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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________
Form 10-Q
______________________________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the Quarterly Period Ended March 31, 2022
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.)
350 Mission Street, 10th Floor
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)

(415) 908-3801
(Registrant’s Telephone Number, Including Area Code)
_________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.000001 per share YELP New York Stock Exchange LLC
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer        
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  
As of April 29, 2022, there were 70,859,229 shares outstanding of the registrant’s common stock, par value $0.000001 per share.


YELP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
Part I.
Item 1.
4
5
6
7
8
9
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
___________________________________
Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “Yelp,” the “Company,” “we,” “us” and “our” refer to Yelp Inc. and, where appropriate, its subsidiaries.
Unless the context otherwise indicates, where we refer in this Quarterly 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 that are optimized for mobile-based browsers. Similarly, references to our “website” refer to versions of our website dedicated to both desktop- and mobile-based browsers, as well as the U.S. and international versions of our website.

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements that involve risks, uncertainties and 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. All statements contained in this Quarterly Report that are not purely historical, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include, but are not limited to, statements about:
our financial performance, including our revenue, operating expenses and margins, as well as our ability to regain or maintain profitability;
our ability to maintain and expand our advertiser base;
our strategic initiatives to support revenue growth and margin expansion;
our investment plans and priorities, including planned investments in product development, marketing and our sales channels, as well as our ability to execute against those priorities and the results thereof;
our ability to operate with a primarily distributed workforce as well as the benefits and costs thereof;
trends and expectations regarding customer and revenue retention;
trends and expectations regarding our key metrics, including consumer traffic and engagement and the opportunity they present for growth;
our liquidity and working capital requirements; and
our plans with respect to our stock repurchase program.
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, which are in turn 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. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the 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 in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”) and elsewhere in this Quarterly Report, such as:
our ability to hire, retain, motivate and effectively manage well-qualified employees in a primarily remote work environment;
2

our ability to accurately forecast revenue and appropriately plan expenses;
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.
NOTE REGARDING METRICS
We review a number of performance metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. Please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics” in this Quarterly Report and in our Annual Report for information on how we define our key metrics. Unless otherwise stated, these metrics do not include metrics from subscription products or our business-owner products.
While our metrics are based on what we believe to be reasonable calculations, there are inherent challenges in measuring usage across our large user base. Certain of our performance metrics, including the number of unique devices accessing our mobile app, ad clicks, average cost-per-click and active claimed local business locations, are tracked with internal company tools, which are not independently verified by any third party and have a number of limitations. For example, our metrics may be affected by mobile applications that automatically contact our servers for regular updates with no discernible user action involved; this activity can cause our system to count the device associated with the app as an app unique device in a given period. Although we take steps to exclude such activity and, as a result, do not believe it has had a material impact on our reported metrics, our efforts may not successfully account for all such activity.
Our metrics that are calculated based on data from third parties — the number of desktop and mobile website unique visitors — are subject to similar limitations. Our third-party providers periodically encounter difficulties in providing accurate data for such metrics as a result of a variety of factors, including human and software errors. In addition, because these traffic metrics are tracked based on unique cookie identifiers, 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 may not accurately reflect the number of people actually visiting our website.
Our measures of traffic and other key metrics may also differ from estimates published by third parties (other than those whose data we use to calculate such 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. From time to time, we may discover inaccuracies in our metrics or make adjustments to improve their accuracy, including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated.

3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YELP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents $ 465,121  $ 479,783 
Accounts receivable (net of allowance for doubtful accounts of $8,201 and $7,153 at March 31, 2022 and December 31, 2021, respectively)
111,762  107,358 
Prepaid expenses and other current assets 60,458  57,536 
Total current assets 637,341  644,677 
Property, equipment and software, net 83,138  83,857 
Operating lease right-of-use assets 132,029  140,785 
Goodwill 104,317  105,128 
Intangibles, net 10,020  10,673 
Restricted cash 794  858 
Other non-current assets 77,267  64,550 
Total assets $ 1,044,906  $ 1,050,528 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 146,283  $ 119,620 
Operating lease liabilities — current 41,130  40,237 
Deferred revenue 8,218  4,156 
Total current liabilities 195,631  164,013 
Operating lease liabilities — long-term 117,398  127,979 
 Other long-term liabilities
7,528  7,218 
Total liabilities 320,557  299,210 
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.000001 par value — 200,000 shares authorized, 71,641 shares issued and 71,559 shares outstanding at March 31, 2022, and 72,171 shares issued and outstanding at December 31, 2021
—  — 
Additional paid-in capital 1,547,337  1,522,572 
Treasury stock (2,886) — 
Accumulated other comprehensive loss (11,903) (11,090)
Accumulated deficit (808,199) (760,164)
Total stockholders' equity 724,349  751,318 
Total liabilities and stockholders' equity $ 1,044,906  $ 1,050,528 

