 |
|
9/30/14 |
|
12/31/14 |
Yelp Inc. |
|
100 |
|
179.27 |
|
151.53 |
|
180.33 |
|
125.67 |
|
158.07 |
|
231.80 |
|
441.20 |
|
459.67 |
|
512.87 |
|
511.20 |
|
455.00 |
|
364.87 |
NYSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composite |
|
100 |
|
101.18 |
|
96.52 |
|
102.91 |
|
105.63 |
|
112.28 |
|
112.35 |
|
118.62 |
|
128.22 |
|
129.79 |
|
135.36 |
|
131.95 |
|
133.63 |
Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arca
Tech |
|
100 |
|
104.53 |
|
97.23 |
|
103.22 |
|
103.53 |
|
114.19 |
|
115.53 |
|
125.95 |
|
138.98 |
|
145.78 |
|
149.17 |
|
151.22 |
|
158.73 |
100
Index |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The information under
Performance Graph is not deemed to be soliciting material or filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of
the Exchange Act, and is not to be incorporated by reference in any filing of
Yelp under the Securities Act or the Exchange Act, whether made before or after
the date of this Annual Report and irrespective of any general incorporation
language in those filings.
Use of Proceeds from
Public Offering of Common Stock
On March 2, 2012, we closed
our initial public offering, in which we sold 8,172,500 shares of Class A common
stock at a price to the public of $15.00 per share. The aggregate offering price
for shares sold in the offering was approximately $122.6 million. The offer and
sale of all of the shares in the initial public offering were registered under
the Securities Act pursuant to a registration statement on Form S-1 (File No.
333-178030), which was declared effective by the SEC on February 16, 2012.
Goldman, Sachs & Co. acted as the lead bookrunning manager and
representative of the underwriters for the initial public offering. Citigroup
Global Markets Inc. and Jefferies & Company, Inc. acted as joint bookrunning
managers and Allen & Company LLC and Oppenheimer & Co. Inc. acted as
co-managers for the initial public offering.
Our use of proceeds to date has been as described in our final prospectus, or the Prospectus, filed with the SEC
pursuant to Rule 424(b) under the Securities Act on March 2, 2012, and has included the majority of the approximately $116.8
million cash portion of the aggregate purchase price of our acquisitions to date.
Issuer Purchases of
Equity Securities
The table below provides
information with respect to repurchases of shares of our Class B common stock.
No shares of our Class A common stock were repurchased during this
period.
37
Table of Contents
|
|
|
|
|
|
|
Total |
|
Maximum |
|
|
|
|
|
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
Shares |
|
Shares that |
|
|
|
|
|
|
|
Purchased as |
|
May Yet |
|
|
|
|
|
|
|
Part of |
|
Be |
|
|
Total |
|
Weighted |
|
Publicly |
|
Purchased |
|
|
Number of |
|
Average |
|
Announced |
|
Under the |
|
|
Shares |
|
Price Paid |
|
Plans or |
|
Plans or |
Period |
|
Purchased |
|
per Share |
|
Programs |
|
Programs |
October 1
October 31, 2014 |
|
|
|
|
|
|
|
|
|
November 1
November 30, 2014(1) |
|
4,892 |
|
$ |
57.88 |
|
|
|
|
December 1
December 31, 2014 |
|
|
|
|
|
|
|
|
|
Total |
|
4,892 |
|
$ |
57.88 |
|
|
|
|
____________________
(1) |
Represents
shares withheld to satisfy tax withholding obligations in connection with
the vesting of employee restricted stock awards under our 2012 Equity
Incentive Plan, as amended. |
38
Table of Contents
Item 6. Selected Consolidated Financial and Other Data.
The following selected consolidated financial and other data should be read in conjunction with, and are qualified by reference to, Managements Discussion and Analysis of
Financial Condition and Results of Operations, and our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. The consolidated statements of
operations data for the years ended December 31, 2014, 2013 and 2012 and the consolidated balance sheet data as of December 31, 2014 and 2013 are derived from the audited consolidated financial statements that are included elsewhere in this Annual
Report. We have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. The consolidated statements
of operations data for the years ended December 31, 2011 and 2010, as well as the consolidated balance sheet data as of December 31, 2012, 2011 and 2010, are derived from audited consolidated financial statements that are not included in this Annual
Report. Our historical results are not necessarily indicative of the results to be expected in any period in the future.
Consolidated Statements of Operations Data: |
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands, except per share amounts) |
Net
revenue |
|
$ |
377,536 |
|
$ |
232,988 |
|
|
$ |
137,567 |
|
|
$ |
83,285 |
|
|
$ |
47,731 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shown separately below)(1) |
|
|
24,382 |
|
|
16,561 |
|
|
|
9,928 |
|
|
|
5,931 |
|
|
|
3,137 |
|
Sales and marketing(1) |
|
|
201,050 |
|
|
131,970 |
|
|
|
85,915 |
|
|
|
54,539 |
|
|
|
33,919 |
|
Product development(1) |
|
|
65,181 |
|
|
38,243 |
|
|
|
20,473 |
|
|
|
11,586 |
|
|
|
6,560 |
|
General and administrative(1) |
|
|
58,274 |
|
|
42,907 |
|
|
|
31,531 |
|
|
|
17,234 |
|
|
|
11,287 |
|
Depreciation and amortization(1) |
|
|
17,590 |
|
|
11,455 |
|
|
|
7,223 |
|
|
|
4,238 |
|
|
|
2,334 |
|
Restructuring and integration(1) |
|
|
|
|
|
675 |
|
|
|
1,262 |
|
|
|
|
|
|
|
|
|
Contribution to The Yelp Foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,928 |
|
|
|
|
|
Total costs
and expenses |
|
|
366,477 |
|
|
241,811 |
|
|
|
156,332 |
|
|
|
99,456 |
|
|
|
57,237 |
|
Income (loss)
from operations |
|
|
11,059 |
|
|
(8,823 |
) |
|
|
(18,765 |
) |
|
|
(16,171 |
) |
|
|
(9,506 |
) |
Other income
(expense), net |
|
|
221 |
|
|
(407 |
) |
|
|
(226 |
) |
|
|
(395 |
) |
|
|
15 |
|
Income (loss) before income taxes |
|
|
11,280 |
|
|
(9,230 |
) |
|
|
(18,991 |
) |
|
|
(16,566 |
) |
|
|
(9,491 |
) |
Benefit
(provision) for income taxes |
|
|
25,193 |
|
|
(838 |
) |
|
|
(122 |
) |
|
|
(102 |
) |
|
|
(75 |
) |
Net income
(loss) |
|
|
36,473 |
|
|
(10,068 |
) |
|
|
(19,113 |
) |
|
|
(16,668 |
) |
|
|
(9,566 |
) |
Accretion of
redeemable convertible preferred stock |
|
|
|
|
|
|
|
|
|
(32 |
) |
|
|
(189 |
) |
|
|
(175 |
) |
Net income
(loss) attributable to common stockholders (Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and B) |
|
$ |
36,473 |
|
$ |
(10,068 |
) |
|
$ |
(19,145 |
) |
|
$ |
(16,857 |
) |
|
$ |
(9,741 |
) |
Net income
(loss) per share attributable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Class A and
B): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.51 |
|
$ |
(0.15 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.10 |
) |
|
$ |
(0.71 |
) |
Diluted |
|
$ |
0.48 |
|
$ |
(0.15 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.10 |
) |
|
$ |
(0.71 |
) |
Weighted-average shares used to compute net income (loss)
per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share attributable
to common stockholders (Class A and B): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
71,936 |
|
|
65,665 |
|
|
|
54,149 |
|
|
|
15,291 |
|
|
|
13,774 |
|
Diluted |
|
|
76,712 |
|
|
65,665 |
|
|
|
54,149 |
|
|
|
15,291 |
|
|
|
13,774 |
|
(1) Stock-based compensation
included in the statements of operations data above was as follows:
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands) |
Cost of
revenue |
|
$ |
729 |
|
$ |
421 |
|
$ |
122 |
|
$ |
50 |
|
|
$ |
26 |
|
Sales and
marketing |
|
|
15,083 |
|
|
10,131 |
|
|
4,917 |
|
|
1,607 |
|
|
|
662 |
|
Product
development |
|
|
14,804 |
|
|
6,270 |
|
|
1,705 |
|
|
721 |
|
|
|
260 |
|
General and
administrative |
|
|
11,657 |
|
|
9,300 |
|
|
8,134 |
|
|
2,499 |
|
|
|
483 |
|
Restructuring
and integration |
|
|
|
|
|
555 |
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based compensation |
|
$ |
42,273 |
|
$ |
26,677 |
|
$ |
14,878 |
|
$ |
4,877 |
|
|
$ |
1,431 |
|
|
Consolidated Balance Sheet Data: |
|
As of December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands) |
Cash and cash
equivalents |
|
$ |
247,312 |
|
$ |
389,764 |
|
$ |
95,124 |
|
$ |
21,736 |
|
|
$ |
27,074 |
|
Property,
equipment and software, net |
|
|
62,761 |
|
|
30,666 |
|
|
14,799 |
|
|
9,881 |
|
|
|
5,256 |
|
Working
capital |
|
|
386,785 |
|
|
391,844 |
|
|
91,218 |
|
|
18,996 |
|
|
|
28,741 |
|
Total
assets |
|
|
629,650 |
|
|
515,977 |
|
|
187,696 |
|
|
43,821 |
|
|
|
41,015 |
|
Redeemable
convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
55,435 |
|
|
|
55,246 |
|
Total
stockholders equity (deficit) |
|
|
588,150 |
|
|
486,483 |
|
|
165,662 |
|
|
(24,347 |
) |
|
|
(20,889 |
) |
39
Table of Contents
Other Financial and Operational Data: |
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands) |
Reviews(1) |
|
|
71,232 |
|
|
52,757 |
|
|
35,959 |
|
|
|
24,817 |
|
|
|
15,115 |
|
Unique Visitors(2) |
|
|
135,399 |
|
|
120,005 |
|
|
86,308 |
|
|
|
65,796 |
|
|
|
39,356 |
|
Mobile Unique
Visitors(3) |
|
|
72,311 |
|
|
52,905 |
|
|
33,150 |
|
|
|
17,504 |
|
|
|
2,811 |
|
Claimed Local Business
Locations(4) |
|
|
2,029 |
|
|
1,488 |
|
|
994 |
|
|
|
606 |
|
|
|
307 |
|
Active
Local Business Accounts(5) |
|
|
94 |
|
|
67 |
|
|
40 |
|
|
|
24 |
|
|
|
11 |
|
Local Advertising
Accounts(6) |
|
|
84 |
|
|
54 |
|
|
31 |
|
|
|
19 |
|
|
|
11 |
|
Adjusted
EBITDA(7) |
|
$ |
70,922 |
|
$ |
29,429 |
|
$ |
4,598 |
|
|
$ |
(1,128 |
) |
|
$ |
(5,741 |
) |
Non-GAAP Net Income(8) |
|
$ |
52,997 |
|
$ |
18,314 |
|
$ |
(3,875 |
) |
|
$ |
(11,765 |
) |
|
$ |
(8,112 |
) |
____________________
(1)
|
Represents the cumulative
number of reviews submitted to Yelp since inception, as of the period end,
including reviews that were not recommended or that had been removed from
our platform. We define a review as each individually written assessment
submitted by a user who has registered by creating a public profile on our
platform. For more information, including information regarding reviews
that are not recommended and removed reviews, see Managements
Discussion and Analysis of Financial Condition and Results of
OperationsKey MetricsReviews. |
(2) |
Represents the average
number of monthly unique visitors for the last three months of the period.
We define monthly unique visitors as the total number of unique visitors
who have visited our website at least once in a given month, and we
average the number of monthly unique visitors in each month of the
three-month period to calculate average monthly unique visitors. For
more information, see
Managements Discussion and
Analysis of Financial Condition and Results of OperationsKey MetricsUnique
Visitors. |
(3) |
Represents the
average number of mobile unique visitors for the last three months of the
period. We define mobile unique visitors as the sum of (i) the
average monthly unique visitors who have visited our mobile website during
that period (measured as described above) and (ii) unique mobile devices
using our mobile app on a monthly average basis over that period.
For more information, see Managements Discussion and Analysis of
Financial Condition and Results of OperationsKey MetricsMobile Unique
Visitors. |
(4) |
Represents the cumulative
number of business locations that have been claimed on Yelp worldwide
since 2008, as of the period end. We define a claimed local business
location as each business address for which a business representative
visits our website and claims the free business listing page for the business located at that address. For
more information, see Managements Discussion and Analysis of Financial Condition and
Results of OperationsKey
MetricsClaimed Local
Business Locations. |
(5) |
Represents the number of
active local business accounts from which we recognized revenue during the
last three months of the period. For more information, see Managements Discussion and Analysis of Financial Condition and
Results of OperationsKey MetricsActive Local Business
Accounts. |
(6) |
Represents the number of local business accounts from which we recognized local advertising revenue during the last three months of the period. We began reporting this metric in the quarter ended December 31, 2014 and intend to provide
this metric instead of active local business accounts in future periods. For more information, see Managements Discussion and Analysis of Financial Condition and Results of OperationsKey
MetricsLocal Advertising Accounts.
|
(7) |
We define adjusted EBITDA
as net income (loss), adjusted to exclude: provision (benefit) for income
taxes, other income (expense), net, interest income, depreciation and
amortization, stock-based compensation expense, restructuring and integration
costs and contribution to the Yelp Foundation. See Non-GAAP
Financial Measures for more information and for a
reconciliation of adjusted EBITDA to net income (loss), the most directly
comparable financial measure calculated and presented in accordance with
GAAP. |
(8) |
We define non-GAAP net income (loss) as net income (loss), adjusted
to exclude: stock-based compensation expense, amortization of intangibles, and the
release of valuation allowance. See Non-GAAP Financial
Measures for more information and for a
reconciliation of non-GAAP net income (loss) to net income (loss), the
most directly comparable financial measure calculated and presented in
accordance with GAAP. |
Non-GAAP Financial
Measures
To provide investors with
additional information regarding our financial results, we have disclosed in the
table above and elsewhere in this Annual Report adjusted EBITDA and non-GAAP net
income (loss), which are non-GAAP financial measures. We have provided a reconciliation
below of both adjusted EBITDA and non-GAAP net income (loss) to net income (loss),
the most directly comparable GAAP financial measure in each case.
We have included adjusted
EBITDA and non-GAAP net income (loss) 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 and non-GAAP net income (loss) can
provide a useful measure for period-to-period comparisons of our core business.
Accordingly, we believe that adjusted EBITDA and non-GAAP net income (loss)
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.
40
Table of Contents
Adjusted EBITDA and
non-GAAP net income (loss) 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. 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 and non-GAAP net income
(loss) do not reflect 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 and non-GAAP net income
(loss) do not consider the potentially dilutive impact of equity-based
compensation; |
● |
adjusted EBITDA does not reflect tax
payments that may represent a reduction in cash available to
us; |
● |
adjusted EBITDA does not consider any
dilutive impact of our contribution to the Yelp Foundation; |
● |
adjusted EBITDA does not take into account
any restructuring or integration costs associated with our acquisition of
Qype; and |
● |
other
companies, including companies in our industry, may calculate adjusted
EBITDA and non-GAAP net
income (loss) differently, which reduces their usefulness as comparative
measures. |
Because of these
limitations, you should consider adjusted EBITDA and non-GAAP net
income (loss) alongside other financial
performance measures, including various cash flow metrics, net income (loss) and
our other GAAP results. The tables below present reconciliations of
adjusted EBITDA and non-GAAP net
income (loss) to net income (loss) for each of the periods
indicated:
Adjusted
EBITDA
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands) |
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
36,473 |
|
|
$ |
(10,068 |
) |
|
$ |
(19,113 |
) |
|
$ |
(16,668 |
) |
|
$ |
(9,566 |
) |
(Benefit)
provision for income taxes |
|
|
(25,193 |
) |
|
|
838 |
|
|
|
122 |
|
|
|
102 |
|
|
|
75 |
|
Other (income)
expense, net |
|
|
(221 |
) |
|
|
407 |
|
|
|
226 |
|
|
|
395 |
|
|
|
(15 |
) |
Depreciation
and amortization |
|
|
17,590 |
|
|
|
11,455 |
|
|
|
7,223 |
|
|
|
4,238 |
|
|
|
2,334 |
|
Stock-based
compensation |
|
|
42,273 |
|
|
|
26,122 |
|
|
|
14,878 |
|
|
|
4,877 |
|
|
|
1,431 |
|
Restructuring
and integration (1) |
|
|
|
|
|
|
675 |
|
|
|
1,262 |
|
|
|
|
|
|
|
|
|
Contribution
to The Yelp Foundation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,928 |
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
70,922 |
|
|
$ |
29,429 |
|
|
$ |
4,598 |
|
|
$ |
(1,128 |
) |
|
$ |
(5,741 |
) |
____________________
(1) |
Restructuring and
integration includes $0.6 million in stock-based compensation expense for
the year ended December 31, 2013. |
Non-GAAP Net Income (Loss)
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
2011 |
|
2010 |
|
|
(in thousands) |
Reconciliation of Non-GAAP Net Income
(Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
36,473 |
|
|
$ |
(10,068 |
) |
|
$ |
(19,113 |
) |
|
$ |
(16,668 |
) |
|
$ |
(9,566 |
) |
Stock-based
compensation |
|
|
42,273 |
|
|
|
26,122 |
|
|
|
14,878 |
|
|
|
4,877 |
|
|
|
1,431 |
|
Amortization
of intangible assets |
|
|
2,448 |
|
|
|
2,260 |
|
|
|
360 |
|
|
|
26 |
|
|
|
23 |
|
Valuation
allowance release |
|
|
(28,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net
income (loss) |
|
$ |
52,997 |
|
|
$ |
18,314 |
|
|
$ |
(3,875 |
) |
|
$ |
(11,765 |
) |
|
$ |
(8,112 |
) |
41
Table of Contents
Item 7. Managements
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
Yelp connects
people with great local businesses by
bringing word of mouth online and providing a platform for businesses and consumers
to engage and transact. Our platform provides value to consumers and businesses
alike by connecting consumers with great local businesses at the critical moment
when they are deciding where to spend their money. Each day, millions of
consumers use our platform to find and interact with local businesses, which in
turn use our free and paid services to help them engage with consumers. The Yelp
Platform, which allows consumers and businesses to transact directly on Yelp,
provides consumers with a continuous experience from discovery to completion of
transactions and local businesses with an additional point of consumer
engagement.
We derive substantially all
of our revenue from the sale of advertising products. In the year ended December
31, 2014, our net revenue was $377.5 million, which represented an increase of
62% from the year ended December 31, 2013, and we generated a net profit of
$36.5 million and adjusted EBITDA of $70.9 million. In the year ended December
31, 2013, our net revenue was $233.0 million, which represented an increase of
69% from the year ended December 31, 2012, and we generated a net loss of $10.1
million and adjusted EBITDA of $29.4 million.
Our success is primarily
the result of significant investment in our communities, employees, content,
brand and technology. We believe that continued investment in our business
provides our largest opportunity for future growth and plan to continue to
invest for long-term growth in our key strategies:
● |
Accelerate Network Effect. We plan to
invest in marketing and product development aimed at both attracting more,
and increasing the usage and contributions of, consumers as we look to
leverage our brand and benefit from accelerating network dynamics in Yelp
communities. We believe that expanding our content will also attract new
consumers as well as increase the number of visits and searches per user,
and so will continue to expand our community engagement efforts and
explore new ways to enable contributors to share content. For example, we
plan to continue to invest in the development of our mobile platform to
take advantage of the growing number of consumers accessing Yelp through
their mobile devices. |
● |
Enhance Monetization. While our core
local advertising business in the United States has a significant and
growing base of revenue, we have invested, and will continue to invest, in
several initiatives to enhance our monetization opportunities. One such
initiative has been, and will continue to be, to aggressively grow our
sales force in order to reach more businesses. We will also continue
expanding the Yelp Platform, business owner tools and other partnerships
to encourage businesses to advertise on our
platform. |
We expect to invest
approximately $25 million in capital expenditures in 2015 to support the growth
of our business. We expect to use the majority of this amount to increase our
office space, upgrade our technology and infrastructure to improve the ability
of our platform to handle the projected increase in usage, and enable the
release of new features and solutions. As a result of this investment
philosophy, we expect that our operating expenses will continue to increase for
the foreseeable future.
Factors Affecting Our
Performance
Traffic and User Engagement. Changes in consumer traffic, as well as the quality
and quantity of contributed content, will affect our revenue and financial
performance. Traffic to our platform determines the number of ads we are able to
show, affects the value of those ads to businesses and influences the content
creation that drives further traffic; as a result, our ability to grow our
business depends on our ability to increase traffic on our platform. Because we
rely on Internet search engines to drive traffic to our platform, a significant
portion of our traffic can be affected by a number of factors, many of which are
not in our direct control. Changes in a search engines ranking algorithms,
methodologies or design layouts may result in links to our website not being prominent enough to
drive traffic to our website. For example, in the second quarter of 2014, Google
made changes to its algorithms and methodologies that may be contributing to the
recent slowing of our traffic growth rate and decline in traffic in the fourth quarter of 2014. We cannot predict the long-term
impact of these changes.
42
Table of Contents
We also anticipate that our traffic growth will continue to slow over time, and potentially decrease in certain
periods, due to the gradual decline in the number of major geographic markets, especially within the United States,
to which we have not already expanded. Further expansion in smaller markets may not yield similar results or
sustain our growth. As our traffic growth rate slows, our success will become increasingly dependent on our ability
to increase levels of user engagement on our platform. This dependence may increase as the portion of our
revenue derived from performance-based advertising increases. If user engagement decreases, our advertisers may stop or
reduce the amount of advertising on our platform and our results of operations would be harmed. In addition, we
also expect the cyclicality and seasonality in our business to become more pronounced as our growth rate slows,
including weaker traffic numbers in the fourth quarter of the year.
Increasing Mobile Usage.
Although we believe use of our mobile platform is complementary to use of our
website on personal computers, we anticipate that growth in traffic to our mobile platform will drive our growth for
the foreseeable future and traffic through personal computers may continue to decline. Although we currently
deliver advertising on our mobile platform, the mobile advertising market remains a new and evolving market.
Given our limited experience in monetizing mobile products and commitment to prioritizing the quality of user
experience over short-term monetization, we may not be able to generate meaningful revenue from our mobile
products despite the expected growth in mobile usage. If consumers continue to access our mobile platform as
substitute for access through personal computers, and if our mobile advertising solutions prove ineffective or
insufficiently profitable, this trend could adversely impact our financial performance.