See Notes to Condensed Consolidated Financial Statements.
4

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2022 2021
Net revenue $ 276,628  $ 232,096 
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 23,429  14,874 
Sales and marketing 126,097  112,909 
Product development 80,685  67,992 
General and administrative 39,383  31,861 
Depreciation and amortization 11,490  13,083 
Restructuring —  20 
Total costs and expenses 281,084  240,739 
Loss from operations (4,456) (8,643)
Other income, net 929  705 
Loss before income taxes (3,527) (7,938)
Benefit from income taxes (2,612) (2,142)
Net loss attributable to common stockholders $ (915) $ (5,796)
Net loss per share attributable to common stockholders
Basic $ (0.01) $ (0.08)
Diluted $ (0.01) $ (0.08)
Weighted-average shares used to compute net loss per share attributable to common stockholders
Basic 71,639  75,245 
Diluted 71,639  75,245 

See Notes to Condensed Consolidated Financial Statements.

5

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
  2022 2021
Net loss $ (915) $ (5,796)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax (813) (2,752)
Other comprehensive loss (813) (2,752)
Comprehensive loss $ (1,728) $ (8,548)

See Notes to Condensed Consolidated Financial Statements.


6

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Common Stock Additional Paid-In Capital Treasury Stock Accumulated
Other Comprehensive Loss
Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance as of December 31, 2020 75,371  $ —  $ 1,398,248  $ (2,964) $ (6,807) $ (533,943) $ 854,534 
Issuance of common stock upon exercises of employee stock options 524  —  6,049  —  —  —  6,049 
Issuance of common stock upon vesting of restricted stock units ("RSUs") 670  —  —  —  —  —  — 
Stock-based compensation (inclusive of capitalized stock-based compensation) —  —  41,519  —  —  —  41,519 
Shares withheld related to net share settlement of equity awards —  —  (16,926) —  —  —  (16,926)
Repurchases of common stock —  —  —  (49,528) —  —  (49,528)
Retirement of common stock (1,412) —  —  49,179  —  (49,179) — 
Foreign currency adjustments, net of tax —  —  —  —  (2,752) —  (2,752)
Net loss —  —  —  —  —  (5,796) (5,796)
Balance as of March 31, 2021 75,153  $ —  $ 1,428,890  $ (3,313) $ (9,559) $ (588,918) $ 827,100 
Balance as of December 31, 2021 72,171  $ —  $ 1,522,572  $ —  $ (11,090) $ (760,164) $ 751,318 
Issuance of common stock upon exercises of employee stock options 27  —  588  —  —  —  588 
Issuance of common stock upon vesting of RSUs 825  —  —  —  —  —  — 
Stock-based compensation (inclusive of capitalized stock-based compensation) —  —  42,767  —  —  —  42,767 
Shares withheld related to net share settlement of equity awards —  —  (18,590) —  —  —  (18,590)
Repurchases of common stock —  —  —  (50,006) —  —  (50,006)
Retirement of common stock (1,382) —  —  47,120  —  (47,120) — 
Foreign currency adjustments, net of tax —  —  —  —  (813) —  (813)
Net loss —  —  —  —  —  (915) (915)
Balance as of March 31, 2022 71,641  $ —  $ 1,547,337  $ (2,886) $ (11,903) $ (808,199) $ 724,349 