Ability to Attract and
Retain Local Businesses. Our
revenue growth is driven by our ability to attract and retain local business
advertisers that purchase our advertising solutions. Our largest sales and
marketing expenses consist of the costs associated with acquiring local business
advertisers. We spent a majority of our sales and marketing
expense for 2014 on initiatives related to local business advertiser acquisition
and expect to continue to expend significant amounts to attract additional local
business advertisers. At the same time, our local advertising agreements
increasingly provide for performance-based cost-per-click payment terms, which
make it more difficult to forecast local advertising revenue accurately. In
addition, our advertisers typically do not have long-term obligations to
purchase our products, and 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. The small and medium-sized businesses on which we heavily rely
often have limited advertising budgets and may be disproportionately affected by
economic downturns. As a result, a worsening economic outlook would likely cause
businesses to decrease investments in advertising, which would adversely affect
our revenue.
Investment in
Growth. We have invested aggressively in the growth of our platform and intend to continue to
invest to support this growth as we expand our platform, grow our communities and local business base, hire
additional employees and further develop our technology. We also plan to invest in product development as we
continue to innovate and introduce new advertising and e-commerce products, explore new platforms and
distribution channels and develop partner arrangements that provide incremental value to our advertisers and
business partners to encourage them to increase their advertising budgets allocated towards our platform. We expect
that these investments will increase our operating expenses, and that any increase in revenue resulting from product
innovations will likely trail the increase in expenses. For example, although we have not historically spent
significantly on marketing programs, we began testing advertising to consumers through various online and offline
channels in the second half of 2014 and plan to continue to do so in 2015; further expansion of these programs could
significantly increase our marketing expenses.
Community
Development. Our long-term growth
depends on our ability to successfully develop new and existing Yelp
communities. It can take years for our platform to achieve a critical mass of
consumers and reviews to drive meaningful traction of our advertising solutions
and begin to generate revenue in a particular community. As a result, we may
continue to generate losses in new communities for an extended period, and
different communities can be expected to grow at different rates and generate
varying levels of revenue. As with most businesses, we expect our revenue growth
to slow as our business matures over time. Local advertising revenue for the
oldest cohort of Yelp communities in the United States, which launched in
2005-2006, grew at 52% in 2014 compared to 2013. This is lower than the growth
rate of local advertising revenue for the 2007-2008 cohort, which grew
63% over the same period, and the 2009-2010 cohort, which grew 78% over the same period. We believe this is
indicative of continued revenue growth, but slowing revenue growth for more mature communities.
43
Table of Contents
Acquisitions. As part of our business strategy, we may determine to expand our product offerings and grow our
business through the acquisition of complementary businesses or technologies. For example, in October 2014, we
acquired Restaurant Kritik and Cityvox to accelerate our international expansion. In addition, in February 2015, we
acquired Eat24Hours.com, Inc., a leading web and app-based food ordering service, to drive daily engagement in
our restaurant vertical and provide the opportunity to expand Eat24’s services to all the restaurants listed on our
platform. Our acquisitions will affect our future financial results due to factors such as the amortization of acquired
intangible assets and may also result in potential charges such as restructuring costs or impairment expense.
Key Metrics
We regularly review a number of metrics, including the following key
metrics, to evaluate our business, measure our performance, identify trends in
our business, prepare financial projections and make strategic decisions.
Reviews
Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that are not recommended or that have 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 for users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information, 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 in to a businesss overall star rating. By clicking on a link on a reviewed businesss page on our website, users can access the reviews that are not 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.
As of December 31, 2014, approximately 66.3 million reviews were
available on business profile pages, including approximately 16.3 million
reviews that were not recommended, after accounting for 4.9 million reviews that
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 presented:
|
|
As of December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Reviews |
|
71,232 |
|
52,757 |
|
35,959 |
Unique
Visitors
Unique visitors represent the average number of monthly unique visitors over a given three-month period. We define monthly unique visitors as the total number of unique visitors who have visited our website at least once in a given month, and we average the number of monthly unique visitors in each month of a given three-month period to calculate average monthly unique visitors. We calculate unique visitors as the number of “users” measured by Google Analytics, a product from Google Inc. that provides digital marketing intelligence, based on the use of unique cookie identifiers. Unique visitors do not include users who access our platform solely through our mobile app. Because the number of unique visitors is based on users with unique cookies, an individual who accesses our website from multiple devices with different cookies may be counted as multiple unique visitors, and multiple individuals who access our website from a shared device with a single cookie may be counted as a single unique visitor.
44
Table of Contents
The following table presents the average monthly number of unique
visitors during the periods presented:
|
|
Three months ended
December 31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Unique Visitors |
|
135,399 |
|
120,005 |
|
86,308 |
Of the average monthly unique visitors in the quarter ended December 31, 2014, approximately 77.6 million
accessed our website through personal computers, compared to 77.7 million and 62.3 million in the quarters ended
December 31, 2013 and 2012, respectively. We anticipate that growth in use of our mobile platform will be the
driver of our growth for the foreseeable future and that usage through personal computers may continue to decline
worldwide.
Mobile Unique
Visitors
We define mobile unique visitors for a given three-month period to be the
sum of (i) the average monthly unique visitors who have visited our mobile
website during that period (measured as described above) and (ii) unique mobile
devices using our mobile app on a monthly average basis over that period. Under
this method of calculation, an individual who accesses both our mobile website
and our mobile app, or accesses either our mobile website or our mobile app from
multiple mobile devices, will be counted as multiple mobile unique visitors.
Multiple individuals who access either our mobile website or mobile app from a
shared device will be counted as a single mobile unique visitor. The following
table presents the average monthly number of mobile unique visitors during the
periods presented:
|
|
Three months ended
December 31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Mobile Unique Visitors |
|
72,311 |
|
52,905 |
|
33,150 |
Claimed Local
Business Locations
The number of claimed local business locations represents the cumulative
number of business locations that have been claimed on Yelp worldwide since
2008, as of a given date. We define a claimed local business location as each
business address for which a business representative visits our website and
claims the free business listing page for the business located at that address.
The following table presents the number of cumulative claimed local business
locations as of the dates presented.
|
|
As of December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Claimed Local Business Locations |
|
2,029 |
|
1,488 |
|
994 |
Active Local Business Accounts and Local Advertising Accounts
The number of active local business accounts represents the number of
local business accounts from which we recognized revenue in a given three-month
period. We treat business accounts that have the same payment and/or user
information as a single business account. The following table presents the
number of active local business accounts in the three-month periods presented:
|
|
Three months ended
December 31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Active Local Business Accounts |
|
94 |
|
67 |
|
40 |
Local advertising accounts comprise all local business accounts from which we recognize revenue in a given
three-month period, excluding local business accounts from which we recognize Yelp Deals revenue only. We
began reporting this metric in the quarter ended December 31, 2014, and intend to provide this metric instead of
active local business accounts in future periods, because we believe it more accurately reflects our core advertising
business than active local business accounts. The following table presents the number of local advertising accounts
in the three-month periods presented:
|
|
Three months ended
December 31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
(in thousands) |
Local Advertising Accounts |
|
84 |
|
54 |
|
31 |
Adjusted EBITDA and Non-GAAP Net Income (Loss)
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude:
provision (benefit) for income taxes; other (income) expense, net; depreciation and amortization; stock-based
compensation expense; restructuring and integration costs; and our contribution to The Yelp Foundation in the quarter ended
December 31, 2011. Non-GAAP net income (loss) is a non-GAAP financial measure that we calculate as net income
(loss), adjusted to exclude: stock-based compensation expense, amortization of intangibles and the release of
valuation allowance.
We believe that adjusted EBITDA and non-GAAP net income (loss) provide useful information to investors in
understanding and evaluating our operating results in the same manner as our
management and our board of directors. This non-GAAP information is not
necessarily comparable to non-GAAP information of other companies. Non-GAAP
information should not be viewed as a substitute for, or superior to, net income
(loss) prepared in accordance with GAAP as a measure of our profitability or
liquidity. Users of this financial information should consider the types of
events and transactions for which adjustments have been made. For more information about adjusted EBITDA
and a reconciliation of adjusted EBITDA to net income (loss), see Selected Consolidated Financial and Other
DataNon-GAAP Financial Measures. For more information about non-GAAP net
income (loss) and a reconciliation of non-GAAP net income (loss)to net income
(loss), see Selected Consolidated Financial
and Other DataNon-GAAP Financial Measures.
45
Table of Contents
Results of Operations
The following tables set forth our results of operations for the periods
presented as a percentage of net revenue for those periods (certain items may
not foot due to rounding). The period-to-period comparison of financial results
is not necessarily indicative of future results.
|
|
Year Ended December
31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
(as a percentage of net
revenue) |
Consolidated Statements of
Operations |
|
|
|
|
|
|
|
Data: |
|
|
|
|
|
|
|
Net
revenue by product |
|
|
|
|
|
|
|
Local advertising |
|
85 |
% |
83 |
% |
79 |
% |
Brand advertising |
|
9 |
|
12 |
|
15 |
|
Other services |
|
6 |
|
5 |
|
6 |
|
Total net revenue |
|
100 |
% |
100 |
% |
100 |
% |
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of revenue (exclusive of |
|
|
|
|
|
|
|
depreciation and amortization shown |
|
|
|
|
|
|
|
separately below) |
|
6 |
% |
7 |
% |
7 |
% |
Sales and marketing |
|
53 |
|
57 |
|
62 |
|
Product development |
|
17 |
|
16 |
|
15 |
|
General and administrative |
|
15 |
|
18 |
|
23 |
|
Depreciation and amortization |
|
5 |
|
5 |
|
5 |
|
Restructuring and integration |
|
|
|
|
|
1 |
|
Total costs and expenses |
|
97 |
|
104 |
|
113 |
|
|
Income (loss) from operations |
|
3 |
|
(4 |
) |
(14 |
) |
Other income (expense), net |
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
3 |
|
(4 |
) |
(14 |
) |
Benefit (provision) for income taxes |
|
7 |
|
|
|
|
|
Net
income (loss) |
|
10 |
% |
(4 |
)% |
(14 |
)% |
46
Table of Contents
Years Ended December 31,
2014, 2013 and 2012
Net
Revenue
We generate revenue from local advertising, brand advertising and other
services. The following table provides a breakdown of our net revenue for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year Ended December
31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Net
revenue by product: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
advertising |
|
$ |
319,137 |
|
$ |
192,983 |
|
$ |
109,159 |
|
65 |
% |
77 |
% |
Brand
advertising |
|
|
34,482 |
|
|
27,960 |
|
|
20,579 |
|
23 |
|
36 |
|
Other services |
|
|
23,917 |
|
|
12,045 |
|
|
7,829 |
|
99 |
|
54 |
|
Total net revenue |
|
$ |
377,536 |
|
$ |
232,988 |
|
$ |
137,567 |
|
62 |
% |
69 |
% |
|
Percentage of total net revenue by
product: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local
advertising |
|
|
85 |
% |
|
83 |
% |
|
79 |
% |
|
|
|
|
Brand
advertising |
|
|
9 |
|
|
12 |
|
|
15 |
|
|
|
|
|
Other services |
|
|
6 |
|
|
5 |
|
|
6 |
|
|
|
|
|
Total net revenue |
|
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
|
During 2014, 2013 and 2012, we focused on revenue growth related to our
local advertiser customer base as well as the development of relationships with
brand advertising agencies. Total net revenue increased $144.5 million, or 62%,
in 2014 compared to 2013, and $95.4 million, or 69%, in 2013 compared to
2012.
Local Advertising. We
generate revenue from local advertising programs, including enhanced profile
pages and performance and impression-based advertising in search results and
elsewhere on our website and mobile app. Our local advertising revenue increased
$126.2 million, or 65%, in 2014 compared to 2013, and $83.8 million, or 77%, in
2013 compared to 2012. The increase in both years was primarily due to a
significant increase in the number of customers purchasing local advertising
plans as we expanded our sales force to reach more local businesses.
Brand Advertising. We
generate revenue from brand advertising through the sale of advertising
solutions for national brands that want to improve their local presence in the
form of display advertisements and brand sponsorships. Our national advertisers
include leading brands in the automobile, financial services, logistics, consumer
goods and health and fitness industries. Our brand advertising revenue increased
$6.5 million, or 23%, in 2014 compared to 2013, and $7.4 million, or 36%, in
2013 compared to 2012. The increase in both years was primarily due to an
increase in the average spend per brand advertiser, driven largely by increased
advertising impressions per brand advertiser.
Other Services. We generate other revenue through partner arrangements, the sale of Yelp Deals and Gift Certificates, and monetization of remnant advertising inventory through third-party ad networks. Our revenue-sharing partner arrangements provide consumers with the ability to complete food delivery transactions and make online reservations through third parties directly on Yelp. Our fixed-fee partner arrangements include allowing third-party data providers to update business listing information on behalf of businesses. Yelp Deals allow merchants to promote themselves and offer discounted goods and services on a real-time basis to consumers directly on our website and mobile app. We earn a fee on Yelp Deals for acting as an agent in these transactions, which we record on a net basis and include in revenue upon a consumers purchase of a deal. Gift Certificates allow merchants to sell full-priced gift certificates directly to consumers through their business profile pages. We earn a fee based on the amount of the Gift Certificate sold, which we record on a net basis and include in revenue upon a consumers purchase of the Gift Certificate.
Our other services revenue increased $11.9 million, or 99%, in 2014
compared to 2013, and $4.2 million, or 54%, in 2013 compared to 2012. The
increase in both years was primarily due to an increase in revenue from added
partnership arrangements, as well as the sale of Yelp Deals and remnant
advertising inventory.
47
Table of Contents
Cost of
Revenue
Our cost of revenue consists primarily of network costs, credit card
processing fees and web hosting, as well as salaries, benefits and stock-based
compensation for our infrastructure teams related to operating our website. It
also includes video production expenses and creative design for brand
advertising.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year Ended
December 31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Cost of revenue |
|
$ |
24,382 |
|
$ |
16,561 |
|
$ |
9,928 |
|
47 |
% |
67 |
% |
Percentage of net revenue |
|
|
6 |
% |
|
7 |
% |
|
7 |
% |
|
|
|
|
Cost of revenue increased $7.8 million, or 47%, in 2014 compared to 2013, and $6.6 million, or 67%, in 2013
compared to 2012. The increases in 2014
and 2013 were primarily attributable to increases of $4.3 million and $1.7 million, respectively, in outside hosting and Internet service fees, which are necessary to support the increase in
visitors to our website and transactions completed on our website. In addition, set up costs, including video
production, for active local business pages increased by $0.4 million and $1.3 million in 2014 and 2013,
respectively, due to increased demand by local businesses for video on their business pages. Expenses related to
creative design for brand and local advertising customers also increased by $0.7 million and $0.2 million in 2014 and 2013, respectively. In addition, merchant fees related to credit card transactions for local advertising increased
$2.0 million and $1.8 million in 2014 and 2013, respectively, and we added personnel to support our website
infrastructure resulting in increases of $0.4 million and $1.6 million in 2014 and 2013, respectively.
Sales and
Marketing
Our sales and marketing expenses primarily consist of salaries, benefits,
stock-based compensation expense, travel expense and incentive compensation expense for our
sales and marketing employees. In addition, sales and marketing expenses include
business acquisition marketing, community management, branding and advertising
costs, as well as allocated facilities and other supporting overhead costs. Our
focus to date has been on organic and viral growth driven by the community
development efforts of our community management team, which is responsible for
growing and fostering local communities, as well as coordinating events to raise
awareness of our brand. As a result, we have incurred minimal sales and
marketing expenses to acquire organic traffic to our platform. However, we have
begun selectively testing advertising to consumers through various channels and plan to continue to do so in 2015.
We expect our community management costs to increase as we continue to expand to new markets and within
existing markets. We expect our sales and marketing expenses to increase as we expand our domestic and
international footprint, increase the number of local advertising accounts and continue to build our brand. The
substantial majority of these expenses will be related to hiring sales employees and Community Managers. We
expect sales and marketing expenses to increase and to be our largest expense for the foreseeable future.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year Ended
December 31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Sales and marketing |
|
$ |
201,050 |
|
$ |
131,970 |
|
$ |
85,915 |
|
52 |
% |
54 |
% |
Percentage of net revenue |
|
|
53 |
% |
|
57 |
% |
|
62 |
% |
|
|
|
|
Sales and marketing expenses increased $69.1 million, or 52%, in 2014 compared to 2013, and $46.1 million, or
54%, in 2013 compared to 2012. The increases in 2014 and 2013 were primarily attributable to increases in
headcount and related expenses of $42.9 million and $30.2 million, respectively, including increases in stock-based
compensation expense of $5.0 million and $5.2 million, respectively, as we expanded our sales organization to take
advantage of the market opportunity created by increased recognition of the value of our platform and increased use
of our free online business accounts. In addition, we experienced increases in facilities and related allocations of
$11.8 million and $6.4 million in 2014 and 2013, respectively. As a result of new marketing campaigns, domestic
and international marketing and advertising costs increased by $9.2 million and $0.1 million in 2014 and 2013,
respectively. As a result of our increase in net revenue for 2014 compared to 2013, and 2013 compared to 2012,
our commission expenses increased $5.2 million and $9.4 million in 2014 and 2013, respectively.
48
Table of Contents
Product
Development
Our product development expenses primarily consist of salaries, benefits
and stock-based compensation expense for our engineers, product management and
information technology personnel. Product development expenses also include
outside services and consulting, allocated facilities and other supporting
overhead costs. We believe that continued investment in features, software
development tools and code modification is important to attaining our strategic
objectives and, as a result, we expect product development expense to increase
for the foreseeable future.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year Ended
December 31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Product development |
|
$ |
65,181 |
|
$ |
38,243 |
|
$ |
20,473 |
|
70 |
% |
87 |
% |
Percentage of net revenue |
|
|
17 |
% |
|
16 |
% |
|
15 |
% |
|
|
|
|
Product development expenses increased $26.9 million, or 70%, in 2014 compared to 2013, and $17.8 million,
or 87%, in 2013 compared to 2012. These increases were primarily attributable to increases in headcount and
related expenses of $24.9 million and $15.3 million in 2014 and 2013, respectively, including increases in stock-based
compensation expense of $8.5 million and $4.6 million, respectively. In addition, we experienced increases in
facilities and related expenses of $2.5 million and $1.3 million in 2014 and 2013, respectively, as a result of the
increases in headcount. In 2014, use of outside consultants decreased by $0.5 million. In 2013, use of outside
consultants increased by $1.2 million as we continued to invest in adding features and functionality to our website
and mobile app.
General and
Administrative
Our general and administrative expenses primarily consist of salaries,
benefits and stock-based compensation for our executive, finance, user
operations, legal, human resources and other administrative employees. Our
general and administrative expenses also include outside consulting, legal and
accounting services, as well as facilities and other supporting overhead costs
not allocated to other departments. We expect our general and administrative
expenses to increase for the foreseeable future as we continue to expand our
business.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year Ended
December 31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
General and administrative |
|
$ |
58,274 |
|
$ |
42,907 |
|
$ |
31,531 |
|
36 |
% |
36 |
% |
Percentage of net revenue |
|
|
15 |
% |
|
18 |
% |
|
23 |
% |
|
|
|
|
General and administrative expenses increased $15.4 million, or 36%, in 2014 compared to 2013, and $11.4
million, or 36%, in 2013 compared to 2012. The increases in 2014 and 2013 were primarily attributable to increases
in headcount and related expenses of $8.3 million and $6.5 million, respectively, including increases in stock-based
compensation expense of $2.3 million and $1.2 million, respectively. Additionally, we invested in our systems and
support for the growth of the business through the use of outside consultants, which contributed to the increases by
$2.4 million in both years. We also experienced increases in facilities and related expenses of $1.6 million and $1.7
million in 2014 and 2013, respectively, and increases in bad debt expense of $3.1 million and $1.3 million in 2014
and 2013, respectively. In 2013, the increase was offset by a decrease in legal costs of $0.5 million due to court
decisions in prior litigation claims.
49
Table of Contents
Depreciation and
Amortization
Depreciation and amortization expenses primarily consist of depreciation
on computer equipment, software, leasehold improvements, capitalized website and
software development costs and amortization of purchased intangibles. We expect
depreciation and amortization expenses to increase for the foreseeable future as
we continue to expand our technology infrastructure.
|
|
|
|
|
|
|
|
|
|
|
2013 to |
|
2012 to |
|
|
|
|
|
|
|
|
|
|
|
|
2014 % |
|
2013 % |
|
|
|
Year
Ended December 31, |
|
Change |
|
Change |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Depreciation and amortization |
|
$
|
17,590 |
|
$
|
11,455 |
|
$
|
7,223 |
|
54 |
% |
59 |
% |
Percentage of net revenue |
|
|
5 |
% |
|
5 |
% |
|
5 |
% |
|
|
|
|
Depreciation and amortization expense increased $6.1 million, or 54%, in 2014 compared to 2013, and $4.2 million, or 59%, in 2013 compared to 2012. These increases were primarily the result of our investments in expanding our technology infrastructure and capital assets to support our increase in headcount across the organization. Depreciation and amortization related to our fixed assets and capitalized website and software development costs increased $5.9 million and $2.3 million in 2014 and 2013, respectively. In addition, amortization related to our intangibles increased by $0.2 million and $1.9 million in 2014 and 2013, respectively, primarily due to the intangibles acquired in acquisitions in such years.
Restructuring and
Integration
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
(in
thousands) |
Restructuring and integration |
|
$ |
|
|
$ |
675 |
|
$ |
1,262 |
In 2014, we incurred zero restructuring and integration costs compared to
$0.7 million in 2013 and $1.3 million in 2012.
In 2012, following the acquisition of Qype, we announced our plan to reduce the size of the Qype workforce and to terminate several of Qype’s leases. In 2013, we announced our plan to further reduce the size of the Qype workforce. These actions were made in order to reduce our cost structure, enhance operating efficiencies and strengthen our business to achieve long-term profitable growth. We incurred restructuring charges of $0.7 million in 2013 and $1.3 million in 2012 as a result of these plans. The restructuring was completed during 2013.
Other Income
(Expense), Net
Other income (expense), net consists primarily of the interest income
earned on our cash and cash equivalents and marketable securities, gains and
losses on the disposal of assets, and foreign exchange gains and losses.
|
|
Year Ended December
31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
(in thousands) |
Interest income |
|
$ |
727 |
|
$ |
62 |
|
$ |
51 |
|
Transaction gains (losses) on foreign exchange |
|
|
(121 |
) |
|
(251 |
) |
|
(259 |
) |
Other non-operating loss, net |
|
|
(385 |
) |
|
(218 |
) |
|
(18 |
) |
Total other income (expense), net |
|
$ |
221 |
|
$ |
(407 |
) |
$ |
(226 |
) |
50
Table of Contents
In 2014, other income (expense), net increased by $0.6 million, driven
primarily by an increase in interest income related to marketable securities. In
addition, there was a decrease in foreign exchange losses due to favorable
foreign currency exchange rates during 2014.
In 2013, other income (expense), net decreased $0.2 million compared to
2012. The decrease was largely driven by a loss on the disposal of assets.
Benefit (Provision)
for Income Taxes
Benefit (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.
|
|
Year Ended
December 31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
|
(in thousands) |
|
Benefit (provision) for income taxes |
|
$
|
25,193 |
|
$
|
(838 |
) |
$
|
(122 |
) |
Income tax expense decreased $26.0 million in 2014 compared to 2013 primarily due to the release of the valuation allowance previously recorded against certain deferred tax assets. Income tax expense increased $0.7 million in 2013 compared to 2012 as a result of taxes due in foreign jurisdictions and state taxes.
Quarterly Results of
Operations and Other Data
The following tables set forth our unaudited quarterly consolidated
statements of operations data and our consolidated statements of operations data
as a percentage of net revenue for each of the eight quarters in the period
ended December 31, 2014 (for which certain items may not foot due to rounding).
We also present other financial and operational data and a reconciliation of net
income (loss) to adjusted EBITDA. We have prepared this quarterly data on a
consistent basis with the audited consolidated financial statements included in
this Annual Report. In the opinion of management, the quarterly financial
information reflects all necessary adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of this data. This
information should be read in conjunction with the audited financial statements
and related notes included elsewhere in this Annual Report. The results of
historical periods are not necessarily indicative of the results of operations
for any future period.
|
|
Quarter
Ended |
|
|
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
|
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
|
|
(dollars in thousands, except per share data) |
|
Consolidated Statements of
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue by product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local advertising |
|
$ |
93,125 |
|
$ |
85,132 |
|
$ |
75,685 |
|
$ |
65,195 |
|
$ |
58,052 |
|
$ |
51,167 |
|
$ |
44,797 |
|
$ |
38,967 |
|
Brand advertising |
|
|
8,653 |
|
|
9,318 |
|
|
9,055 |
|
|
7,455 |
|
|
9,244 |
|
|
6,910 |
|
|
7,048 |
|
|
4,758 |
|
Other services |
|
|
8,109 |
|
|
8,005 |
|
|
4,047 |
|
|
3,757 |
|
|
3,355 |
|
|
3,104 |
|
|
3,178 |
|
|
2,408 |
|
Total net revenue |
|
|
109,887 |
|
|
102,455 |
|
|
88,787 |
|
|
76,407 |
|
|
70,651 |
|
|
61,181 |
|
|
55,023 |
|
|
46,133 |
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue (exclusive of depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and amortization shown
separately |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
below)(1) |
|
|
7,286 |
|
|
6,174 |
|
|
5,845 |
|
|
5,077 |
|
|
4,926 |
|
|
4,277 |
|
|
4,018 |
|
|
3,340 |
|
Sales and marketing(1) |
|
|
53,580 |
|
|
54,551 |
|
|
47,798 |
|
|
45,121 |
|
|
38,847 |
|
|
34,126 |
|
|
30,803 |
|
|
28,194 |
|
Product development(1) |
|
|
19,076 |
|
|
17,397 |
|
|
14,726 |
|
|
13,982 |
|
|
11,802 |
|
|
11,208 |
|
|
7,997 |
|
|
7,236 |
|
General and administrative(1) |
|
|
16,662 |
|
|
15,185 |
|
|
13,257 |
|
|
13,170 |
|
|
13,460 |
|
|
10,535 |
|
|
10,148 |
|
|
8,764 |
|
Depreciation and amortization |
|
|
5,291 |
|
|
4,604 |
|
|
4,034 |
|
|
3,661 |
|
|
3,524 |
|
|
2,816 |
|
|
2,637 |
|
|
2,478 |
|
Restructuring and integration(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
675 |
|
Total costs and expenses |
|
|
101,895 |
|
|
97,911 |
|
|
85,660 |
|
|
81,011 |
|
|
72,559 |
|
|
62,962 |
|
|
55,603 |
|
|
50,687 |
|
|
Income (loss) from operations |
|
|
7,992 |
|
|
4,544 |
|
|
3,127 |
|
|
(4,604 |
) |
|
(1,908 |
) |
|
(1,781 |
) |
|
(580 |
) |
|
(4,554 |
) |
Other income (expense), net |
|
|
38 |
|
|
200 |
|
|
(15 |
) |
|
(2 |
) |
|
(109 |
) |
|
(31 |
) |
|
(66 |
) |
|
(201 |
) |
|
Income (loss) before income taxes |
|
|
8,030 |
|
|
4,744 |
|
|
3,112 |
|
|
(4,606 |
) |
|
(2,017 |
) |
|
(1,812 |
) |
|
(646 |
) |
|
(4,755 |
) |
Benefit (provision) for income taxes |
|
|
24,698 |
|
|
(1,107 |
) |
|
(369 |
) |
|
1,971 |
|
|
(52 |
) |
|
(510 |
) |
|
(232 |
) |
|
(44 |
) |
Net
income (loss) attributable to common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders (Class A
and B) |
|
$ |
32,728 |
|
$ |
3,637 |
|
$ |
2,743 |
|
$ |
(2,635 |
) |
$ |
(2,069 |
) |
$ |
(2,322 |
) |
$ |
(878 |
) |
$ |
(4,799 |
) |
|
Net
income (loss) per share attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stockholders
(Class A and B): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.45 |
|
$ |
0.05 |
|
$ |
0.04 |
|
$ |
(0.04 |
) |
$ |
(0.03 |
) |
$ |
(0.04 |
) |
$ |
(0.01 |
) |
$ |
(0.08 |
) |
Diluted |
|
$ |
0.42 |
|
$ |
0.05 |
|
$ |
0.04 |
|
$ |
(0.04 |
) |
$ |
(0.03 |
) |
$ |
(0.04 |
) |
$ |
(0.01 |
) |
$ |
(0.08 |
) |
|
Weighted-average shares used to compute |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net income (loss) per
share attributable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to common stockholders
(Class A and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
72,645 |
|
|
72,195 |
|
|
71,714 |
|
|
71,171 |
|
|
68,847 |
|
|
65,530 |
|
|
64,576 |
|
|
63,733 |
|
Diluted |
|
|
77,211 |
|
|
77,296 |
|
|
77,056 |
|
|
71,171 |
|
|
68,847 |
|
|
65,530 |
|
|
64,576 |
|
|
63,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes non-cash stock-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
207 |
|
$ |
253 |
|
$ |
119 |
|
$ |
150 |
|
$ |
140 |
|
$ |
104 |
|
$ |
105 |
|
$ |
72 |
|
Sales and marketing |
|
|
4,038 |
|
|
3,911 |
|
|
3,737 |
|
|
3,397 |
|
|
3,201 |
|
|
2,660 |
|
|
2,282 |
|
|
1,988 |
|
Product development |
|
|
4,508 |
|
|
3,807 |
|
|
3,447 |
|
|
3,042 |
|
|
2,705 |
|
|
1,709 |
|
|
1,040 |
|
|
816 |
|
General and administrative |
|
|
3,063 |
|
|
2,947 |
|
|
2,780 |
|
|
2,867 |
|
|
2,743 |
|
|
2,542 |
|
|
2,286 |
|
|
1,729 |
|
Restructuring and integration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
555 |
|
Total stock-based compensation |
|
$ |
11,816 |
|
$ |
10,918 |
|
$ |
10,083 |
|
$ |
9,456 |
|
$ |
8,789 |
|
$ |
7,015 |
|
$ |
5,713 |
|
$ |
5,160 |
|
51
Table of Contents
|
|
Quarter
Ended |
|
|
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
|
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
|
|
|
|
|
|
(as a percentage of net revenue) |
|
|
|
|
|
|
|
Consolidated Statements
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue by product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local advertising |
|
85 |
% |
83 |
% |
85 |
% |
85 |
% |
82 |
% |
84 |
% |
81 |
% |
85 |
% |
Brand advertising |
|
8 |
|
9 |
|
10 |
|
10 |
|
13 |
|
11 |
|
13 |
|
10 |
|
Other services |
|
7 |
|
8 |
|
5 |
|
5 |
|
5 |
|
5 |
|
6 |
|
5 |
|
Total net revenue |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and amortization shown |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
separately below) |
|
7 |
|
6 |
|
7 |
|
7 |
|
7 |
|
7 |
|
7 |
|
7 |
|
Sales and marketing |
|
49 |
|
53 |
|
54 |
|
59 |
|
55 |
|
56 |
|
56 |
|
61 |
|
Product development |
|
17 |
|
17 |
|
17 |
|
18 |
|
17 |
|
18 |
|
15 |
|
16 |
|
General and administrative |
|
15 |
|
15 |
|
15 |
|
17 |
|
19 |
|
17 |
|
18 |
|
19 |
|
Depreciation and amortization |
|
5 |
|
4 |
|
5 |
|
5 |
|
5 |
|
5 |
|
5 |
|
5 |
|
Restructuring and integration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Total costs and expenses |
|
93 |
|
96 |
|
96 |
|
106 |
|
103 |
|
103 |
|
101 |
|
109 |
|
|
Income (loss) from operations |
|
7 |
|
4 |
|
4 |
|
(6 |
) |
(3 |
) |
(3 |
) |
(1 |
) |
(10 |
) |
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
7 |
|
5 |
|
4 |
|
(6 |
) |
(3 |
) |
(3 |
) |
(1 |
) |
(10 |
) |
Benefit (provision) for income taxes |
|
22 |
|
(1 |
) |
|
|
3 |
|
|
|
(1 |
) |
|
|
|
|
Net
income (loss) |
|
30 |
% |
4 |
% |
3 |
% |
(3 |
)% |
(3 |
)% |
(4 |
)% |
(1 |
)% |
(10 |
)% |
52
Table of Contents
|
|
Quarter Ended |
|
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
|
(in thousands) |
Other Financial and
Operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reviews |
|
|
71,232 |
|
|
66,592 |
|
|
61,342 |
|
|
56,905 |
|
|
52,757 |
|
|
47,322 |
|
|
42,526 |
|
|
39,103 |
Unique Visitors |
|
|
135,399 |
|
|
139,418 |
|
|
137,761 |
|
|
132,460 |
|
|
120,005 |
|
|
117,447 |
|
|
108,058 |
|
|
102,065 |
Mobile Unique
Visitors |
|
|
72,311 |
|
|
73,440 |
|
|
67,886 |
|
|
61,190 |
|
|
52,905 |
|
|
50,455 |
|
|
45,064 |
|
|
40,168 |
Claimed Local Business Locations |
|
|
2,029 |
|
|
1,886 |
|
|
1,751 |
|
|
1,623 |
|
|
1,488 |
|
|
1,344 |
|
|
1,222 |
|
|
1,103 |
Active Local Business Accounts |
|
|
94 |
|
|
86 |
|
|
80 |
|
|
74 |
|
|
67 |
|
|
57 |
|
|
51 |
|
|
45 |
Local Advertising Accounts |
|
|
84 |
|
|
77 |
|
|
69 |
|
|
63 |
|
|
54 |
|
|
46 |
|
|
40 |
|
|
35 |
Adjusted EBITDA |
|
$ |
25,099 |
|
$ |
20,066 |
|
$ |
17,244 |
|
$ |
8,513 |
|
$ |
10,405 |
|
$ |
8,050 |
|
$ |
7,770 |
|
$ |
3,204 |
Non-GAAP Net Income (Loss) |
|
$ |
18,897 |
|
$ |
15,198 |
|
$ |
13,455 |
|
$ |
7,447 |
|
$ |
7,340 |
|
$ |
5,278 |
|
$ |
5,358 |
|
$ |
338 |
____________________
(1) For information on how we define these operational and other metrics, see —Key Metrics.
The following table presents a reconciliation of adjusted EBITDA to net
income (loss).
|
|
Quarter Ended |
|
|
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
|
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
|
|
(in thousands) |
|
Reconciliation of adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$
|
32,728 |
|
$
|
3,637 |
|
$
|
2,743 |
|
$
|
(2,635 |
) |
$
|
(2,069 |
) |
$
|
(2,322 |
) |
$
|
(878 |
) |
$
|
(4,799 |
) |
(Benefit) provision for income taxes |
|
|
(24,698 |
) |
|
1,107 |
|
|
369 |
|
|
(1,971 |
) |
|
52 |
|
|
510 |
|
|
232 |
|
|
44 |
|
Other (income) expense,
net |
|
|
(38 |
) |
|
(200 |
) |
|
15 |
|
|
2 |
|
|
109 |
|
|
31 |
|
|
66 |
|
|
201 |
|
Depreciation and amortization |
|
|
5,291 |
|
|
4,604 |
|
|
4,034 |
|
|
3,661 |
|
|
3,524 |
|
|
2,816 |
|
|
2,637 |
|
|
2,478 |
|
Stock-based compensation |
|
|
11,816 |
|
|
10,918 |
|
|
10,083 |
|
|
9,456 |
|
|
8,789 |
|
|
7,015 |
|
|
5,713 |
|
|
4,605 |
|
Restructuring and integration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
675 |
|
Adjusted EBITDA |
|
$ |
25,099 |
|
$ |
20,066 |
|
$ |
17,244 |
|
$ |
8,513 |
|
$ |
10,405 |
|
$ |
8,050 |
|
$ |
7,770 |
|
$ |
3,204 |
|
The following table presents a reconciliation of non-GAAP net income
(loss) to net income (loss).
|
|
Quarter
Ended |
|
|
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
Dec 31, |
|
Sep 30, |
|
Jun 30, |
|
Mar 31, |
|
|
|
2014 |
|
2014 |
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
|
|
(in thousands) |
|
Reconciliation of adjusted
non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
32,728 |
|
$ |
3,637 |
|
$ |
2,743 |
|
$ |
(2,635 |
) |
$ |
(2,069 |
) |
$ |
(2,322 |
) |
$ |
(878 |
) |
$ |
(4,799 |
) |
Stock-based compensation |
|
|
11,816 |
|
|
10,918 |
|
|
10,083 |
|
|
9,456 |
|
|
8,789 |
|
|
7,015 |
|
|
5,713 |
|
|
4,605 |
|
Amortization of intangible assets |
|
|
550 |
|
|
643 |
|
|
629 |
|
|
626 |
|
|
620 |
|
|
585 |
|
|
523 |
|
|
532 |
|
Valuation allowance release |
|
|
(26,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income (loss) |
|
$ |
18,897 |
|
$ |
15,198 |
|
$ |
13,455 |
|
$ |
7,447 |
|
$ |
7,340 |
|
$ |
5,278 |
|
$ |
5,358 |
|
$ |
338 |
|
Liquidity and Capital
Resources
As of December 31, 2014, we had cash and cash equivalents of $247.3 million. Cash and cash equivalents consist of both cash and money market funds. Our cash held internationally as of December 31, 2014 was $8.4 million. We did not have any outstanding bank loans or credit facilities in place as of December 31, 2014. Our investment portfolio is comprised of 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. 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, 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 our 2012 Employee Stock Purchase Plan, or ESPP.
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 and cash equivalents, together with any cash generated from operations, will be sufficient to meet our working capital requirements and anticipated purchases of property and equipment for at least the next 12 months. However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated. We may require or otherwise seek additional funds in the next 12 months to respond to business
challenges, including the need to develop new features and products or enhance
existing services, improve our operating infrastructure or acquire complementary
businesses and technologies, and, accordingly, we may need to engage in equity
or debt financings to secure additional funds.
53
Table of Contents
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.
Cash
Flows
The following table
summarizes our cash flows for the periods presented:
|
|
Year Ended December
31, |
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
(in thousands) |
Consolidated Statements of Cash Flows
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
$ |
29,054 |
|
|
$ |
16,243 |
|
|
$ |
7,524 |
|
Depreciation and amortization |
|
|
17,590 |
|
|
|
11,455 |
|
|
|
7,223 |
|
Cash
provided by (used in) operating activities |
|
|
57,932 |
|
|
|
21,432 |
|
|
|
(99 |
) |
Cash used in investing activities |
|
|
(228,674 |
) |
|
|
(18,827 |
) |
|
|
(40,592 |
) |
Cash
provided by financing activities |
|
|
29,549 |
|
|
|
291,720 |
|
|
|
114,173 |
|
Operating Activities.
We generated $57.9 million of
cash in operating activities in the year ended December 31, 2014, primarily
resulting from our net income of $36.5 million, which included non-cash
depreciation and amortization of $17.6 million, non-cash stock-based
compensation of $42.3 million, non-cash provision for doubtful accounts of $7.2
million and $28.2 million increase related to our release of valuation
allowance previously recorded against certain domestic and foreign deferred tax
assets. In addition, significant changes in our operating assets and liabilities
resulted from the following:
● |
increase in accounts receivable of $21.3 million due to an increase
in billings for local advertising plans and brand advertising campaigns,
as well as the timing of payments from these customers; |
● |
increase in accounts
payable, accrued expenses and other liabilities of $8.9 million relating
to the growth in our business and the increase in accrued vacation and
employee-related expenses, accrued cost of sales, deferred rent for new
facilities, and timing of invoices and payments to vendors; and
|
● |
increase in prepaids
and other assets of $4.0 million relating to the increase in prepaid
payroll bonuses, prepaid cost of sales and amounts due from others.
|
We generated $21.4 million
of cash from operating activities in the year ended December 31, 2013, primarily
resulting from our net loss of $10.1 million, offset by non-cash stock-based
compensation of $26.7 million, non-cash depreciation and amortization of $11.5
million, an increase in excess tax benefit from the exercise of stock-based
award activity of $0.4 million, which is reclassified as a financing activity,
and non-cash provision for doubtful accounts of $3.3 million. In addition,
significant changes in our operating assets and liabilities resulted from the
following:
● |
increase in accounts
receivable of $12.8 million due to an increase in billings for local
advertising plans and brand advertising campaigns, as well as timing of
payments from these customers; |
● |
increase in accounts
payable, accrued expenses and other liabilities of $5.0 million relating
to the growth in the business and, more specifically, the increase in
accrued vacation and employee-related expenses, deferred rent for new
facilities, as well as timing of invoices and payments to vendors; and
|
● |
increase in prepaids
and other assets of $1.6 million relating to the increase in value added
tax due from taxing authorities, an increase in deferred tax assets,
prepaid business data and prepaid rent for our facilities.
|
54
Table of Contents
We used $0.1 million of
cash from operating activities during the year ended December 31, 2012,
primarily resulting from our net loss of $19.1 million, non-cash stock-based
compensation of $14.9 million, provision for doubtful accounts of $1.9 million
and non-cash depreciation and amortization of $7.2 million. In addition,
significant changes in our operating assets and liabilities resulted from the
following:
● |
increase in accounts
receivable of $4.1 million due to an increase in billings for local
advertising plans and brand advertising campaigns, as well as timing of
payments from these customers; |
● |
increase in prepaids
and other assets of $2.6 million relating to the increase in value added
tax due from taxing authorities, prepaid business data and prepaid rent
for our facilities; and |
● |
increase in accounts
payable, accrued expenses, and other liabilities of $2.0 million relating
to the growth in the business and, more specifically, the increase in
accrued bonus and commissions, increase in accrued vacation and employee
related expenses, and deferred rent for new facilities.
|
Investing Activities.
Our primary investing activities in
the year ended December 31, 2014 consisted of purchases of marketable
securities, acquisitions, as well as the continued purchases of property and
equipment to support the build out of our data centers, leasehold improvements
for our headquarters in San Francisco and other locations, the purchase
of technology hardware to support our growth in headcount and software to
support website and mobile app development, website operations and our corporate
infrastructure. Purchases of property and equipment, as well as leasehold
improvements, may vary from period to period due to the timing of the expansion
of our offices, operations and website and internal-use software and
development. We expect to continue to invest in property and equipment,
leaseholds and the development of software in 2015.
We used $228.7 million of
cash in investing activities during the year ended December 31, 2014, including
$14.3 million net of cash received related to acquisitions during the year.
Other cash used in investing activities primarily related to purchases of
marketable securities of $210.5 million, as well as an increase in expenditures
related to website and internally developed software of $11.3 million, purchases
of perpetual data licenses of $1.7 million and purchases of property, equipment,
software and leasehold improvements of $29.1 million to support the growth in our business and an increase in restricted cash of $14.8 million associated with
letters of credit in connection with leased office space. Cash used in investing
was offset by $53.0 million of maturities of investment securities held to
maturity.
We used $18.8 million in
investing activities during the year ended December 31, 2013, including $2.1
million net of cash received related to the acquisition of SeatMe. In addition,
we used $16.2 million for purchases of property, equipment and software and
incurred expenditures of $4.9 million for capitalized website and software
development costs. Cash used in investing was offset by $1.2 million of cash
released from escrow related to the Qype acquisition, recorded as a measurement
period adjustment to the initial fair value of the acquired assets and
liabilities. Cash used in investing was also offset by a decrease in the
required amount of letters of credit in connection with the lease for our San
Francisco headquarters, which resulted in a decrease of $3.2 million in
restricted cash.
We used $40.6 million in
investing activities during the year ended December 31, 2012, including $24.1
million net of cash received for the acquisition of Qype. In addition, we used
$7.5 million for purchases of property, equipment and software and incurred
expenditures of $2.9 million for capitalized website and software development
costs. We also entered into new lease agreements for office space in San
Francisco and London. In connection with entry into such leases, we were
obligated to deliver letters of credit in the aggregate amount of $6.0 million,
which resulted in an increase of $6.0 million in restricted cash.
55
Table of Contents
Financing
Activities. During the year ended
December 31, 2014, we generated $29.5 million in financing activities, primarily
due to net proceeds of $20.2 million from the issuance of common stock upon the
exercise of stock options and $8.9 million in net proceeds from the sale of
stock under our ESPP.
We generated $291.7 million
of cash from financing activities during the year ended December 31, 2013. We
received $276.5 million in proceeds from our follow-on offering, net of $12.4
million in total offering expenses, including underwriter commission and
discounts associated with the transaction. We also generated $13.5 million in
net proceeds from the issuance of common stock related to the exercise of stock
options, an increase of $0.4 million in excess tax benefits from the exercise of
stock options and $2.0 million in net proceeds from the sale of stock under our
ESPP.
We generated $114.2 million
of cash from financing activities during the year ended December 31, 2012. We
received $111.8 million in proceeds from our initial public offering, or IPO, net of $10.8 million in
offering expenses, including underwriter commission and discounts associated
with the transaction. With the exception of the IPO, our financing activities
during the year ended December 31, 2012 consisted primarily of net proceeds from
the issuance of common stock related to the exercise of stock options.
Off Balance Sheet
Arrangements
We did not have any off
balance sheet arrangements in 2014, 2013 or 2012.
Contractual Obligations
We lease various office
facilities, including our corporate headquarters in San Francisco, California,
under operating lease agreements that expire from 2015 to 2026. The terms of the
lease agreements provide for rental payments on a graduated basis. We recognize
rent expense on a straight-line basis over the lease periods. We do not have any
debt or material capital lease obligations, and all of our property, equipment
and software have been purchased with cash. As of December 31, 2014, we had no
material long-term purchase obligations outstanding with any vendors or third
parties. As of December 31, 2014, the following table summarizes our future
minimum payments under non-cancelable operating leases for equipment and office
facilities:
|
|
Payments Due by
Period |
|
|
Total |
|
Less Than 1
Year |
|
1 – 3 Years |
|
3 – 5 Years |
|
More Than 5
Years |
|
|
(in thousands) |
Operating lease obligations |
|
$ |
343,409 |
|
$ |
25,617 |
|
$ |
109,050 |
|
$ |
75,849 |
|
$ |
132,893 |
The contractual commitment
amounts in the table above are associated with agreements that are enforceable
and legally binding. Obligations under contracts that we can cancel without a
significant penalty are not included in the table above. As of December 31,
2014, our total liability for uncertain tax positions was $3.3 million. We are
not reasonably able to estimate the timing of future cash flow related to this
liability. As a result, this amount is not included in the contractual
obligations table above.
56
Table of Contents
Item 7A. Quantitative
and Qualitative Disclosures About Market Risk.
We have operations both
within the United States and internationally, and we are exposed to market risks
in the ordinary course of business. These risks include primarily interest rate,
foreign exchange risks and inflation.
Interest Rate
Fluctuation
The primary objective of
our investment activities is to preserve principal while maximizing income
without significantly increasing risk.
Our cash and cash
equivalents consist of cash and money market funds. We do not have any long-term
borrowings. Because our cash and cash equivalents have a relatively short
maturity, their fair value is relatively insensitive to interest rate changes.
We believe a hypothetical 10% increase in the interest rates as of December 31,
2014 would not have a material impact on our cash and cash equivalents
portfolio.
Our marketable securities
are comprised of fixed-rate debt securities issued by U.S. corporations, U.S.
government agencies and the U.S. Treasury; as such, their fair value may be
affected by fluctuations in interest rates in the broader economy. As we have
both the ability and intent to hold these securities to maturity, such
fluctuations would have no impact on our results of operations.
Foreign Currency
Exchange Risk
We have foreign currency
risks related to our revenue and operating expenses denominated in currencies
other than the U.S. dollar, principally the British pound sterling and the Euro.
The volatility of exchange rates depends on many factors that we cannot forecast
with reliable accuracy. Although we have experienced and will continue to
experience fluctuations in net income (loss) as a result of transaction gains
(losses), net related to revaluing certain cash balances, trade accounts
receivable balances and intercompany balances that are denominated in currencies
other than the U.S. dollar, we believe a hypothetical 10%
strengthening/(weakening) of the U.S. dollar against the British pound sterling,
either alone or in combination with a hypothetical 10% strengthening/(weakening)
of the U.S. dollar against the Euro, would not have a material impact on our
results of operations. In the event our foreign sales and expenses increase as a
proportion of our overall sales and expenses, our operating results may be more
greatly affected by fluctuations in the exchange rates of the currencies in
which we do business. At this time we do not, but we may in the future, enter
into derivatives or other financial instruments in an attempt to hedge our
foreign currency exchange risk. It is difficult to predict the impact hedging
activities would have on our results of operations.
Inflation Risk
We do not believe that
inflation has had a material effect on our business, financial condition or
results of operations. If our costs were to become subject to significant
inflationary pressures, we may not be able to fully offset such higher costs
through price increases. Our inability or failure to do so could harm our
business, financial condition or results of operations.
Item 8. Financial
Statements and Supplementary Data.
Our financial statements
and the report of our independent registered public accounting firm are included
in this Annual Report beginning on page F-1. The index to our
financial statements is included in Part IV, Item 15 below.
Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
57
Table of Contents
Item 9A. Controls and
Procedures.
Evaluation of Disclosure
Controls and Procedures
We maintain disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, that are designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the companys management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosure.
Our management, with the
participation of our Chief Executive Officer and our Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2014. Based on the evaluation of our disclosure controls and
procedures as of December 31, 2014, our Chief Executive Officer and our Chief
Financial Officer concluded that, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance level.
Managements Annual
Report on Internal Control Over Financial Reporting
Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and
15d-15(f). Under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, our management evaluated the
effectiveness of our internal control over financial reporting based on the
framework set forth in Internal
ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The scope of managements assessment of the effectiveness of our
internal control over financial reporting included all of our consolidated
operations except for the operations of Restaurant Kritik and Cityvox, which we
acquired on October 24, 2014 and October 28, 2014, respectively. This exclusion
is in accordance with the SECs general guidance that an assessment of a
recently acquired business may be omitted from the scope of our evaluation in the year of
acquisition. Each of Restaurant Kritik and Cityvox account for less than one percent of the
total assets and less than one percent of total revenues of the consolidated financial
statements of the Company as of and for the fiscal year ended December 31, 2014.
Based on this evaluation, our management concluded that our internal control
over financial reporting was effective as of December 31, 2014. Our management
reviewed the results of this evaluation with the audit committee of our board of
directors.
Deloitte &Touche LLP,
an independent registered public accounting firm, has audited the consolidated
financial statements included in this Annual Report and, as part of the audit,
has issued a report on the effectiveness of our internal control over financial
reporting as of December 31, 2014, which is included below.
Changes in Internal
Control Over Financial Reporting
There was no change in our
internal control over financial reporting identified in connection with the
evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that
occurred during the three months ended December 31, 2014 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
58
Table of Contents
Inherent Limitations on
Effectiveness of Controls
Our management, including
our Chief Executive Officer and our Chief Financial Officer, believes that our
disclosure controls and procedures and internal control over financial reporting
are designed to provide reasonable assurance of achieving their objectives and
are effective at the reasonable assurance level. However, our management does
not expect that our disclosure controls and procedures or our internal control
over financial reporting will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. These inherent limitations
include the realities that judgments in decision making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by the
collusion of two or more people or by management override of controls. The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Yelp Inc.
San Francisco, California
We have audited the internal control over financial reporting of Yelp Inc. and subsidiaries (the
"Company") as of December 31, 2014, based on criteria established in Internal Control Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in
Managements Annual Report on Internal Control Over Financial Reporting, management excluded from its
assessment the internal control over financial reporting of Restaurant-Kritik and Cityvox, which were both
acquired in October 2014 and whose financial statements constitute less than 1% of the total assets and less than
1% of total revenue of the consolidated financial statement amounts as of and for the year ended December 31,
2014. Accordingly, our audit did not include the internal control over financial reporting at Restaurant-Kritik and
Cityvox. The Company's management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision
of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance
regarding their liability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014,based on the criteria established in Internal Control Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014 of
the Company and our report dated February 27, 2015 expressed an unqualified opinion on those financial
statements.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
February 27, 2015
Item 9B. Other
Information.
None.
59
Table of Contents
PART III
Item 10. Directors,
Executive Officers and Corporate Governance.
Information required by
this item regarding directors and director nominees, executive officers, the
board of directors and its committees, and certain corporate governance matters
is incorporated by reference to the information set forth under the captions
Proposal No. 1Election of Directors, Information Regarding Board of
Directors and Corporate Governance and Executive Officers in the definitive
proxy statement for our 2015 Annual Meeting of Stockholders, or the 2015 Proxy
Statement. Information required by this item regarding compliance with Section
16(a) of the Exchange Act is incorporated by reference to the information set
forth under the caption Section 16(a) Beneficial Ownership Reporting
Compliance in our 2015 Proxy Statement.
We have adopted a written
code of business conduct and ethics that applies to all of our employees,
officers and directors, including our principal executive officer, principal
financial officer and principal accounting officer. The code of business conduct
and ethics is available on our corporate website at www.yelp-ir.com under the section entitled “Corporate Governance”. If we
make any substantive amendments to our code of business conduct and ethics or
grant any of our directors or executive officers any waiver, including any
implicit waiver, from a provision of our code of business conduct and ethics, we
will disclose the nature of the amendment or waiver on our website or in a
Current Report on Form 8-K.
Item 11. Executive
Compensation.
Information required by
this item regarding executive compensation is incorporated by reference to the
information set forth under the captions Executive Compensation, Director
Compensation and Information Regarding the Board of Directors and Corporate
Governance in our 2015 Proxy Statement.
Item
12. |
Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters. |
Information required by
this item regarding security ownership of certain beneficial owners and
management is incorporated by reference to the information set forth under the
caption Security Ownership of Certain Beneficial Owners and Management in our
2015 Proxy Statement. Information required by this item regarding securities
authorized for issuance under our equity compensation plans is incorporated by
reference to the information set forth under the caption Equity Compensation
Plan Information in our 2015 Proxy Statement.
Item 13. Certain
Relationships and Related Transactions, and Director Independence.
Information required by
this item regarding certain relationships and related transactions is
incorporated by reference to the information set forth under the captions
Transactions with Related Persons in our 2015 Proxy Statement. Information
required by this item regarding director independence is incorporated by
reference to the information set forth under the caption Information Regarding
the Board of Directors and Corporate Governance in our 2015 Proxy Statement.
Item 14. Principal
Accounting Fees and Services.
Information required by
this item regarding principal accounting fees and services is incorporated by
reference to the information set forth under the caption Proposal No.
2Ratification of Selection of Independent Registered Public Accounting Firm in
our 2015 Proxy Statement.
60
Table of
Contents
PART IV
Item 15. Exhibits,
Financial Statement Schedules.
(a) The following documents
are filed as part of this Annual Report:
61
Table of
Contents
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 27, 2015
|
YELP
INC. |
|
|
|
/s/ Rob
Krolik |
|
|
Rob
Krolik |
|
Chief Financial Officer |
|
(Principal Financial
and Accounting Officer) |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose signature appears below constitutes and
appoints Rob Krolik and Laurence Wilson, and each of them, as his or her true
and lawful attorneys-in-fact and agents, with full power of substitution for him
or her, and in his or her name in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done therewith, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, and either
of them, his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Jeremy Stoppelman |
|
Chief Executive Officer and Director |
|
February 27, 2015 |
JEREMY STOPPELMAN |
|
(Principal Executive
Officer) |
|
|
|
/s/ Geoff Donaker |
|
Chief Operating Officer and Director |
|
February 27, 2015 |
GEOFF DONAKER |
|
|
|
|
|
|
|
|
|
/s/ Rob Krolik |
|
Chief Financial Officer |
|
February 27, 2015 |
ROB KROLIK |
|
(Principal Financial
and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Max Levchin |
|
Chairman |
|
February 27, 2015 |
MAX LEVCHIN |
|
|
|
|
|
/s/ Fred Anderson |
|
Director |
|
February 27, 2015 |
FRED ANDERSON |
|
|
|
|
|
/s/ Peter Fenton |
|
Director |
|
February 27, 2015 |
PETER FENTON |
|
|
|
|
|
/s/ Robert Gibbs |
|
Director |
|
February 27, 2015 |
ROBERT GIBBS |
|
|
|
|
|
/s/ Diane Irvine |
|
Director |
|
February 27, 2015 |
DIANE IRVINE |
|
|
|
|
|
/s/ Jeremy Levine |
|
Director |
|
February 27, 2015 |
JEREMY LEVINE |
|
|
|
|
|
/s/ Mariam Naficy |
|
Director |
|
February 27, 2015 |
MARIAM NAFICY |
|
|
|
|
62
Table of
Contents
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Yelp Inc.
San Francisco, California
We have audited the accompanying consolidated balance sheets of Yelp Inc. and subsidiaries (the
Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations,
comprehensive income (loss), redeemable convertible preferred stock and stockholders equity (deficit), and cash
flows for each of the three years in the period ended December 31, 2014. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the consolidated financial
position of Yelp Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Company's internal control over financial reporting as of December 31, 2014, based on
the criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 27, 2015 expressed an unqualified
opinion on the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
February 27, 2015
F-1
Table of
Contents
Yelp Inc.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except share data)
|
December
31, |
|
|
2014 |
|
|
2013 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
247,312 |
|
|
$
|
389,764 |
|
Short-term
marketable securities |
|
118,498 |
|
|
|
|
|
Accounts
receivable (net of allowance for doubtful accounts of $1,627 and $810 at
December 31, |
|
|
|
|
|
|
|
2014 and 2013, respectively) |
|
35,593 |
|
|
|
21,317 |
|
Prepaid
expenses and other current assets |
|
19,355 |
|
|
|
5,752 |
|
Total current assets |
|
420,758 |
|
|
|
416,833 |
|
|
Long-term marketable securities |
|
38,612 |
|
|
|
|
|
Property, equipment and software, net |
|
62,761 |
|
|
|
30,666 |
|
Goodwill |
|
67,307 |
|
|
|
59,690 |
|
Intangibles, net |
|
5,786 |
|
|
|
5,235 |
|
Restricted cash |
|
17,943 |
|
|
|
3,247 |
|
Other assets |
|
16,483 |
|
|
|
306 |
|
Total Assets |
$ |
629,650 |
|
|
$ |
515,977 |
|
|
Liabilities and
Stockholders Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
$ |
1,398 |
|
|
$ |
3,364 |
|
Accrued
liabilities |
|
29,581 |
|
|
|
19,004 |
|
Deferred
revenue |
|
2,994 |
|
|
|
2,621 |
|
Total current liabilities |
|
33,973 |
|
|
|
24,989 |
|
Long-term liabilities |
|
7,527 |
|
|
|
4,505 |
|
Total liabilities |
|
41,500 |
|
|
|
29,494 |
|
|
Commitments and contingencies (Note
11) |
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
|
|
|
Common
stock, $0.000001 par value500,000,000 shares authorized; 72,920,582 and
70,874,493 |
|
|
|
|
|
|
|
shares issued and outstanding at December 31, 2014 and 2013,
respectively |
|
|
|
|
|
|
|
Additional
paid-in capital |
|
627,742 |
|
|
|
553,753 |
|
Accumulated other comprehensive income |
|
(5,609 |
) |
|
|
3,186 |
|
Accumulated deficit |
|
(33,983 |
) |
|
|
(70,456 |
) |
|
Total stockholders
equity |
|
588,150 |
|
|
|
486,483 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity |
$ |
629,650 |
|
|
$ |
515,977 |
|
See notes to consolidated
financial statements.
F-2
Table of
Contents
Yelp Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
|
2012 |
|
Net
revenue |
$ |
377,536 |
|
$ |
232,988 |
|
|
$ |
137,567 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation and amortization shown
separately below) |
|
24,382 |
|
|
16,561 |
|
|
|
9,928 |
|
Sales and marketing |
|
201,050 |
|
|
131,970 |
|
|
|
85,915 |
|
Product development |
|
65,181 |
|
|
38,243 |
|
|
|
20,473 |
|
General and administrative |
|
58,274 |
|
|
42,907 |
|
|
|
31,531 |
|
Depreciation and amortization |
|
17,590 |
|
|
11,455 |
|
|
|
7,223 |
|
Restructuring and integration |
|
|
|
|
675 |
|
|
|
1,262 |
|
Total costs and expenses |
|
366,477 |
|
|
241,811 |
|
|
|
156,332 |
|
|
Income (Loss) from operations |
|
11,059 |
|
|
(8,823 |
) |
|
|
(18,765 |
) |
Other income (expense), net |
|
221 |
|
|
(407 |
) |
|
|
(226 |
) |
Income (Loss) before income taxes |
|
11,280 |
|
|
(9,230 |
) |
|
|
(18,991 |
) |
Benefit (Provision) for income taxes |
|
25,193 |
|
|
(838 |
) |
|
|
(122 |
) |
Net
income (loss) |
|
36,473 |
|
|
(10,068 |
) |
|
|
(19,113 |
) |
Accretion of redeemable convertible preferred
stock |
|
|
|
|
|
|
|
|
(32 |
) |
Net
income (loss) attributable to common stockholders (Class A and
B) |
$ |
36,473 |
|
$ |
(10,068 |
) |
|
$ |
(19,145 |
) |
|
Net
income (loss) per share attributable to common stockholders (Class A and
B) |
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.51 |
|
$ |
(0.15 |
) |
|
$ |
(0.35 |
) |
Diluted |
$ |
0.48 |
|
$ |
(0.15 |
) |
|
$ |
(0.35 |
) |
|
Weighted-average shares used to compute net
income (loss) per share attributable to |
|
|
|
|
|
|
|
|
|
|
common
stockholders (Class A and B) |
|
|
|
|
|
|
|
|
|
|
Basic |
|
71,936 |
|
|
65,665 |
|
|
|
54,149 |
|
Diluted |
|
76,712 |
|
|
65,665 |
|
|
|
54,149 |
|
See notes to consolidated
financial statements.
F-3
Table of
Contents
Yelp Inc.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
Year Ended December
31, |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Net
income (loss) |
$ |
36,473 |
|
|
$ |
(10,068 |
) |
|
$
|
(19,113 |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
|
(8,795 |
) |
|
|
2,381 |
|
|
|
534 |
|
Other comprehensive income (loss) |
|
(8,795 |
) |
|
|
2,381 |
|
|
|
534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
$ |
27,678 |
|
|
$ |
(7,687 |
) |
|
$ |
(18,579 |
) |
See notes to consolidated
financial statements.
F-4
Table of
Contents
Yelp Inc.
CONSOLIDATED STATEMENTS OF
REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY
(DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND
2014
(In thousands, except shares)
|
|
Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
Convertible |
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
Preferred
Stock |
|
|
Common
Stock |
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Stockholders |
|
|
|
Shares |
|
Amount |
|
|
Shares |
|
|
Amount |
|
Capital |
|
|
Income
(Loss) |
|
|
Deficit |
|
|
Equity
(Deficit) |
|
BalanceDecember 31,
2011 |
|
143,267,115 |
|
$ |
55,435 |
|
|
|
16,956,409 |
|
|
$ |
|
|
$ |
16,625 |
|
|
$ |
271 |
|
|
$ |
(41,243 |
) |
|
$ |
(24,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercises of employee
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options |
|
|
|
|
|
|
|
|
1,606,612 |
|
|
|
|
|
|
3,736 |
|
|
|
|
|
|
|
|
|
|
|
3,736 |
|
Issuance of restricted stock |
|
|
|
|
|
|
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,147 |
|
|
|
|
|
|
|
|
|
|
|
15,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of redeemable
convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred stock |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32 |
) |
|
|
(32 |
) |
Conversion of preferred stock to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock in connection
with |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
initial public
offering |
|
(143,267,115 |
) |
|
(55,467 |
) |
|
|
35,816,772 |
|
|
|
|
|
|
55,466 |
|
|
|
|
|
|
|
|
|
|
|
55,466 |
|
Issuance of common stock in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
connection with initial public |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
offering, net of offering costs. |
|
|
|
|
|
|
|
|
8,172,500 |
|
|
|
|
|
|
111,350 |
|
|
|
|
|
|
|
|
|
|
|
111,350 |
|
Repurchase of common stock from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employees |
|
|
|
|
|
|
|
|
(17,193 |
) |
|
|
|
|
|
(333 |
) |
|
|
|
|
|
|
|
|
|
|
(333 |
) |
Issuance of common stock in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
connection with acquisition of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qype
GmbH |
|
|
|
|
|
|
|
|
968,919 |
|
|
|
|
|
|
23,254 |
|
|
|
|
|
|
|
|
|
|
|
23,254 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
534 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,113 |
) |
|
|
(19,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceDecember 31, 2012 |
|
|
|
|
|
|
|
|
63,505,269 |
|
|
|
|
|
|
225,245 |
|
|
|
805 |
|
|
|
(60,388 |
) |
|
|
165,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercises of employee stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options |
|
|
|
|
|
|
|
|
2,648,121 |
|
|
|
|
|
|
13,554 |
|
|
|
|
|
|
|
|
|
|
|
13,554 |
|
Issuance of common stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
release of restricted stock
units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(RSUs) |
|
|
|
|
|
|
|
|
98,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employee stock purchase plan |
|
|
|
|
|
|
|
|
81,900 |
|
|
|
|
|
|
1,960 |
|
|
|
|
|
|
|
|
|
|
|
1,960 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,170 |
|
|
|
|
|
|
|
|
|
|
|
27,170 |
|
Issuance of common stock in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
connection with follow-on public |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
offering, net of offering costs |
|
|
|
|
|
|
|
|
4,312,500 |
|
|
|
|
|
|
276,527 |
|
|
|
|
|
|
|
|
|
|
|
276,527 |
|
Repurchase of common stock from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employees |
|
|
|
|
|
|
|
|
(15,850 |
) |
|
|
|
|
|
(674 |
) |
|
|
|
|
|
|
|
|
|
|
(674 |
) |
Issuance of common stock in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
connection with acquisition of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SeatMe,
Inc. |
|
|
|
|
|
|
|
|
244,520 |
|
|
|
|
|
|
9,666 |
|
|
|
|
|
|
|
|
|
|
|
9,666 |
|
Excess tax benefit from share-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
award activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305 |
|
|
|
|
|
|
|
|
|
|
|
305 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,381 |
|
|
|
|
|
|
|
2,381 |
|
Net
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,068 |
) |
|
|
(10,068 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceDecember 31,
2013 |
|
|
|
|
|
|
|
|
70,874,493 |
|
|
|
|
|
$ |
553,753 |
|
|
|
3,186 |
|
|
|
(70,456 |
) |
|
|
486,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercises of employee
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options |
|
|
|
|
|
|
|
|
1,679,654 |
|
|
|
|
|
|
20,164 |
|
|
|
|
|
|
|
|
|
|
|
20,164 |
|
Issuance of common stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
release
of restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(RSUs) |
|
|
|
|
|
|
|
|
90,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employee stock purchase
plan |
|
|
|
|
|
|
|
|
279,538 |
|
|
|
|
|
|
8,869 |
|
|
|
|
|
|
|
|
|
|
|
8,869 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,520 |
|
|
|
|
|
|
|
|
|
|
|
44,520 |
|
Repurchase of common stock from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employees |
|
|
|
|
|
|
|
|
(18,628 |
) |
|
|
|
|
|
(1,318 |
) |
|
|
|
|
|
|
|
|
|
|
(1,318 |
) |
Issuance of common stock in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
connection with acquisition of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SeatMe,
Inc. |
|
|
|
|
|
|
|
|
14,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from share-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
award activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,754 |
|
|
|
|
|
|
|
|
|
|
|
1,754 |
|
Foreign currency
translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,795 |
) |
|
|
|
|
|
|
(8,795 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,473 |
|
|
|
36,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceDecember 31,
2014 |
|
|
|
|
|
|
|
$ |
72,920,582 |
|
|
$ |
|
|
$ |
627,742 |
|
|
$ |
(5,609 |
) |
|
$ |
(33,983 |
) |
|
$ |
588,150 |
|
See notes to consolidated
financial statements.
F-5
Table of
Contents
Yelp Inc.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
|
Year Ended December
31, |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
36,473 |
|
|
$ |
(10,068 |
) |
|
$ |
(19,113 |
) |
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
17,590 |
|
|
|
11,455 |
|
|
|
7,223 |
|
Provision for doubtful accounts and sales returns |
|
7,238 |
|
|
|
3,304 |
|
|
|
1,913 |
|
Stock-based compensation |
|
42,273 |
|
|
|
26,677 |
|
|
|
14,878 |
|
Release of valuation allowance |
|
(28,197 |
) |
|
|
|
|
|
|
|
|
(Gain) loss on disposal of assets and web-site development costs |
|
4 |
|
|
|
159 |
|
|
|
64 |
|
Premium amortization, net, on securities held-to-maturity |
|
349 |
|
|
|
|
|
|
|
|
|
Excess tax benefit from share-based award activity |
|
(1,834 |
) |
|
|
(353 |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
(21,291 |
) |
|
|
(12,843 |
) |
|
|
(4,118 |
) |
Prepaid expenses and other assets |
|
(4,011 |
) |
|
|
(1,572 |
) |
|
|
(2,552 |
) |
Accounts payable, accrued expenses and other liabilities |
|
8,927 |
|
|
|
4,971 |
|
|
|
2,049 |
|
Deferred revenue |
|
411 |
|
|
|
(298 |
) |
|
|
(443 |
) |
Net cash provided by (used in) operating activities |
|
57,932 |
|
|
|
21,432 |
|
|
|
(99 |
) |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash
received |
|
(14,340 |
) |
|
|
(2,057 |
) |
|
|
(24,125 |
) |
Purchases of property, equipment, and software |
|
(29,054 |
) |
|
|
(16,243 |
) |
|
|
(7,524 |
) |
Capitalized website and
software development costs |
|
(11,349 |
) |
|
|
(4,856 |
) |
|
|
(2,930 |
) |
Change
in restricted cash |
|
(14,764 |
) |
|
|
3,176 |
|
|
|
(6,013 |
) |
Purchases of
intangibles |
|
(1,724 |
) |
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
14 |
|
|
|
|
|
|
|
|
|
Goodwill measurement period
adjustment |
|
|
|
|
|
1,153 |
|
|
|
|
|
Purchases of marketable securities |
|
(210,459 |
) |
|
|
|
|
|
|
|
|
Maturities of marketable
securities |
|
53,002 |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(228,674 |
) |
|
|
(18,827 |
) |
|
|
(40,592 |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from initial public offering, net of underwriter fees |
|
|
|
|
|
|
|
|
|
114,006 |
|
Proceeds from follow-on
offering, net of offering costs |
|
|
|
|
|
276,527 |
|
|
|
|
|
Payments for deferred offering costs |
|
|
|
|
|
|
|
|
|
(2,200 |
) |
Proceeds from issuance of
common stock from share-based awards |
|
20,164 |
|
|
|
13,554 |
|
|
|
3,675 |
|
Proceeds from issuance of common stock for Employee Stock Purchase
Plan |
|
8,869 |
|
|
|
1,960 |
|
|
|
|
|
Repurchase of common
stock |
|
(1,318 |
) |
|
|
(674 |
) |
|
|
|
|
Excess
tax benefit from share-based award activity |
|
1,834 |
|
|
|
353 |
|
|
|
|
|
Repayment of acquired
debt |
|
|
|
|
|
|
|
|
|
(1,308 |
) |
Net cash provided by financing activities |
|
29,549 |
|
|
|
291,720 |
|
|
|
114,173 |
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS |
|
(1,259 |
) |
|
|
315 |
|
|
|
(94 |
) |
CHANGE IN CASH AND CASH
EQUIVALENTS |
|
(142,452 |
) |
|
|
294,640 |
|
|
|
73,388 |
|
CASH
AND CASH EQUIVALENTSBeginning of
period |
|
389,764 |
|
|
|
95,124 |
|
|
|
21,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTSEnd of period |
$ |
247,312 |
|
|
$ |
389,764 |
|
|
$ |
95,124 |
|
|
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes |
$ |
1,972 |
|
|
$ |
291 |
|
|
$ |
110 |
|
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment recorded in accounts payable and
accruals |
$ |
6,374 |
|
|
$ |
2,685 |
|
|
$ |
549 |
|
|
Capitalized website and
software development costs recorded in accounts payable and
accruals |
$ |
169 |
|
|
$ |
17 |
|
|
$ |
4 |
|
|
Contingent consideration related to acquisitions |
$ |
835 |
|
|
$ |
|
|
|
$ |
|
|
Accretion of redeemable
convertible preferred stock |
$ |
|
|
|
$ |
|
|
|
$ |
32 |
|
Vesting
of early exercised options |
$ |
|
|
|
$ |
|
|
|
$ |
61 |
|
See notes to consolidated
financial statements.
F-6
Table of
Contents
Yelp Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012
1. ORGANIZATION AND
DESCRIPTION OF BUSINESS
Yelp Inc. was incorporated
in Delaware on September 3, 2004. Except where specifically noted or the context
otherwise requires, the use of terms
such as the Company and Yelp in these Notes to Consolidated Financial
Statements refers to Yelp Inc. and
its subsidiaries.
Yelp connects people with
great local businesses by bringing
word of mouth online and providing a platform for businesses and consumers to engage and transact. Yelps platform is
transforming the way people discover local businesses; every day, millions of consumers visit its website or use its
mobile app to find great local businesses to meet their everyday needs.
Businesses of all sizes use the Yelp platform to engage with consumers at the
critical moment when they are deciding where to spend their money.
The Company consists of Yelp Inc. and
18 wholly-owned entities. Yelp UK Ltd was incorporated on December 1, 2008, Yelp Canada Inc. was incorporated on February
24, 2009, Yelp Ireland Limited was incorporated on May 31, 2010, Yelp Deutschland GmbH was incorporated on June 7, 2010,
Yelp Ireland Holding Company Limited was incorporated on June 16, 2010, Yelp France SAS was incorporated on July 8, 2010,
Yelp Italia S.r.l. was incorporated on June 27, 2011, Yelp Australia Pty. Ltd was incorporated on August 9, 2011, Yelp
Spain, S.L. was incorporated on May 4, 2012, Yelp Singapore PTE Ltd was incorporated on June 15, 2012, Yelp Brazil
Serviços de Marketing Ltda. was incorporated on May 29, 2013, and Yelp Japan, G.K. was incorporated on September 20, 2013. Qype GmbH, Qype Ltd., Qype
SARL and Qype SL (collectively, Qype) were acquired on October 23,
2012, SeatMe, Inc. was acquired on July 24, 2013 and Cityvox SAS (Cityvox) was acquired on October 27, 2014 (see Note 5). The financial results of these subsidiaries are included within the
consolidated financial statements of the Company presented herein.
Basis of
PresentationThe consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP).
All intercompany balances and transactions have been eliminated in consolidation.
Certain Significant
Risks and UncertaintiesThe Company operates in a
dynamic industry and, accordingly, can be affected by a variety of
factors. For example, the Companys
management believes that changes in any of the following areas could have a significant negative
effect on the Company in terms of its future financial position, results of
operations or cash flows: rates of revenue growth; traffic to the Companys websites and mobile applications and the number of reviews
and advertisers they attract; reliance on search engines and the placement and
prominence in results rankings; the quality and reliability of reviews; scaling
and adaptation of existing technology
and network infrastructure; management of the Companys growth; new markets and
international expansion; protection of the Companys brand, reputation and
intellectual property; competition in the Companys market; qualified employees and key personnel;
intellectual property infringement and other claims; and changes in government regulation affecting the Companys
business, among other things.
2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Use of
EstimatesThe preparation of the Companys consolidated financial statements in
conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of income and
expenses during the reporting period. These estimates are based on information
available as of the date of the consolidated financial statements; therefore,
actual results could differ from managements estimates.
F-7
Table of
Contents
Foreign Currency
TranslationThe consolidated
financial statements of the Companys foreign subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of foreign subsidiaries are
translated at exchange rates in effect as of the balance sheet date. Revenues
and expenses are translated at average exchanges rates in effect during the
year. Translation adjustments are recorded within accumulated other
comprehensive loss, a separate component of stockholders equity (deficit).
Cash and Cash
EquivalentsThe Company considers all highly liquid
investments, such as treasury bills, commercial paper, certificates of deposit
and money market instruments with maturities of three months or less at the time
of acquisition to be cash equivalents. Cash and cash equivalents primarily
consist of amounts held in interest-bearing money market funds that were readily
convertible to cash. The fair value of cash and cash equivalents approximates
their carrying value.
Marketable
SecuritiesThe Company determines the classification of its
marketable securities at the time of purchase and re-evaluates these
determinations at each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost and are periodically assessed for other-than-temporary impairment.
Amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity, and is included in interest income.
Held-to-maturity securities with less than one year to maturity are included in
short-term marketable securities. All other held-to-maturity securities are
classified as long-term.
Concentrations of Credit
RiskFinancial instruments that potentially subject the
Company to concentration of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company places its cash and cash
equivalents with major financial institutions, which management assesses to be
of high credit quality, in order to limit the exposure of each
investment.
Credit risk with respect to
accounts receivable is dispersed due to the large number of customers. In
addition, the Companys credit risk
is mitigated by the relatively short collection period. Collateral is not
required for accounts receivable. The
Company maintains an allowance for doubtful accounts receivable balances. The
allowance is based upon historical loss patterns, the number of days that
billings are past due and an evaluation of the potential risk of loss associated
with delinquent accounts. When new information becomes available to indicate
that the estimate provided as the allowance was incorrect, an adjustment, which
is considered a change in estimate, is made. The fair value of accounts
receivable approximates their carrying value.
As of December 31, 2014 and
2013, there were no customers that accounted for more than 10% of total accounts
receivable.
The following table
presents the changes in the allowance for doubtful accounts (in
thousands):
|
Year Ended December
31, |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
Allowance for doubtful accounts: |
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
$ |
810 |
|
|
$ |
384 |
|
|
$ |
210 |
|
Add: bad
debt expense |
|
6,369 |
|
|
|
3,210 |
|
|
|
1,913 |
|
Less:
write-offs, net of recoveries |
|
(5,552 |
) |
|
|
(2,784 |
) |
|
|
(1,739 |
) |
Balance, end of period |
$ |
1,627 |
|
|
$ |
810 |
|
|
$ |
384 |
|
Property, Equipment and
SoftwareProperty, equipment and software are stated at
cost less accumulated depreciation and amortization. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
which are approximately three to five years. Leasehold improvements are
amortized over the lease term.
Website and Internal-Use
Software Development CostsCosts related to website
and internal-use software are
primarily related to the Companys website, including support systems. The
Company capitalizes its 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. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which
approximates three years. Costs incurred prior to meeting these criteria, together with costs incurred for training and
maintenance, are expensed as incurred. 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.
F-8
Table of Contents
The Company capitalized
$13.9 million, $5.4 million and $3.2 million in website and internal-use
software costs during the years ended December 31, 2014, 2013 and 2012,
respectively, which are included in property, equipment and software, net on the
consolidated balance sheets. Amortization expense related to website and
internal-use software was $4.6 million, $2.6 million and $1.9 million for the
years ended December 31, 2014, 2013 and 2012, respectively.
The Company wrote off an
immaterial amount, $0.1 million and $0.2 million of website and internal-use
software costs during the years ended December 31, 2014, 2013 and 2012,
respectively. The retirements were related to obsolete projects no longer
supported by the Company. The loss on disposition of the projects has been
included in depreciation and amortization expense in the Companys consolidated
statements of operations.
Business
CombinationsThe Company accounts
for acquisitions of entities that include inputs and processes and have the
ability to create outputs as business combinations. The Company allocates the
purchase price of the acquisition to the tangible assets, liabilities and
identifiable intangible assets acquired based on their estimated fair values.
The excess of the purchase price over those fair values is recorded as goodwill.
Acquisition-related expenses and integration costs are expensed as incurred.
During the measurement period, the Company records adjustments to the assets
acquired and liabilities assumed with the corresponding offset to goodwill.
After the measurement period, which could be up to one year after the
transaction date, subsequent adjustments are recorded to the Companys
consolidated statements of operations.
GoodwillGoodwill
represents the excess of the purchase price in a business combination over the
fair value of net tangible and intangible assets acquired. The carrying amount
of goodwill is reviewed at least annually or more frequently if events or
changes in circumstances indicate that the carrying value of goodwill may not be
recoverable. We have the option to first assess qualitative factors to determine
whether it is more likely than not that the fair value of our single reporting
operating unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the two-step goodwill impairment under the
authoritative guidance issued by the Financial Accounting Standards Board
(FASB). If we determine that it is more likely than not that its fair value is
less than its carrying amount, or opt to not perform a qualitative assessment,
then the two-step goodwill impairment test will be performed. The first step,
identifying a potential impairment, compares the fair value of the reporting
unit with its carrying amount. If the carrying amount exceeds its fair value,
the second step will be performed; otherwise, no further step is required. The
second step, measuring the impairment loss, compares the implied fair value of
the goodwill with the carrying amount of the goodwill. Any excess of the
goodwill carrying amount over the applied fair value is recognized as an
impairment loss, and the carrying value of goodwill is written down to fair
value. No impairment charges have been recorded to date.
Intangible
AssetsIntangible assets include
acquired intangible assets identified through business combinations, which are
carried at fair value less accumulated amortization, and purchased intangible
assets, which are carried at cost less accumulated amortization. Amortization is
recorded over the estimated useful lives of the assets, generally 24 to 84
months. The Company reviews amortizable intangible assets to be held and used
for impairment whenever events or changes in circumstance indicate that the
carrying value of the assets may not be recoverable. Determination of
recoverability is based on the lowest level of identifiable estimated
undiscounted cash flows resulting from the use of the asset and its eventual
disposition. Measurement of any impairment loss is based on the excess of the
carrying value of the asset over its fair value. No impairment charges have been
recorded to date.
Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed ofThe Company evaluates its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
F-9
Table of Contents
Revenue
RecognitionThe Company generates
revenue from local advertising, brand advertising and other services. The
Company recognizes revenue when all of the following conditions are met: there
is persuasive evidence of an arrangement, service has been provided to the
customer, collection of the fees is reasonably assured and the amount of fees to
be paid by the customer are fixed or determinable. Payments received in advance
of services being rendered are recorded as deferred revenue and recognized over
the requisite service period.
Local
AdvertisingLocal advertising
revenue is generated primarily through fixed monthly fee advertising plans with
local businesses for advertising placements on the Companys website and mobile
app. Revenue is recognized ratably over the service period, net of customer
discounts. The arrangements are evidenced by written and/or electronic
acceptance of the Companys agreement that stipulates the volume of advertising
to be delivered and the pricing.
Brand
AdvertisingThe Company generates
brand advertising revenue through the sale of display advertisements (both
graphic and text) on its website, including advertisements from leading national
brands in the food and restaurant, automobile, financial services, logistics,
consumer goods and health and fitness industries. The Company recognizes revenue
from the sale of impression-based advertisements on its online network in the
period in which the advertisements (impressions) are delivered, net of
customer discounts. The Company also has brand revenue from fixed-price brand
sponsorships that are recognized ratably over the service period. The
arrangements are evidenced by insertion orders or contracts that stipulate the
types of advertising to be delivered and the pricing.
Other ServicesOther service revenue includes the sale of vouchers through the Companys Yelp Deals and Gift
Certificates, revenue-sharing partner arrangements, partner reseller arrangements and the monetization of remnant
advertising inventory through third-party ad networks. Yelp Deals allow merchants to promote themselves and offer
discounted goods and services on a real-time basis to consumers directly on the Companys website and mobile app
and, until the quarter ended December 31, 2011, via email. The Company earns a fee on Yelp Deals for acting as an
agent in these transactions, which are recorded on a net basis and included in revenue upon sale of the deal. The
Company records a sales allowance for potential Yelp Deal refunds based on the Companys estimate of future
refunds. Gift Certificates allow merchants to sell full-priced gift certificates directly to customers through their
business profile page. The Company earns a fee based on the amount of the Gift Certificate sold, which it records on
a net basis and include in revenue upon a consumers purchase of the Gift Certificate. Revenue-sharing partner
arrangements provide consumers with the ability to complete food delivery transactions and make online
reservations through third parties directly on Yelp. The Company also generates revenue through fixed-fee reseller
agreements that allow partners to sell Yelp Branded Profiles to their clients and transaction-based arrangements
allowing third-party data providers to update business listing information on behalf of businesses.
Multiple-Element
Arrangements. The Company enters
into arrangements with customers to sell advertising packages that include
different media placements or ad services that are delivered at the same time,
or within close proximity of one another.
The Company allocates
arrangement consideration in multiple-deliverable revenue arrangements at the
inception of an arrangement to all deliverables or those packages in which all
components of the package are delivered at the same time, based on the relative
selling price method in accordance with the selling price hierarchy, which
includes: (1) vendor-specific objective evidence (VSOE) if available; (2)
third-party evidence (TPE) if VSOE is not available; and (3) best estimate of
selling price (BESP) if neither VSOE nor TPE is available.
VSOE. The Company determines VSOE based on its
historical pricing and discounting practices for the specific product or service
when sold separately. In determining VSOE, the Company requires that a
substantial majority of the standalone selling prices for these services fall
within a reasonably narrow pricing range. The Company has not historically sold
a large volume of transactions on a standalone basis. As a result, the Company
has not been able to establish VSOE for any of its advertising
products.
F-10
Table of Contents
TPE. When VSOE cannot be established for deliverables
in multiple element arrangements, the Company applies judgment with respect to
whether it can establish a selling price based on TPE. TPE is determined based
on competitor prices for
similar deliverables when sold separately. Generally, the Companys go-to-market
strategy differs from that of its peers and its offerings contain a significant
level of differentiation such that the comparable pricing of services cannot be
obtained. Furthermore, the Company is unable to reliably determine what similar
competitor services selling prices are on a standalone basis. As a result, the
Company has not been able to establish selling price based on TPE.
BESP. When it is unable to establish selling price
using VSOE or TPE, the Company uses BESP in its allocation of arrangement
consideration. The objective of BESP is to determine the price at which the
Company would transact a sale if the service were sold on a standalone basis.
BESP is generally used to allocate the selling price to deliverables in the
Companys multiple element arrangements. The Company determines BESP for
deliverables by considering multiple factors including, but not limited to,
prices it charges for similar offerings, market conditions, competitive
landscape and pricing practices. The Company limits the amount of allocable
arrangement consideration to amounts that are fixed or determinable and that are
not contingent on future performance or future deliverables. The Company will
regularly review BESP. Changes in assumptions or judgments or changes to the
elements in the arrangement could cause a material increase or decrease in the
amount of revenue that the Company reports in a particular period.
The Company recognizes the
relative fair value of the media placements or ad services as they are delivered
assuming all other revenue recognition criteria are met.
Cost of
RevenueThe Companys cost of
revenue primarily consists of credit card processing fees, web hosting, Internet
service costs and salaries, benefits and stock-based compensation for its
infrastructure teams related to operating the Companys website as well as
creative design for brand advertising and video production expenses.
Stock-Based
CompensationWe account for
share-based employee compensation plans under the fair value recognition and
measurement provisions in accordance with applicable accounting standards, which
require all share-based payments to employees, including grants of stock
options, restricted stock awards (RSAs), restricted stock units (RSUs) and
our 2012 Employee Stock Purchase Plan (ESPP) to be measured based on the
grant-date fair value of the awards.
Share-based compensation
expense is recorded net of estimated forfeitures in the Companys consolidated
statements of income and, accordingly, is recorded for only those share-based
awards that the Company expects to vest. The Company estimates the forfeiture
rate based on historical forfeitures of equity awards and adjusts the rate to
reflect changes in facts and circumstances, if any. The Company will revise its
estimated forfeiture rate if actual forfeitures differ from its initial
estimates.
Advertising
ExpensesAdvertising expenses are
expensed as incurred. Total advertising expenses incurred were $8.1 million,
$1.3 million and $0.7 million for the years ended December 31, 2014, 2013 and
2012, respectively.
Comprehensive income
(loss)The Company reports by
major components and, as a single total, the change in its net assets during the
period from non-owner sources. Comprehensive income (loss) consists of net
income (loss) and accumulated other comprehensive income (loss), which includes
certain changes in equity that are excluded from net income (loss).
Specifically, it includes foreign currency translation adjustments.
Income
TaxesThe Company records 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 the Companys financial statements or tax
returns. In estimating future tax consequences, generally all expected future
events other than enactments or changes in the tax law or rates are considered.
Valuation allowances are provided to reduce deferred tax assets to the amount
that is more likely than not to be realized.
F-11
Table of Contents
The Company operates in
various tax jurisdictions and is subject to audit by various tax authorities.
The Company provides 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.
The Company recognizes the
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.
Stock
SplitOn January 25, 2012, the
Companys board of directors approved a 1-for-4 reverse stock split of the
Companys common stock. The reverse stock split became effective on February 2,
2012. Upon the effectiveness of the reverse stock split, (i) every four shares
of outstanding common stock was decreased to one share of common stock, (ii) the
number of shares of common stock into which each outstanding warrant or option
to purchase common stock is exercisable was proportionally decreased on a
1-for-4 basis, (iii) the exercise price of each outstanding warrant or option to
purchase common stock was proportionately increased on a 1-for-4 basis and (iv)
the conversion ratio for each share of preferred stock outstanding was
proportionately reduced on a 1-for-4 basis. All of the share numbers, share
prices and exercise prices have been adjusted within these financial statements,
on a retroactive basis, to reflect this 1-for-4 reverse stock split.
Employee Benefit
PlanThe Company sponsors a
qualified 401(k) defined contribution plan covering eligible employees.
Participants may contribute a portion of their annual compensation limited to a
maximum annual amount set by the Internal Revenue Service. Employer
contributions under this plan were $1.9 million, zero and zero for the years
ended December 31, 2014, 2013 and 2012, respectively.
Recent Accounting
Pronouncements Not Yet EffectiveIn May 2014, FASB issued Accounting Standards Update 2014-09,
Revenue from Contracts with
Customers (ASU 2014-09), which
amended the existing accounting standards for revenue recognition. ASU 2014-09
establishes principles for recognizing revenue upon the transfer of promised
goods or services to customers, in an amount that reflects the consideration
expected to be received in exchange for those goods or services. The updated
standard will replace most existing GAAP revenue recognition guidance when it
becomes effective, and permits the use of either the retrospective or cumulative
effect transition method. Early adoption of this accounting standard is not
permitted. ASU 2014-09 will become effective for the Company in the first
quarter of the year ending December 31, 2017. The Company has not yet selected a
transition method and is currently evaluating the effect that ASU 2014-09 will
have on its consolidated financial statements and related
disclosures.
In August 2014, FASB issued
Accounting Standards Update 2014-15, Presentation of Financial Statements Going Concern (Subtopic
205-40). The new guidance
addresses managements responsibility to evaluate whether there is substantial
doubt about an entitys ability to continue as a going concern and to provide
related footnote disclosures. Managements evaluation should be based on
relevant conditions and events that are known and reasonably knowable at the
date that the financial statements are issued. The standard will be effective
for the first interim period within annual reporting periods beginning after
December 15, 2016. Early adoption is permitted. The Company does not expect to
early adopt this guidance and does not believe that the adoption of this
guidance will have a material impact on its consolidated financial statements.
3. FAIR VALUE OF
FINANCIAL INSTRUMENTS
The Companys investments
in money market accounts are recorded at fair value in the consolidated
financial statements. All other financial instruments are classified as
held-to-maturity investments and accordingly are recorded at amortized cost;
however, the Company is required to determine the fair value of these
investments on a recurring basis to identify any potential impairment. The
accounting guidance for fair value measurements prioritizes the inputs used in
measuring fair value in the following hierarchy:
Level 1Observable inputs,
such as quoted prices in active markets,
Level 2Inputs other than the quoted prices in active
markets that are observable either directly or indirectly, or
Level 3Unobservable inputs in which there is little or
no market data, which requires the Company to develop its own
assumptions.
F-12
Table of Contents
This hierarchy requires the
Company to use observable market data, when available, and to minimize the use
of unobservable inputs when determining fair value. The Companys money market
funds and U.S. government bonds are classified within Level 1 of the fair value
hierarchy because they are valued using quoted prices in active markets. The
Companys commercial paper, corporate bonds and agency bonds are classified
within Level 2 of the fair value hierarchy because they have been valued using
inputs other than quoted prices in active markets that are observable directly
or indirectly.
The Company classifies the
contingent consideration liability, related to the acquisition of
Restaurant Kritik, within Level 3, because it was estimated using a discounted cash
flow technique with significant inputs that are not observable in the market.
The significant inputs not observable in the market in the Level 3 measurement included our probability assessments of completion, appropriately
discounted considering the uncertainties associated with the obligation, and were calculated in accordance with the terms of the asset purchase agreement. Refer to Note 5
regarding the effects of the acquisition on the Companys consolidated financial
statements.
The following table
represents the Companys financial instruments measured at fair value as of
December 31, 2014 and 2013 (in thousands):
|
|
December 31,
2014 |
|
December 31,
2013 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
208,593 |
|
$ |
|
|
$ |
|
|
$ |
208,593 |
|
$ |
360,690 |
|
$ |
|
|
$ |
|
|
$ |
360,690 |
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government
bonds |
|
|
5,005 |
|
|
|
|
|
|
|
|
5,005 |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
|
|
|
31,965 |
|
|
|
|
|
31,965 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
29,486 |
|
|
|
|
|
29,486 |
|
|
|
|
|
|
|
|
|
|
|
|
Agency
bonds |
|
|
|
|
|
90,575 |
|
|
|
|
|
90,575 |
|
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
marketable securities |
|
$ |
213,598 |
|
$ |
152,026 |
|
$ |
|
|
$ |
365,624 |
|
$ |
360,690 |
|
$ |
|
|
$ |
|
|
$ |
360,690 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liability |
|
$ |
|
|
$ |
|
|
$ |
835 |
|
$ |
835 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
4. MARKETABLE
SECURITIES
The amortized cost, gross
unrealized gains and losses, and fair value of securities held-to-maturity, all
of which mature within two years, as of December 31, 2014 are as follows (in
thousands):
|
|
As of December 31,
2014 |
|
|
|
|
|
Gross |
|
Gross |
|
|
|
|
|
|
|
|
|
Unrealized |
|
Unrealized |
|
|
|
|
|
|
Amortized Cost |
|
Gains |
|
Losses |
|
|
Fair
Value |
Short-term marketable |
|
|
|
|
|
|
|
|
|
|
|
|
|
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
paper |
|
$ |
31,964 |
|
$ |
|
|
$ |
|
|
|
$ |
31,964 |
Corporate
bonds |
|
|
24,397 |
|
|
1 |
|
|
(31 |
) |
|
|
24,367 |
Agency bonds |
|
|
57,130 |
|
|
1 |
|
|
(26 |
) |
|
|
57,105 |
U.S. government
bonds |
|
|
5,007 |
|
|
|
|
|
(2 |
) |
|
|
5,005 |
|
|
$ |
118,498 |
|
$ |
2 |
|
$ |
(59 |
) |
|
$ |
118,441 |
|
Long-term marketable |
|
|
|
|
|
|
|
|
|
|
|
|
|
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
5,120 |
|
$ |
|
|
$ |
(1 |
) |
|
$ |
5,119 |
Agency bonds |
|
|
33,492 |
|
|
|
|
|
(22 |
) |
|
|
33,470 |
|
|
$ |
38,612 |
|
$ |
|
|
$ |
(23 |
) |
|
$ |
38,589 |
|
Total marketable securities |
|
$ |
157,111 |
|
$ |
2 |
|
$ |
(82 |
) |
|
$ |
157,031 |
F-13
Table of Contents
The following table
presents gross unrealized losses and fair values for those securities that were
in an unrealized loss position as of December 31, 2014, aggregated by investment
category and the length of time that the individual securities have been in a
continuous loss position (in thousands):
|
|
As of December 31, 2014 |
|
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
Total |
|
|
|
Fair Value |
|
Unrealized Loss |
|
|
Fair Value |
|
Unrealized Loss |
|
Fair Value |
|
Unrealized Loss |
|
Corporate bonds |
|
$ |
24,439 |
|
$ |
(32 |
) |
|
$ |
|
|
$ |
|
|
$ |
24,439 |
|
$ |
(32 |
) |
Agency
bonds |
|
|
79,564 |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
79,564 |
|
|
(48 |
) |
U.S.
government bonds |
|
|
5,005 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
5,005 |
|
|
(2 |
) |
Total |
|
$ |
109,008 |
|
$ |
(82 |
) |
|
$ |
|
|
$ |
|
|
$ |
109,008 |
|
$ |
(82 |
) |
The Company periodically
reviews its investment portfolio for other-than-temporary impairment. The
Company considers such factors as the duration, severity and reason for the
decline in value, and the potential recovery period. The Company also considers
whether it is more likely than not that it will be required to sell the
securities before recovery of their amortized cost basis, and whether the
amortized cost basis cannot be recovered as a result of credit losses. During
the three months and year ended December 31, 2014, the Company did not recognize
any other-than-temporary impairment loss. The Company had no investments in
marketable securities outside of money market funds prior to April 1, 2014.
5. ACQUISITIONS
2014 Acquisitions
In 2014, the Company, through its wholly-owned subsidiary, Yelp Ireland Ltd., completed the acquisition of all the outstanding equity interests in Cityvox SAS. The Company, through its wholly-owned subsidiaries Yelp Ireland Ltd. and Qype GmbH, also acquired the assets comprising the business conducted under the name Restaurant Kritik (“Restaurant Kritik”) from Kabukiman Ltd. The aggregate purchase price of these businesses was $15.3 million, net of $0.1 million cash acquired; the purchase price did not include stock in either transaction. Each of these acquisitions has been accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), under the acquisition method. Accordingly, the aggregate purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition dates, and is subject to adjustment based on purchase price adjustment provisions contained in the acquisition agreements. The results of operations of the acquired companies have been included in the Company’s consolidated financial statements from the respective acquisition dates. Net revenues, earnings since the acquisition and pro forma results of operations for these acquisitions have not been presented because they are not material to the consolidated results of operations, either individually or in aggregate. During the quarter ended December 31, 2014, the Company recorded acquisition-related transaction costs of $0.6 million, which were included in general and administrative expense.
Under the Restaurant Kritik asset purchase agreement, the Company agreed to pay an additional $0.9 million in consideration if the migration of Restaurant Kritik's content to Yelp is completed within one year of the acquisition date. The estimated fair value of the contingent consideration was approximately $0.8 million as of the acquisition date and is included in current liabilities on our consolidated balance sheet.
F-14
Table of Contents
The following table
presents the aggregate purchase price allocations recorded in the Company's consolidated
balance sheets as of the acquisition dates (in thousands):
Net
tangible assets |
$ |
(277 |
) |
Goodwill |
|
13,995 |
|
Intangible assets |
|
1,546 |
|
Total purchase price
(excluding contingent consideration) |
|
15,264 |
|
Contingent consideration |
|
826 |
|
Total purchase
price |
$ |
16,090 |
|
Estimated useful lives as
of the acquisition dates of the intangible assets acquired are shown below:
Intangible Type |
Useful Life |
Content |
5
years |
Developed technology |
0.5
years |
Trade name |
2
years |
Weighted average |
4.3
years |
The intangible assets are
being amortized on a straight-line basis, which reflects the pattern in which
the economic benefits of the intangible assets are being utilized. The goodwill
represents the excess value over both tangible and intangible assets acquired.
The goodwill in these transactions is primarily attributable to traffic and the
opportunity for expansion. None of the goodwill is expected to be deductible for
tax purposes.
2013
Acquisition
On July 24, 2013, the
Company acquired SeatMe, Inc. (SeatMe). In connection with the acquisition,
all of the outstanding capital stock and options to purchase capital stock of
SeatMe were converted into the right to receive an aggregate of approximately
$2.2 million in cash and 260,901 shares of Yelp Class A common stock with an
aggregate fair value of approximately $9.7 million, as determined on the basis
of the closing market price of the Companys Class A common stock on the
acquisition date. Of the total consideration paid in connection with the
acquisition, $0.1 million in cash and 31,236 shares of Yelp Class A common stock
were initially held in escrow to secure indemnification obligations. The key
factor underlying the acquisition was securing the technology to provide online
reservations directly through the Companys website with minimal product and
engineering work.
F-15
Table of Contents
The acquisition was
accounted for as a business combination in accordance with ASC 805, with the
results of SeatMes operations included in the consolidated financial statements
starting on July 24, 2013. The following table summarizes the consideration paid
for SeatMe and the allocation of the purchase price, based on the
estimated fair value of the assets acquired and liabilities assumed at the
acquisition date (in thousands):
|
July 24,
2013 |
Fair
value of purchase consideration: |
|
|
Cash: |
|
|
Distributed to SeatMe equity holders |
$ |
2,057 |
Held in escrow account |
|
56 |
Class A common
stock: |
|
|
Distributed to SeatMe equity holders |
|
8,420 |
Held in escrow account |
|
1,246 |
Total purchase consideration |
$ |
11,779 |
|
Fair
value of net assets acquired: |
|
|
Cash and cash equivalents |
$ |
56 |
Property and equipment |
|
47 |
Intangibles |
|
1,440 |
Goodwill |
|
10,279 |
Other assets |
|
117 |
Total assets acquired |
|
11,939 |
Total liabilities assumed |
|
160 |
Net assets acquired |
$ |
11,779 |
Estimated useful lives as
of the acquisition date of the intangible assets acquired are shown
below:
Intangible Type |
Useful Life |
Developed technology |
6
years |
Customer relationships |
2
years |
Trade name |
2 years |
Weighted average |
5.6
years |
The intangible assets are
being amortized on a straight-line basis, which reflects the pattern in which
the economic benefits of the intangible assets are being utilized. The goodwill
results from the Companys opportunity to offer its customers and leverage the
SeatMe web- and app-based reservation solution. None of the goodwill is
deductible for tax purposes.
For the year ended December
31, 2013, the Company recorded acquisition-related transaction costs of
approximately $0.2 million, which were included in general and administrative
expense in the accompanying consolidated statement of operations. Net revenues,
earnings since the acquisition and pro forma results of operations for this
acquisition have not been presented because they are not material to the
consolidated results of operations, either individually or in
aggregate.
2012
Acquisition
On October 23, 2012, the
Company, through Yelp Ireland Ltd., completed the acquisition of all the
outstanding equity interests of Qype for approximately $24.3 million in cash and
Yelp Class A common stock with an approximate fair value of $23.3 million. Of
the total consideration paid in connection with the acquisition, $10.3 million
is held in the form of cash in escrow to secure indemnification obligations. The
balance remaining in the escrow fund relating to this acquisition was
approximately $7.5 million as of December 31, 2014.
F-16
Table of Contents
The acquisition was
accounted for as a business combination in accordance with ASC 805, with the
results of Qypes operations included in the consolidated financial statements
starting on October 23, 2012. The key factors underlying the acquisition were to
secure an established European market presence, obtain Qypes content and
traffic and the opportunity for expansion. The following table summarizes the
consideration paid for Qype and the allocation of the purchase
price, based on the estimated fair value of the assets acquired and liabilities
assumed at the acquisition date (in thousands):
|
October 23,
2012 |
Fair
value of purchase consideration: |
|
|
Cash consideration |
$ |
14,020 |
Cash in escrow account |
|
10,276 |
Fair value of Class A
common stock |
|
23,254 |
Total purchase consideration |
$ |
47,550 |
|
Fair
value of net assets acquired: |
|
|
Cash |
$ |
172 |
Accounts receivable |
|
1,237 |
Other current assets |
|
1,239 |
Property and equipment |
|
233 |
Intangibles |
|
6,134 |
Goodwill |
|
48,056 |
Total assets acquired |
|
57,071 |
Accounts payable |
|
2,169 |
Accrued liabilities |
|
4,858 |
Deferred revenue |
|
1,190 |
Debt |
|
1,304 |
Total liabilities assumed |
|
9,521 |
Net assets acquired |
$ |
47,550 |
The fair value of the
968,919 shares of Class A common stock issued as part of the consideration paid
for Qype was determined on the basis of the closing market price of the
Companys Class A common stock on the acquisition date.
Estimated useful lives as
of the acquisition date of the intangible assets acquired are shown
below:
Intangible Type |
Useful Life |
Content |
5
years |
Advertiser relationships |
2
years |
Developed technology |
2
years |
Trade name |
2 years |
Weighted average |
3.6
years |
The intangible assets are
being amortized on a straight-line basis, which reflects the pattern in which
the economic benefits of the intangible assets are being utilized. The goodwill
results from the Companys opportunity to expand its geographic footprint in
Europe, the future revenue opportunities that the Company expects to achieve
from leveraging Qypes content to attract more traffic and users to its website
and ultimately to acquire more advertisers. None of the goodwill is deductible
for tax purposes.
For the year ended December
31, 2012, the Company recorded acquisition-related transaction costs of
approximately $1.0 million, which were included in general and administrative
expense in the accompanying consolidated statement of operations.
Refer to Note 14 regarding
the tax effect of the acquisition on the Companys consolidated financial
statements.
F-17
Table of Contents
The unaudited pro forma financial information in
the table below summarizes the combined results of operations for the Company
and Qype, and includes the accounting effects resulting from the acquisition,
including transaction, restructuring and integration costs, amortization charges
from acquired intangible assets, and changes in depreciation due to differing
asset values and depreciation lives as though the companies were combined as of
January 1, 2012. The unaudited pro forma financial information, as presented
below, is for informational purposes only and is not necessarily indicative of
the results of operations that would have been achieved if the acquisition had
taken place as of January 1, 2012 (in thousands, except per share
data):
|
Pro Forma for the |
|
|
Year Ended |
|
|
December
31, |
|
|
2012 |
|
Revenue |
$ |
146,265 |
|
Net
income (loss) |
|
(23,186 |
) |
Basic and diluted net loss per share attributable to common
stockholders |
$ |
(0.42 |
) |
In October 2012, following
the acquisition of Qype, the Company announced its plan to reduce the size of
the Qype workforce and terminate several of Qypes leases. These actions were
taken in order to reduce the Companys cost structure, enhance operating
efficiencies and strengthen the Companys business to achieve long-term
profitable growth. As a result of this plan, the Company incurred restructuring
charges during the fourth quarter of 2012 and the first quarter of 2013, which
were included in the restructuring and integration costs in the accompanying
consolidated statements of operations for such periods. The Companys
restructuring plan was substantially completed during the year ended December
31, 2013 and the remaining restructuring liability was zero as of December 31,
2014. The Company has recorded restructuring charges of $1.9 million through
December 31, 2013. The following table summarizes the changes in the Companys
restructuring liabilities (in thousands):
Balance as of December 31, 2012 |
$ |
685 |
|
Provision |
|
935 |
|
Adjustment to provision |
|
(261 |
) |
Payments |
|
(1,308 |
) |
Balance as of December 31, 2013 |
$ |
51 |
|
Payments |
|
(51 |
) |
Balance as of December 31, 2014 |
$ |
|
|
6. CASH AND CASH
EQUIVALENTS
Cash and cash equivalents
as of December 31, 2014 and 2013 consist of the following (in
thousands):
|
|
December
31, |
|
|
2014 |
|
2013 |
Cash
and cash equivalents |
|
|
|
|
|
|
Cash |
|
$ |
38,719 |
|
$ |
29,074 |
Money market funds |
|
|
208,593 |
|
|
360,690 |
Total cash and cash equivalents |
|
$ |
247,312 |
|
$ |
389,764 |
The lease agreements for
certain of the Companys offices require the Company to maintain letters of
credit issued to the landlords of each facility. Each letter of credit is
subject to renewal annually until the applicable lease expires and is
collateralized by restricted cash. As of December 31, 2014 and December 31,
2013, the Company had letters of credit totaling $17.9 million and $3.2 million,
respectively, related to such leases.
7. PROPERTY, EQUIPMENT
AND SOFTWARE, NET
Property, equipment and
software, net as of December 31, 2014 and 2013 consist of the following (in
thousands):
|
December
31, |
|
|
2014 |
|
|
2013 |
|
Computer equipment |
$
|
19,111 |
|
|
$
|
13,348 |
|
Software |
|
802 |
|
|
|
541 |
|
Capitalized website and software development
costs |
|
27,602 |
|
|
|
13,878 |
|
Furniture and fixtures |
|
6,621 |
|
|
|
4,388 |
|
Leasehold improvements |
|
36,991 |
|
|
|
13,984 |
|
Telecommunication |
|
2,610 |
|
|
|
2,179 |
|
Total |
|
93,737 |
|
|
|
48,318 |
|
Less
accumulated depreciation |
|
(30,976 |
) |
|
|
(17,652 |
) |
Net property, equipment and
software |
$ |
62,761 |
|
|
$ |
30,666 |
|
F-18
Table of Contents
Depreciation expense for
the years ended December 31, 2014, 2013 and 2012 was approximately $14.3
million, $7.9 million and $5.9 million, respectively.
8. GOODWILL AND
INTANGIBLE ASSETS
Goodwill as of December 31,
2014 and 2013 and changes in the carrying amount of goodwill during the years
ended December 31, 2014 and 2013 are as follows (in thousands):
Balance as of December 31, 2012 |
|
$ |
48,605 |
|
Goodwill
acquired |
|
|
10,279 |
|
Measurement
period adjustment |
|
|
(1,153 |
) |
Effect
of currency translation |
|
|
1,959 |
|
Balance as of December 31, 2013 |
|
$ |
59,690 |
|
Goodwill
acquired |
|
|
13,995 |
|
Effect
of currency translation |
|
|
(6,378 |
) |
Balance as of December 31, 2014 |
|
$ |
67,307 |
|
Under the terms of the
share purchase agreement by and among the Company, its wholly-owned subsidiary
Yelp Ireland Ltd., Qype and its shareholders, the Qype purchase price was
subject to a post-closing adjustment based on Qypes net working capital as of
the acquisition date. On April 15, 2013, Yelp and the former Qype shareholders
agreed to an adjustment of the purchase price in favor of Yelp in the amount of
€0.9 million (approximately $1.2 million as of April 15, 2013) based on Qypes
net working capital as of the acquisition date. As this agreement occurred
during the measurement period of the acquisition, as defined by ASC 805, the
impact of this adjustment was recorded as an increase to cash and a decrease to
goodwill. The related funds were released to the Company from the escrow fund
during the year ended December 31, 2013.
The intangible assets
detail at December 31, 2014 and 2013 consist of the following (in thousands):
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Weighted Average Remaining Life |
December 31, 2014: |
|
|
|
|
|
|
|
|
|
|
|
Content |
|
$ |
4,299 |
|
$ |
(1,393 |
) |
$ |
2,906 |
|
3.6 years |
Developed
technology |
|
|
1,963 |
|
|
(861 |
) |
|
1,102 |
|
4.2 years |
Advertiser
relationships |
|
|
1,853 |
|
|
(1,853 |
) |
|
|
|
0.0 years |
Data licenses |
|
|
1,724 |
|
|
(138 |
) |
|
1,586 |
|
4.5 years |
Trade name and
other |
|
|
596 |
|
|
(469 |
) |
|
127 |
|
1.4 years |
Domains |
|
|
253 |
|
|
(188 |
) |
|
65 |
|
3.5 years |
|
|
$ |
10,688 |
|
$ |
(4,902 |
) |
$ |
5,786 |
|
|
|
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Weighted Average Remaining Life |
December 31, 2013: |
|
|
|
|
|
|
|
|
|
|
|
Content |
|
$ |
3,413 |
|
$ |
(811 |
) |
$ |
2,602 |
|
3.8 years |
Advertiser
relationships |
|
|
2,045 |
|
|
(1,214 |
) |
|
831 |
|
0.8 years |
Developed
technology |
|
|
1,851 |
|
|
(422 |
) |
|
1,429 |
|
4.8 years |
Trade name and
other |
|
|
553 |
|
|
(276 |
) |
|
277 |
|
1.1 years |
Domains |
|
|
250 |
|
|
(154 |
) |
|
96 |
|
3.9 years |
|
|
$ |
8,112 |
|
$ |
(2,877 |
) |
$ |
5,235 |
|
|
F-19
Table of Contents
Amortization expense for
the years ended December 31, 2014, 2013 and 2012 was approximately $2.4 million,
$2.3 million and $0.4 million, respectively.
Estimated future
amortization of purchased intangible assets at December 31, 2014 was as follows
(in thousands):
Year ending December
31, |
|
|
Amount |
2015 |
|
$ |
1,694 |
2016 |
|
|
1,461 |
2017 |
|
|
1,299 |
2018 |
|
|
794 |
2019 and thereafter |
|
|
538 |
Total amortization |
|
$ |
5,786 |
9. ACCRUED
LIABILITIES
Accrued liabilities as of
December 31, 2014 and 2013 consist of the following (in thousands):
|
|
December
31, |
|
|
2014 |
|
2013 |
Fixed asset purchase commitments |
|
$ |
6,329 |
|
$ |
2,247 |
Accrued commissions |
|
|
4,198 |
|
|
3,707 |
Accrued vacation |
|
|
3,972 |
|
|
2,950 |
Accrued employee related expenses |
|
|
2,116 |
|
|
1,784 |
Accrued cost of sales |
|
|
2,052 |
|
|
624 |
Accrued income, withholding, and business
taxes |
|
|
1,354 |
|
|
1,837 |
Accrued payroll tax |
|
|
1,251 |
|
|
1,508 |
Deferred rent |
|
|
1,229 |
|
|
298 |
Merchant revenue share liability |
|
|
1,218 |
|
|
932 |
Other accrued expenses |
|
|
5,862 |
|
|
3,117 |
Total |
|
$ |
29,581 |
|
$ |
19,004 |
10. OTHER INCOME
(EXPENSE), NET
Other income (expense), net
for the years ended December 31, 2014, 2013 and 2012 consist of the following
(in thousands):
|
|
Year Ended
December 31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
Interest income |
|
$ |
727 |
|
$ |
62 |
|
$ |
51 |
|
Transaction gain (loss) on foreign
exchange |
|
|
(121 |
) |
|
(251 |
) |
|
(259 |
) |
Other non-operating income (loss),
net |
|
|
(385 |
) |
|
(218 |
) |
|
(18 |
) |
Other
income (expense), net |
|
$ |
221 |
|
$ |
(407 |
) |
$ |
(226 |
) |
11. COMMITMENTS AND
CONTINGENCIES
Office Facility
LeasesThe Company leases its
office facilities under operating lease agreements that expire from 2015 to
2026. Certain lease agreements provide for rental payments on a graduated basis.
The Company recognizes rent expense on a straight-line basis over the lease
period.
Rental expense was $14.6
million, $8.7 million and $4.8 million for the years ended December 31, 2014,
2013 and 2012, respectively.
F-20
Table of Contents
Aggregate Future Lease
CommitmentsThe Companys minimum
payments under noncancelable operating leases for equipment and office space
having initial terms in excess of one year are as follows at December 31, 2014
(in thousands):
Year Ending December 31, |
|
Operating Leases |
2015 |
|
$ |
25,617 |
2016 |
|
|
34,720 |
2017 |
|
|
36,944 |
2018 |
|
|
37,386 |
2019 |
|
|
37,309 |
Thereafter |
|
|
171,433 |
Total minimum lease payments |
|
$ |
343,409 |
Legal
ProceedingsThe Company is
subject to legal proceedings arising in the ordinary course of business.
Although the results of litigation and claims cannot be predicted with
certainty, the Company currently does not believe that the final outcome of any
of these matters will have a material adverse effect on the Companys business,
financial position, results of operations or cash flows.
In February and March 2010,
the Company was sued in two putative class actions on behalf of local businesses
asserting various causes of action based on claims that the Company manipulated
the ratings and reviews on its platform to coerce local businesses to buy its
advertising products. These cases were subsequently consolidated in an action
asserting claims for violation of the California Business and Professions Code,
extortion and attempted extortion based on the conduct they allege and seeking
monetary relief in an unspecified amount and injunctive relief. In October 2011,
the court dismissed this consolidated action with prejudice. The plaintiffs have
appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed the
dismissal of the consolidated action. The plaintiffs submitted a petition to the
Ninth Circuit for a rehearing, which was denied on October 28,
2014.
In August 2014, two putative class action lawsuits alleging violations of federal securities laws were
filed in the U.S. District Court for the Northern District of California, naming as defendants the Company and
certain of its officers. The lawsuits allege violations of the Exchange Act by the Company and its officers for allegedly
making materially false and misleading statements regarding our business and operations between October
29, 2013 and April 3, 2014. These cases were subsequently consolidated and, in January 2015, plaintiffs filed a
consolidated complaint seeking unspecified monetary damages and other relief. On February 6, 2015, the Company and the other named defendants
filed a motion to dismiss the consolidated complaint, and the court is currently scheduled to have a hearing on the
motion on April 16, 2015.
In addition, we are subject
to legal proceedings arising in the ordinary course of business. Although the
results of litigation and claims cannot be predicted with certainty, we
currently do not believe that the final outcome of any of these matters will
have a material adverse effect on our business, financial position, results of
operations or cash flows.
Indemnification
AgreementsIn the ordinary
course of business, the Company may provide indemnifications of varying scope
and terms to customers, vendors, lessors, business partners and other parties
with respect to certain matters, including, but not limited to, losses arising
out of breach of such agreements, services to be provided by the Company or from
intellectual property infringement claims made by third parties. In addition,
the Company has entered into indemnification agreements with directors and
certain officers and employees that will require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors, officers or employees.
While the outcome of these
matters cannot be predicted with certainty, the Company does not believe that
the outcome of any claims under indemnification arrangements will have a
material effect on the Companys financial position, results of operations or
cash flows.
F-21
Table of Contents
12. STOCKHOLDERS EQUITY
(DEFICIT)
Initial Public
Offering
In March 2012, the Company
completed its initial public offering (IPO), whereby 8,172,500 shares of Class
A common stock were sold by the Company (inclusive of 1,072,500 shares of Class
A common stock from the full exercise of the overallotment option of shares
granted to the underwriters) and 50,000 shares of Class A common stock were sold
by a selling stockholder, The Yelp Foundation. The public offering price of the
shares sold in the offering was $15.00 per share. The Company did not receive
any proceeds from the sales of shares by the selling stockholder. The total
gross proceeds from the offering to the Company were $122.6 million. After
deducting underwriters discounts and commissions and offering expenses, the
aggregate net proceeds received by the Company totaled approximately $111.4
million. Immediately prior to the closing of the IPO, all shares of the
Companys outstanding redeemable convertible preferred stock automatically
converted into 35,816,772 shares of Class B common stock. As a result, following
the IPO, the Company has two classes of authorized common stock outstanding:
Class A common stock (one vote per share) and Class B common stock (ten votes
per share).
In November 2011, the board
of directors of the Company approved the establishment of The Yelp Foundation
(the Foundation), a non-profit organization designed to support consumers and
businesses in the communities in which the Company operates. The Foundations
officers include several of the Companys current officers. The Companys board
of directors approved a contribution and issuance of 520,000 shares of the
Companys common stock to the Foundation, of which the Foundation has sold
100,000 shares, including 50,000 shares in the IPO. The Company recorded an
expense in the amount of $5.9 million for the contribution based on the fair
value of the common stock on the date the shares were issued to the Foundation.
The Company recorded the expense as a charitable contribution expense as it
constituted an unconditional transfer of assets to an entity in a voluntary
nonreciprocal transfer.
The Company has not
consolidated the Foundation as (1) the Company does not have a financial
interest in the Foundation, (2) the Company does not have voting rights and (3)
the Foundation meets the definition of a non-profit organization under ASC
810-20, Consolidation Control of Partnerships and Similar Entities as it is
organized exclusively for charitable, scientific, literary and educational
purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of
1986 and is governed by Section 5211(b) of the California Nonprofit Public
Benefit Corporation Law.
Follow-on
Offering
In October 2013, the
Company closed its follow-on offering of 4,312,500 shares of its Class A common
stock (inclusive of 562,500 shares of Class A common stock from the full
exercise of the overallotment option of shares granted to the underwriters). The
public offering price of the shares sold in the offering was $67.00 per share.
The total gross proceeds from the offering to the Company were $288.9 million.
After deducting underwriting discounts and commissions and offering expenses
payable by the Company, the aggregate net proceeds received by the Company
totaled approximately $276.5 million.
The following table
presents the shares authorized and issued and outstanding as of the periods
presented:
|
|
December 31,
2014 |
|
December 31,
2013 |
|
|
Shares Authorized |
|
Shares Issued
and Outstanding |
|
Shares Authorized |
|
Shares Issued
and Outstanding |
Stockholders equity: |
|
|
|
|
|
|
|
|
Class A common stock, $0.000001
par value |
|
200,000,000 |
|
63,062,071 |
|
200,000,000 |
|
59,163,134 |
Class B common stock, $0.000001 par value |
|
100,000,000 |
|
9,858,511 |
|
100,000,000 |
|
11,711,359 |
Common stock, $0.000001 par
value |
|
200,000,000 |
|
|
|
200,000,000 |
|
|
Undesignated Preferred Stock |
|
10,000,000 |
|
|
|
10,000,000 |
|
|
F-22
Table of Contents
Common Stock Reserved
for Future Issuance
As of December 31, 2014,
the Company had reserved shares of Class A and Class B common stock for future issuances in
connection with the following:
Options outstanding |
|
9,037,935 |
Restricted stock units and awards outstanding |
|
1,131,849 |
Available for future stock option and restricted stock units
and awards grants |
|
5,010,212 |
Available for future ESPP options |
|
1,958,667 |
Total reserved for future issuance |
|
17,138,663 |
Equity Incentive
Plans
The Company has outstanding
awards under three equity incentive plans: the Amended and Restated 2005 Equity
Incentive Plan (the 2005 Plan), the 2011 Equity Incentive Plan (the 2011
Plan) and the 2012 Equity Incentive Plan, as amended (the 2012 Plan). In July
2011, the Company terminated the 2005 Plan and provided that no further stock
awards were to be granted under the 2005 Plan. All outstanding stock awards
under the 2005 Plan continue to be governed by their existing terms. Upon the
effectiveness of the underwriting agreement in connection with the IPO, all
shares that were reserved under the 2011 Plan but not issued were assumed by the
2012 Plan. No further awards will be granted pursuant to the 2011 Plan. All
outstanding stock awards under the 2011 Plan continue to be governed by their
existing terms. Under the 2012 Plan, the Company has the ability to issue
incentive stock options, non-statutory stock options, stock appreciation rights,
RSUs, RSAs, performance units and performance shares. Additionally, the 2012
Plan provides for the grant of performance cash awards to employees, directors
and consultants.
Stock
Options
Stock options granted under
the 2012 Plan are granted at a price per share not less than the fair value at
date of grant. Options granted to date generally vest either over a four-year
period with 25% vesting at the end of one year and the remaining vesting monthly
thereafter or over a four-year period with 10% vesting over the first year, 20%
vesting over the second year, 30% vesting over the third year and 40% vesting
over the fourth year. Options granted generally are exercisable for up to 10
years.
A summary of stock option
activity for the year ended December 31, 2014 is as follows:
|
|
Options
Outstanding |
|
Weighted- Average Remaining Contractual Term (in
years) |
|
Aggregate Intrinsic
Value (in
thousands) |
|
|
Number
of Shares |
|
Weighted- Average Exercise Price |
|
|
|
|
|
Options outstandingDecember 31, 2013 |
|
11,101,166 |
|
$ |
18.24 |
|
8.17 |
|
$ |
562,855 |
Granted |
|
209,700 |
|
|
75.58 |
|
|
|
|
|
Exercised |
|
(1,679,654 |
) |
|
11.99 |
|
|
|
|
|
Canceled |
|
(593,277 |
) |
|
35.05 |
|
|
|
|
|
Options outstandingDecember 31, 2014 |
|
9,037,935 |
|
$ |
19.64 |
|
7.26 |
|
$ |
324,160 |
|
Options vested and expected to vest as of December 31,
2014 |
|
8,717,559 |
|
$ |
19.21 |
|
7.20 |
|
$ |
315,938 |
Options vested and exercisable as
of December 31,
2014 |
|
4,658,770 |
|
$ |
13.48 |
|
6.63 |
|
$ |
193,221 |
F-23
Table of Contents
Aggregate intrinsic value
represents the difference between the fair value of the Companys common stock
and the exercise price of outstanding, in-the-money options. The total intrinsic
value of options exercised was approximately $108.7 million, $90.7 million and
$31.3 million for the years ended December 31, 2014, 2013 and 2012,
respectively.
The weighted-average grant
date fair value of options granted was $41.84, $16.75 and $0.72 for the years
ended December 31, 2014, 2013 and 2012, respectively.
As of December 31, 2014,
total unrecognized compensation costs, adjusted for estimated forfeitures,
related to unvested stock options was approximately $54.7 million, which is
expected to be recognized over a weighted-average time period of 2.03
years.
The following table
summarizes information about outstanding and vested stock options as of December
31, 2014:
|
|
Options
Outstanding |
|
Options
Vested and
Exercisable |
Exercise Price Range |
|
Number of Options Outstanding |
|
Weighted Average Remaining Life
(Years) |
|
Weighted Average Exercise Price |
|
Number of Options |
|
Weighted Average Exercise Price |
$1.00 - $6.92 |
|
181,177 |
|
4.81 |
|
$ |
4.54 |
|
177,010 |
|
$ |
4.52 |
$7.16 |
|
3,014,841 |
|
6.00 |
|
|
7.16 |
|
2,578,444 |
|
|
7.16 |
$8.16 - $18.85 |
|
1,178,719 |
|
7.15 |
|
|
14.16 |
|
577,297 |
|
|
12.58 |
$18.91 - $21.13 |
|
262,158 |
|
8.17 |
|
|
20.28 |
|
87,572 |
|
|
20.12 |
$21.18 |
|
1,817,455 |
|
8.10 |
|
|
21.18 |
|
566,786 |
|
|
21.18 |
$21.24 - $26.03 |
|
1,133,496 |
|
7.92 |
|
|
24.86 |
|
330,909 |
|
|
24.41 |
$26.89 - $51.98 |
|
961,006 |
|
8.30 |
|
|
33.95 |
|
251,284 |
|
|
33.79 |
$58.32 - $78.18 |
|
463,658 |
|
8.91 |
|
|
67.73 |
|
89,468 |
|
|
66.17 |
$82.42 |
|
1,875 |
|
9.66 |
|
|
82.42 |
|
|
|
|
|
$94.42 |
|
23,550 |
|
9.16 |
|
|
94.42 |
|
|
|
|
|
Total |
|
9,037,935 |
|
7.26 |
|
$ |
19.64 |
|
4,658,770 |
|
$ |
13.48 |
RSUs and
RSAs
The cost of RSUs and RSAs
are determined using the fair value of the Companys common stock on the date of
grant. RSUs and RSAs generally vest either over a four-year period with 25%
vesting at the end of one year and the remaining vesting quarterly or annually
thereafter, or over a four-year period with 10% vesting over the first year, 20%
vesting over the second year, 30% vesting over the third year and 40% vesting
over the fourth year.
A summary of RSU and RSA
activity for the year ended December 31, 2014 is as follows:
|
|
Restricted Stock
Units |
|
Restricted Stock
Awards |
|
|
Number of Shares |
|
Weighted- Average Grant
Date Fair
Value |
|
Number of
Shares |
|
Weighted- Average
Grant Date
Fair Value |
UnvestedDecember 31, 2013 |
|
443,603 |
|
$ |
44.66 |
|
73,470 |
|
$ |
9.41 |
Granted |
|
905,839 |
|
|
71.76 |
|
|
|
|
|
Released |
|
(101,872 |
) |
|
39.69 |
|
(42,500 |
) |
|
9.36 |
Canceled |
|
(115,721 |
) |
|
62.57 |
|
|
|
|
|
UnvestedDecember 31, 2014 |
|
1,131,849 |
|
$ |
64.96 |
|
30,970 |
|
$ |
9.48 |
F-24
Table of Contents
As of December 31, 2014,
the Company had approximately $61.6 million of unrecognized stock-based
compensation expense, net of estimated forfeitures, related to RSUs and RSAs,
which will be recognized over the remaining weighted-average vesting period of
approximately 3.32 years.
Employee Stock Purchase
Plan
Concurrent with the
effectiveness of the underwriting agreement in connection with the IPO on March
1, 2012, the ESPP became effective. The ESPP allows eligible employees to
purchase shares of the Companys Class A common stock at a discount through
payroll deductions of up to 15% of their eligible compensation, subject to any
plan limitations during designated offering periods. At the end of each offering
period that began prior to December 1, 2014, employees are able to purchase
shares at 85% of the lower of the fair market value of the Companys Class A
common stock on the first trading day of the offering period or on the last day
of the offering period. At the end of each offering period that began December
1, 2014 or later, employees are able to purchase shares at 85% of the fair
market value of the Companys Class A common stock on the last day of the
offering period. There were 279,538 shares purchased by employees under the ESPP
at weighted-average purchase price of $31.73 per share during the year ended
December 31, 2014. The Company recognized $4.5 million of stock-based
compensation related to the ESPP during the year ended December 31,
2014.
Stock-Based
Compensation Expense
The fair value of options
granted to employees is estimated on the grant date using the
Black-Scholes-Merton option valuation model. This valuation model for
stock-based compensation expense requires the Company to make assumptions and
judgments about the variables used in the calculation, including the expected
term (weighted-average period of time that the options granted are expected to
be outstanding), the volatility in the fair market value of the Companys Class
A common stock, a risk-free interest rate, expected dividends and the estimated
forfeitures of unvested stock options. To the extent actual results differ from
the estimates, the difference will be recorded as a cumulative adjustment in the
period estimates are revised. No compensation cost is recorded for options that
do not vest. The Company uses the simplified calculation of expected life and
volatility is based on an average of the historical volatilities of the common
stock of several entities with characteristics similar to those of the Company.
The risk-free rate is based on the U.S. Treasury yield curve in effect at the
time of grant for periods corresponding with the expected life of the option.
Expected forfeitures are based on the Companys historical
experience.
The Company uses the
straight-line method for expense attribution. For the years ended December 31,
2014, 2013 and 2012, the weighted-average assumptions are as follows:
|
|
Year Ended December
31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
Dividend yield |
|
|
|
|
|
|
|
Annual risk-free rate |
|
2.07 |
% |
1.25 |
% |
1.01 |
% |
Expected volatility |
|
57.56 |
% |
60.83 |
% |
62.76 |
% |
Expected term (years) |
|
6.17 |
|
6.17 |
|
6.18 |
|
The following table
presents the weighted-average assumptions used to estimate the fair value of the
ESPP for the year ended December 31, 2014 and 2013. There were no offering
periods prior to 2013.
|
|
Year Ended December
31, |
|
|
|
2014 |
|
2013 |
|
Dividend yield |
|
|
|
|
|
Annual risk-free rate |
|
0.18 |
% |
0.19 |
% |
Expected volatility |
|
47.14 |
% |
56.30 |
% |
Expected term (years) |
|
1.09 |
|
1.25 |
|
F-25
Table of Contents
The following table
summarizes the effects of stock-based compensation related to stock-based awards
to employees and non-employees on the Companys consolidated statements of
operations as of December 31, 2014, 2013 and 2012, is as follows (in
thousands):
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
Cost
of revenue |
|
$ |
729 |
|
$ |
421 |
|
$ |
122 |
Sales and marketing |
|
|
15,083 |
|
|
10,131 |
|
|
4,917 |
Product development |
|
|
14,804 |
|
|
6,270 |
|
|
1,705 |
General and
administrative |
|
|
11,657 |
|
|
9,300 |
|
|
8,134 |
Restructuring and integration |
|
|
|
|
|
555 |
|
|
|
Total
stock-based compensation in income (loss) before income
taxes |
|
$ |
42,273 |
|
$ |
26,677 |
|
$ |
14,878 |
Benefit from income taxes |
|
|
(15,064 |
) |
|
|
|
|
|
Total
stock-based compensation effects in income (loss) |
|
|
27,209 |
|
|
26,677 |
|
|
14,878 |
During the years ended
December 31, 2014, 2013 and 2012, the Company capitalized $2.3 million, $0.5
million and $0.3 million, respectively, of stock-based compensation as website
development costs.
13. NET INCOME (LOSS)
PER SHARE
Basic and diluted net
income (loss) per share attributable to common stockholders are presented in
conformity with the two-class method required for participating securities.
Immediately prior to the consummation of the IPO in March 2012, all outstanding
shares of preferred stock and common stock were converted to Class B common
stock. As a result, Class A and Class B common stock are the only outstanding
equity in the Company. The rights of the holders of Class A and Class B common
stock are identical, except with respect to voting and conversion. Each share of
Class A common stock is entitled to one vote per share and each class of Class B
common stock is entitled to 10 votes per share. Shares of Class B common stock
may be converted into Class A common stock at any time at the option of the
stockholder, and are automatically converted upon sale or transfer to Class A
common stock, subject to certain limited exceptions, and in connection with
certain other conversion events.
Basic net income (loss) per
share is computed using the weighted-average number of shares of common stock
outstanding during the period. Diluted net income per share is computed using
the weighted-average number of shares of common stock and, if dilutive,
potential shares of common stock outstanding during the period. The Companys
potential shares of common stock consist of the incremental shares of common
stock issuable upon the exercise of stock options and, to a lesser extent,
shares issuable upon the vesting of RSUs, RSAs and purchases related to the
ESPP. The dilutive effect of these potential shares of common stock is reflected
in diluted earnings per share by application of the treasury stock method. The
computation of the diluted net income (loss) per share of Class A common stock
assumes the conversion of Class B common stock, while the diluted net income
(loss) per share of Class B common stock does not assume the conversion of Class
B common stock.
The undistributed earnings
are allocated based on the contractual participation rights of the Class A and
Class B common stock as if the earnings for the year have been distributed. As
the liquidation and dividend rights are identical, the undistributed earnings
are allocated on a proportionate basis. Further, as the conversion of Class B
common stock is assumed in the computation of the diluted net income (loss) per
share of Class A common stock, the undistributed earnings are equal to net
income (loss) for that computation.
F-26
Table of Contents
The following table
presents the calculation of basic and diluted net income (loss) per share (in
thousands, except per share data):
|
|
Year Ended December
31, |
|
|
|
2014 |
|
2013 |
|
2012 |
|
|
|
Class A |
|
Class B |
|
Class A |
|
Class B |
|
Class A |
|
Class B |
|
Basic net income (loss) per
share attributable to common
stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
31,178 |
|
$ |
5,295 |
|
$ |
(6,291 |
) |
$ |
(3,777 |
) |
$ |
(3,464 |
) |
$ |
(15,649 |
) |
Accretion
of redeemable convertible
preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
(26 |
) |
Allocation
of undistributed earnings |
|
$ |
31,178 |
|
$ |
5,295 |
|
$ |
(6,291 |
) |
$ |
(3,777 |
) |
$ |
(3,470 |
) |
$ |
(15,675 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding |
|
|
61,492 |
|
|
10,444 |
|
|
41,033 |
|
|
24,632 |
|
|
9,815 |
|
|
44,333 |
|
Basic net income (loss) per share attributable to common
stockholders |
|
$ |
0.51 |
|
$ |
0.51 |
|
$ |
(0.15 |
) |
$ |
(0.15 |
) |
$ |
(0.35 |
) |
$ |
(0.35 |
) |
|
Diluted net income (loss) per
share attributable to common
stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of undistributed earnings for
basic calculation |
|
$ |
31,178 |
|
$ |
5,295 |
|
$ |
(6,291 |
) |
$ |
(3,777 |
) |
$ |
(3,470 |
) |
$ |
(15,675 |
) |
Reallocation
of undistributed earnings
as a result of conversion from
Class B to Class A shares |
|
|
5,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reallocation
of undistributed earnings
to Class B shares |
|
|
|
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of undistributed earnings |
|
$ |
36,473 |
|
$ |
6,206 |
|
$ |
(6,291 |
) |
$ |
(3,777 |
) |
$ |
(3,470 |
) |
$ |
(15,675 |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares used in basic calculation |
|
|
61,492 |
|
|
10,444 |
|
|
41,033 |
|
|
24,632 |
|
|
9,815 |
|
|
44,333 |
|
Weighted-average
effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Class B to Class A
common shares outstanding |
|
|
10,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options |
|
|
4,377 |
|
|
2,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
dilutive securities |
|
|
399 |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares used in diluted
calculation |
|
|
76,712 |
|
|
13,053 |
|
|
41,033 |
|
|
24,632 |
|
|
9,815 |
|
|
44,333 |
|
Diluted net income (loss) per share attributable to common
stockholders |
|
$ |
0.48 |
|
$ |
0.48 |
|
$ |
(0.15 |
) |
$ |
(0.15 |
) |
$ |
(0.35 |
) |
$ |
(0.35 |
) |
The following
weighted-average stock-based instruments were excluded from the calculation of
diluted net income (loss) per share attributable to common stockholders because
their effect would have been anti-dilutive for the periods presented (in
thousands):
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
Stock options |
|
71 |
|
11,101 |
|
10,113 |
Restricted stock units |
|
|
|
444 |
|
284 |
Restricted stock awards |
|
|
|
73 |
|
116 |
Employee stock purchase
plan |
|
|
|
20 |
|
|
F-27
Table of Contents
14. INCOME TAXES
The Company accounts for
income taxes in accordance with authoritative guidance, which requires the use
of the asset and liability method. Under this method, deferred income tax assets
and liabilities are determined based upon the difference between the
consolidated financial statement carrying amounts and the tax basis of assets
and liabilities and are measured using the enacted tax rate expected to apply to
taxable income in the years in which the differences are expected to be
reversed.
The following table
presents domestic and foreign components of income (loss) before income taxes
for the periods presented (in thousands):
|
|
2014 |
|
2013 |
|
2012 |
|
United States |
|
$ |
13,083 |
|
$ |
(6,184 |
) |
$ |
(12,624 |
) |
Foreign |
|
|
(1,803 |
) |
|
(3,046 |
) |
|
(6,367 |
) |
Total |
|
$ |
11,280 |
|
$ |
(9,230 |
) |
$ |
(18,991 |
) |
The income tax provision is
composed of the following (in thousands):
|
|
2014 |
|
2013 |
|
2012 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|
State |
|
|
704 |
|
|
145 |
|
|
3 |
|
Foreign |
|
|
1,322 |
|
|
1,189 |
|
|
136 |
|
|
|
|
2,026 |
|
|
1,334 |
|
|
139 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(14,806 |
) |
$ |
|
|
$ |
|
|
State |
|
|
(7,613 |
) |
|
|
|
|
|
|
Foreign |
|
|
(4,800 |
) |
|
(496 |
) |
|
(17 |
) |
|
|
|
(27,219 |
) |
|
(496 |
) |
|
(17 |
) |
Total (benefit) provision for income
taxes |
|
$ |
(25,193 |
) |
$ |
838 |
|
$ |
122 |
|
The following table
presents a reconciliation of the statutory federal rate and the Companys
effective tax rate for the periods presented:
|
|
2014 |
|
2013 |
|
2012 |
|
Tax
benefit at federal statutory rate |
|
35.00 |
% |
(34.00 |
)% |
(34.00 |
)% |
Statenet of federal
effect |
|
3.63 |
|
(4.71 |
) |
(5.84 |
) |
Foreign rate differential |
|
(2.17 |
) |
33.11 |
|
(38.74 |
) |
Stock-based compensation |
|
12.76 |
|
1.21 |
|
7.96 |
|
Acquisition costs |
|
|
|
0.51 |
|
2.39 |
|
Meals &
Entertainment |
|
3.75 |
|
3.74 |
|
3.05 |
|
Tax
credits |
|
(23.37 |
) |
(39.77 |
) |
(5.22 |
) |
Change in valuation
allowance |
|
(248.14 |
) |
45.02 |
|
70.13 |
|
Change in tax rate |
|
(4.72 |
) |
|
|
|
|
Other |
|
(0.08 |
) |
3.95 |
|
0.91 |
|
Effective tax rate |
|
(223.34 |
)% |
9.06 |
% |
0.64 |
% |
F-28
Table of Contents
The effective tax rate in
2014 reflects a $28.2 million benefit associated with the release of valuation
allowance previously recorded against certain domestic and foreign deferred tax
assets. In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or all 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.
At the end of 2013, the Company could not
assert, at the required more-likely-than-not level of certainty, that its
domestic and foreign operations would generate sufficient taxable income to
realize all of our deferred tax assets after considering the duration and
severity of losses in prior years, investments in domestic and international
markets, and investments in employees, content, brand and technology.
During 2014, after consideration of the
relative impact of all evidence, positive and negative, the Company determined, at the
required more-likely-than-not level of certainty, that certain domestic and
foreign deferred tax assets would 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.
Consideration was given to negative evidence that was also present in 2013.
However, after considering the profit achieved in 2014 and expectations of
continued profitability on an ongoing basis, we concluded that it was
more-likely-than-not that the Company would have future taxable income sufficient to
realize the benefit associated with certain domestic and foreign deferred tax
assets.
F-29
Table of Contents
Deferred income taxes reflect 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 following table presents the significant components of the
Companys deferred tax assets and liabilities for the periods presented (in
thousands):
|
|
2014 |
|
2013 |
Deferred tax
assets: |
|
|
|
|
|
|
|
|
Reserves and
others |
|
$ |
6,584 |
|
|
$ |
4,285 |
|
Accrued legal |
|
|
|
|
|
|
12 |
|
Stock-based
compensation |
|
|
17,933 |
|
|
|
10,416 |
|
Contribution
carryforward |
|
|
1,889 |
|
|
|
2,070 |
|
Net operating loss
carryforward |
|
|
10,611 |
|
|
|
17,335 |
|
Tax credit
carryforward |
|
|
4,957 |
|
|
|
4,671 |
|
Gross deferred tax assets |
|
|
41,974 |
|
|
|
38,789 |
|
Valuation
allowance |
|
|
(4,159 |
) |
|
|
(31,166 |
) |
Total deferred tax assets |
|
|
37,815 |
|
|
|
7,623 |
|
Deferred tax
liabilities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
(10,738 |
) |
|
|
(7,095 |
) |
Total deferred tax liabilities |
|
|
(10,738 |
) |
|
|
(7,095 |
) |
Net deferred
tax assets |
|
$ |
27,077 |
|
|
$ |
528 |
|
At December 31, 2014, the
Company has federal and state net operating loss carryforwards of approximately
$166.7 million and $146.5 million respectively, expiring beginning in 2024 and
2015, respectively. Further, the Company has trading losses in Ireland of $11.5
million. The Ireland trading losses may be carried forward indefinitely against
Ireland profits. The Company has losses of $9.6 million and $13.4 million in
Germany and France, respectively, which may be carried forward indefinitely
against profits in the respective jurisdictions as a result of the acquisitions
of Qype and Cityvox. At December 31, 2014, the Company
has federal research credit carryforwards of approximately $4.1 million that
expire beginning in 2024, and California research credit carryforwards of
approximately $3.8 million which do not expire. At December 31, 2014, the
Company also has $4.5 million of California Enterprise Zone credit, expiring
beginning in 2023.
Utilization of the net
operating loss carryforwards and credits may be subject to a substantial annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986, as amended, and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization. The Company does not expect any previous ownership changes,
as defined under Section 382 and 383 of the Internal Revenue Code, to result in
a limitation that will reduce the total amount of net operating loss
carryforwards and credits that can be utilized. Further, Qype and Cityvox loss carryforwards may be subject to limitations under
the applicable laws of the taxing jurisdictions due to ownership change
limitations.
As a result of certain
realization requirements of the accounting guidance for stock-based
compensation, the table of deferred tax assets and liabilities shown above does
not include certain deferred tax assets at December 31, 2014 and 2013 that arose
directly from (or the use of which was postponed by) tax deductions related to
equity compensation in excess of compensation recognized for financial
reporting. Approximately $163.5 million of federal net operating losses, $138.3
million of state net operating losses, $1.7 million of Ireland net operating
losses, $2.5 million of federal research and development tax credits and $0.1
million of state Enterprise Zone credits are related to tax stock option
deductions in excess of book deductions. The Company uses the accounting
guidance for income taxes for purposes of determining when excess tax benefits
have been realized. This amount will be credited to stockholders equity when it
is realized on the tax return.
It is the intention of the
Company to reinvest the earnings from Yelp Canada Inc., Yelp UK Ltd., and Yelp
Ireland Holding Company Limited and its subsidiaries. The Company does not
provide for U.S. income taxes on the earnings of foreign subsidiaries as such
earnings are to be reinvested indefinitely. As of December 31, 2014, the Company
estimates $2.1 million of cumulative amount of earnings upon which U.S. income
taxes have not been provided. The income tax liability would be insignificant if
these earnings were to be repatriated.
F-30
Table of Contents
As of December 31, 2014,
2013 and 2012 the Company has $3.3 million, $1.8 million and $0.6 million,
respectively, of unrecognized tax benefits. A reconciliation of the beginning
and ending amount of unrecognized benefits is as follows (in
thousands):
|
|
2014 |
|
2013 |
|
2012 |
Balance at the
beginning of the year |
|
$ |
1,774 |
|
$ |
611 |
|
$ |
1 |
Increase based on
tax positions related to the prior year |
|
|
69 |
|
|
3 |
|
|
495 |
Increase based on
tax positions related to the current year |
|
|
1,433 |
|
|
1,160 |
|
|
115 |
Balance at the
end of the year |
|
$ |
3,276 |
|
$ |
1,774 |
|
$ |
611 |
As of December 31, 2014,
the Company has $3.2 million unrecognized tax benefits that, if recognized,
would affect the effective tax rate. The Companys policy is to record interest
and penalties related to unrecognized tax benefits as income tax expense. During
the years ended December 31, 2014, 2013, and 2012, the Company had immaterial
amounts related to the accrual of interest and penalties.
The Company does not have
any tax positions for which it is reasonably possible the total amount of gross
unrecognized tax benefits will increase or decrease within 12 months of the year
ended December 31, 2014.
The Company is subject to
taxation in the U.S. and various states and foreign jurisdictions. Due to the
Companys net losses, substantially all of its federal, state and foreign income
tax returns since inception are still subject to audit.
15. RELATED-PARTY
TRANSACTIONS
The Company does not have
any significant related party transactions, other than contributions made to The
Foundation (see Note 12).
16. INFORMATION ABOUT
REVENUE AND GEOGRAPHIC AREAS
The Company considers
operating segments to be components of the Company in which separate financial
information is available that is evaluated regularly by the Companys chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The chief operating decision maker for the Company is the Chief
Executive Officer. The Chief Executive Officer reviews financial information
presented on a consolidated basis, accompanied by information about revenue by
product line and geographic region for purposes of allocating resources and
evaluating financial performance. The Company has one business activity and
there are no segment managers who are held accountable for operations, operating
results or plans for levels or components below the consolidated unit level.
Accordingly, the Company has determined that it has a single operating and
reporting segment.
The following tables
present the Companys revenue by product line for the periods presented (in
thousands):
|
|
Year Ended December
31, |
|
|
2014 |
|
2013 |
|
2012 |
Net revenue by
product: |
|
|
|
|
|
|
|
|
|
Local
advertising |
|
$ |
319,137 |
|
$ |
192,983 |
|
$ |
109,159 |
Brand
advertising |
|
|
34,482 |
|
|
27,960 |
|
|
20,579 |
Other
services |
|
|
23,917 |
|
|
12,045 |
|
|
7,829 |
Total |
|
$ |
377,536 |
|
$ |
232,988 |
|
$ |
137,567 |
For the years ended
December 31, 2014, 2013 and 2012, revenue generated internationally was 2.9%,
4.6% and 2.2%, respectively. Revenue by geography is based on the billing
address of the customer. No individual customer accounted for 10% or more of
consolidated net revenue in any of such periods.
F-31
Table of Contents
The following tables
present the Companys long-lived assets by geographic region for the periods
presented (in thousands):
|
|
December
31, |
Long-Lived
Assets |
|
2014 |
|
2013 |
|
2012 |
United
States |
|
$ |
73,344 |
|
$ |
29,186 |
|
$ |
14,275 |
All Other
Countries |
|
|
5,900 |
|
|
1,786 |
|
|
702 |
Total |
|
$ |
79,244 |
|
$ |
30,972 |
|
$ |
14,977 |
17. SUBSEQUENT
EVENTS
On February 9, 2015, the Company acquired Eat24Hours.com, Inc. (Eat24), a leading web and app-based food ordering service, for an aggregate purchase price of $134 million, consisting of approximately 1.4
million shares of Yelp Class A common stock and $75 million cash, less certain transaction expenses and subject to
customary working capital adjustments. The Company expects the acquisition to drive daily engagement in the key
restaurant vertical and provide it with the opportunity to expand Eat24s offering to the approximately 1 million U.S.
restaurants listed on the Companys platform. The company is currently in the process of valuing the assets acquired
and liabilities assumed in the transaction.
F-32
Table of Contents
EXHIBIT
INDEX
|
|
|
|
|
|
|
|
|
|
|
|
Filed |
|
|
|
|
|
|
Incorporated by
Reference |
|
Herewith |
Exhibit |
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Exhibit
Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing
Date |
|
|
2.1 |
|
Share Purchase Agreement, dated October 23, 2012, by and among Yelp
Inc., Yelp Ireland Ltd., Qype GmbH and the shareholders of Qype
GmbH. |
|
8-K |
|
001-35444 |
|
99.1 |
|
10/24/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
|
Agreement and Plan of Merger, dated July 18, 2013, by and among
Yelp Inc., Ranger Merger Corp., Ranger Merger LLC, SeatMe, Inc. and
Alexander Kvamme, as Stockholders Agent. |
|
8-K |
|
001-35444 |
|
99.1 |
|
7/24/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended and Restated Certificate of
Incorporation of Yelp Inc. |
|
8-K |
|
001-35444 |
|
3.1 |
|
3/9/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Amended and Restated Bylaws of Yelp Inc. |
|
S-1/A |
|
333-178030 |
|
3.4 |
|
2/3/2012 |
|
|
|
4.1 |
|
Reference is made to Exhibits 3.1 and
3.2. |
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
Form of Class A Common Stock Certificate. |
|
S-1/A |
|
333-178030 |
|
4.1 |
|
2/3/2012 |
|
|
|
4.3 |
|
Form of Class B Common Stock
Certificate. |
|
S-1/A |
|
333-178030 |
|
4.2 |
|
2/3/2012 |
|
|
|
10.1* |
|
Amended and Restated 2005 Equity Incentive
Plan. |
|
S-1 |
|
333-178030 |
|
10.2 |
|
11/17/2011 |
|
|
|
10.2* |
|
Form of Option Agreement and Option Grant
Notice under Amended and Restated 2005 Equity Incentive Plan. |
|
S-1 |
|
333-178030 |
|
10.3 |
|
11/17/2011 |
|
|
|
10.3* |
|
2011 Equity Incentive Plan. |
|
S-1/A |
|
333-178030 |
|
10.4 |
|
2/3/2012 |
|
|
|
10.4* |
|
Forms of Option Agreement and Option Grant
Notice under 2011 Equity Incentive Plan. |
|
S-1/A |
|
333-178030 |
|
10.5 |
|
2/3/2012 |
|
|
|
10.5* |
|
Form of Indemnification Agreement made by
and between Yelp Inc. and each of its directors and executive
officers. |
|
S-1/A |
|
333-178030 |
|
10.6 |
|
2/3/2012 |
|
|
|
10.6* |
|
Amended and Restated Offer Letter, by and
between Yelp Inc. and Geoff Donaker, dated February 3, 2012. |
|
S-1/A |
|
333-178030 |
|
10.7 |
|
2/3/2012 |
|
|
|
10.7* |
|
Amended and Restated Offer Letter, by and
between Yelp Inc. and Rob Krolik, dated February 3, 2012. |
|
S-1/A |
|
333-178030 |
|
10.8 |
|
2/3/2012 |
|
|
|
10.8* |
|
Amended and Restated Offer Letter, by and
between Yelp Inc. and Jed Nachman, dated February 3, 2012. |
|
S-1/A |
|
333-178030 |
|
10.9 |
|
2/3/2012 |
|
|
|
10.9* |
|
Amended and Restated Offer Letter, by and
between Yelp Inc. and Laurence Wilson, dated February 3, 2012. |
|
S-1/A |
|
333-178030 |
|
10.10 |
|
2/3/2012 |
|
|
|
10.10 |
|
Amended and Restated Office Lease, by and
between Yelp Inc. and 706 Mission Street Co. LLC, effective October 1,
2009. |
|
S-1/A |
|
333-178030 |
|
10.12 |
|
2/3/2012 |
|
|
|
10.11 |
|
Galleria Corporate Center Lease between Yelp
Inc. and JEMB SCOTTSDALE LLC, dated January 20, 2010; First Amendment to
Lease, dated January 4, 2011; Second Amendment to Lease, dated August 8,
2011. |
|
S-1/A |
|
333-178030 |
|
10.13 |
|
2/3/2012 |
|
|
|
10.12 |
|
License Agreement between Harrison 160, LLC,
as Licensor, and MRL Ventures Inc., as Licensee, dated as of April 16,
2004; Addendums through November 10, 2011. |
|
S-1/A |
|
333-178030 |
|
10.14 |
|
2/3/2012 |
|
|
|
10.13* |
|
Offer Letter, by and between Yelp Inc. and
Jeremy Stoppelman, dated February 3, 2012. |
|
S-1/A |
|
333-178030 |
|
10.15 |
|
2/3/2012 |
|
|
|
10.14* |
|
2012 Equity Incentive Plan, as
amended. |
|
8-K |
|
001-35444 |
|
10.1 |
|
6/11/2013 |
|
|
|
10.15* |
|
Form of Option Agreement and Grant Notice
and RSU Award Agreement and Grant Notice under 2012 Equity Incentive
Plan. |
|
S-1/A |
|
333-178030 |
|
10.17 |
|
2/3/2012 |
|
|
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
Filed |
|
|
|
|
|
|
Incorporated by
Reference |
|
Herewith |
Exhibit |
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Exhibit
Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing
Date |
|
|
10.16* |
|
2012 Employee Stock
Purchase Plan. |
|
S-1/A |
|
333-178030 |
|
10.18 |
|
2/3/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17* |
|
Executive Severance
Benefit Plan. |
|
S-1/A |
|
333-178030 |
|
10.19 |
|
2/3/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18* |
|
Secondment Agreement,
dated April 25, 2012, by and between Yelp Inc. and Jed Nachman. |
|
8-K |
|
001-35444 |
|
99.1 |
|
4/27/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.19 |
|
Lease Agreement, by
and between Yelp UK Limited and Knight Frank LLP, dated March 1,
2012. |
|
10-Q |
|
001-35444 |
|
10.11 |
|
5/4/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20 |
|
Office Lease, dated
May 9, 2012, by and between Yelp Inc. and Stockbridge 138 New Montgomery
LLC. |
|
8-K |
|
001-35444 |
|
10.1 |
|
5/10/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21* |
|
Compensation
Information for Registrants Executive Officers. |
|
8-K |
|
001-35444 |
|
|
|
2/8/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22* |
|
Letter
Agreement, dated May 22, 2014, by and between Joseph Nachman and Yelp
Inc. |
|
8-K |
|
001-35444 |
|
99.1 |
|
5/28/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.23 |
|
Lease, dated
July 31, 2014, by and between Yelp Inc. and 11 Madison Avenue
LLC. |
|
8-K |
|
001-35444 |
|
10.1 |
|
8/6/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1 |
|
Subsidiaries of Yelp
Inc. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1 |
|
Consent of Independent
Registered Public Accounting Firm. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
24.1 |
|
Power of Attorney
(included on signature page). |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Certification pursuant
to Rule 13a-14(a)/15d-14(a). |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
Certification pursuant
to Rule 13a-14(a)/15d-14(a). |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
Certifications of
Chief Executive Officer and Chief Financial Officer. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
XBRL Instance
Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy
Extension Schema Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy
Extension Calculation Linkbase Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF |
|
XBRL Taxonomy
Extension Definition Linkbase Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy
Extension Labels Linkbase Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE |
|
XBRL Taxonomy
Extension Presentation Linkbase Document. |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Indicates management contract or compensatory plan or
arrangement. |
|
|
|
The certifications attached as Exhibit 32.1 accompany this Annual
Report, are not deemed filed with the Securities and Exchange Commission
and are not to be incorporated by reference into any filing of Yelp Inc.
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, whether made before or after the date of this
Annual Report, irrespective of any general incorporation language
contained in such filing. |
EXHIBIT 21.1
SUBSIDIARIES
Cityvox SAS
(France)
Eat24, LLC (Delaware)
Qype GmbH
(Germany)
Qype Ltd. (England and
Wales)
Qype SARL
(France)
Qype Spain S.L.
(Spain)
SeatMe, LLC
(Delaware)
Yelp Australia Pty Ltd
(Australia)
Yelp Canada Inc.
(Canada)
Yelp Deutschland GmbH
(Germany)
Yelp España S.L.
(Spain)
Yelp France SAS
(France)
Yelp Ireland Holding
Company Limited (Ireland)
Yelp Ireland Limited
(Ireland)
Yelp Italia S.r.l.
(Italy)
Yelp Singapore PTE Ltd.
(Singapore)
Yelp UK Ltd (England and
Wales)
Yelp Japan, G.K.
(Japan)
Yelp Brazil Servicos de
Marketing Ltda. (Brazil)
EXHIBIT 23.1
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the
incorporation by reference in Registration Statement No. 333-191967 on Form S-3
and Registration Statement Nos. 333-180221, 333-187545, 333-192016, and
333-194260 on Form S-8 of our reports dated February 27, 2015, relating to the
consolidated financial statements of Yelp Inc. and subsidiaries, and the
effectiveness of Yelp Inc.s internal
control over financial reporting, appearing in this Annual Report on Form 10-K of Yelp
Inc. for the year ended December 31, 2014.
/S/ |
DELOITTE & TOUCHE LLP
|
San Francisco, California
February 27, 2015
EXHIBIT 31.1
CERTIFICATIONS
I, Jeremy Stoppelman,
certify that:
1. I have reviewed this
Annual Report on Form 10-K of Yelp Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
4. The registrants other
certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b) Designed such internal
control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report
any change in the registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
5. The registrants other
certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
a) All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or
not material, that involves management or other employees who have a significant
role in the registrants internal control over financial reporting.
Date: February 27, 2015
/s/ Jeremy
Stoppelman |
Jeremy
Stoppelman |
Chief Executive
Officer |
EXHIBIT 31.2
CERTIFICATION
I, Rob Krolik, certify
that:
1. I have reviewed this
Annual Report on Form 10-K of Yelp Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
4. The registrants other
certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
b) Designed such internal
control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report
any change in the registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
5. The registrants other
certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrants auditors and
the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
a) All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or
not material, that involves management or other employees who have a significant
role in the registrants internal control over financial reporting.
Date: February 27, 2015
/s/ Rob
Krolik |
Rob
Krolik |
Chief Financial
Officer |
EXHIBIT 32.1
CERTIFICATION
Pursuant to the requirement
set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended
(the Exchange Act), and Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. § 1350), Jeremy Stoppelman, Chief Executive Officer of
Yelp Inc. (the Company), and Rob Krolik, Chief Financial Officer of the
Company, each hereby certifies that, to the best of his knowledge:
1. The Companys Annual Report on Form 10-K for the
period ended December 31, 2014, to which this Certification is attached as Exhibit 32.1 (the
Annual Report), fully complies with the requirements of Section 13(a) or
Section 15(d) of the Exchange Act; and
2. The information contained in the Annual Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
In Witness Whereof, the
undersigned have set their hands hereto as of the 27th day of February,
2015.
/s/ Jeremy
Stoppelman |
|
/s/ Rob
Krolik |
Jeremy
Stoppelman |
|
Rob
Krolik |
Chief Executive Officer |
|
Chief Financial Officer |
This certification
accompanies the Annual Report on Form 10-K to which it relates, is not deemed
filed with the Securities and Exchange Commission and is not to be incorporated
by reference into any filing of Yelp Inc. under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (whether made before
or after the date of the Form 10-K), irrespective of any general incorporation
language contained in such filing.
Yelp (NYSE:YELP)
Historical Stock Chart
From Jun 2024 to Jul 2024
Yelp (NYSE:YELP)
Historical Stock Chart
From Jul 2023 to Jul 2024