See Notes to Condensed Consolidated Financial Statements.
7

YELP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2022 2021
Operating Activities
Net loss $ (915) $ (5,796)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 11,490  13,083 
Provision for doubtful accounts 7,562  3,289 
Stock-based compensation 41,060  39,245 
Noncash lease cost 8,453  10,779 
Deferred income taxes (11,074) (2,406)
Amortization of deferred cost 4,039  3,401 
Other adjustments, net 248  14 
Changes in operating assets and liabilities:
Accounts receivable (11,968) (3,639)
Prepaid expenses and other assets (7,494) 491 
Operating lease liabilities (9,492) (6,871)
Accounts payable, accrued liabilities and other liabilities 27,994  7,341 
Net cash provided by operating activities 59,903  58,931 
Investing Activities
Purchases of property, equipment and software (6,636) (6,005)
Other investing activities 61  29 
Net cash used in investing activities (6,575) (5,976)
Financing Activities
Proceeds from issuance of common stock for employee stock-based plans 540  6,049 
Taxes paid related to the net share settlement of equity awards (18,487) (16,803)
Repurchases of common stock (50,006) (49,528)
Net cash used in financing activities (67,953) (60,282)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (101) 68 
Change in cash, cash equivalents and restricted cash (14,726) (7,259)
Cash, cash equivalents and restricted cash — Beginning of period 480,641  596,540 
Cash, cash equivalents and restricted cash — End of period $ 465,915  $ 589,281 
Supplemental Disclosures of Other Cash Flow Information
Refunds received for income taxes, net $ (1,005) $ (704)
Supplemental Disclosures of Noncash Investing and Financing Activities
Purchases of property, equipment and software recorded in accounts payable and accrued liabilities $ 3,178  $ 1,242 
Tax liabilities related to equity awards included in accounts payable and accrued liabilities $ $ 43 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ —  $ 4,497 
Repurchases of common stock recorded in accounts payable and accrued liabilities $ 2,656  $ 2,041 

See Notes to Condensed Consolidated Financial Statements.
8

YELP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS FOR PRESENTATION
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 Condensed Consolidated Financial Statements refers to Yelp Inc. and its subsidiaries.
Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust Yelp for its extensive ratings and reviews of businesses across a broad range of categories, while businesses advertise on Yelp to reach its large audience of purchase-oriented and generally affluent consumers.
Basis of Presentation
The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Annual Report.
The unaudited condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP, including certain notes to the financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation, including reclassifying amortization of deferred costs to a separate line item within the condensed consolidated statement of cash flows.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments of a normally recurring nature necessary for the fair presentation of the interim periods presented.
Principles of Consolidation
These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of the Company’s unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed 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 condensed consolidated financial statements; therefore, actual results could differ from management’s estimates due to the uncertainty of the extent of the impacts of macroeconomic conditions and other factors.
Significant Accounting Policies
There have been no material changes to the Company's significant accounting policies from those described in the Annual Report.
9

2. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash, cash equivalents and restricted cash as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Cash $ 74,694  $ 89,407 
Cash equivalents 390,427  390,376 
Total cash and cash equivalents $ 465,121  $ 479,783 
Restricted cash 794  858 
Total cash, cash equivalents and restricted cash $ 465,915  $ 480,641 
3. FAIR VALUE MEASUREMENTS
The Company’s investments in money market accounts are recorded as cash equivalents at fair value on the condensed consolidated balance sheets.
The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value in the following hierarchy:
Level 1—Observable inputs, such as quoted prices in active markets,
Level 2—Inputs other than quoted prices in active markets that are observable either directly or indirectly, or
Level 3—Unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data, when available, to minimize the use of unobservable inputs when determining fair value. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets. The Company's certificates of deposit 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 following table represents the fair value of the Company’s financial instruments, including those measured at fair value on a recurring basis, as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022 December 31, 2021
  Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash equivalents:  
Money market funds $ 390,427  $ —  $ —  $ 390,427  $ 390,376  $ —  $ —  $ 390,376 
Other investments:
Certificates of deposit —  10,000  —  10,000  —  10,000  —  10,000 
Total cash equivalents and other investments $ 390,427  $ 10,000  $ —  $ 400,427  $ 390,376  $ 10,000  $ —  $ 400,376 
The certificates of deposit are reflected in prepaid expenses and other current assets on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
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4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Prepaid expenses $ 15,811  $ 13,480 
Certificates of deposit 10,000  10,000 
Other current assets 34,647  34,056 
Total prepaid expenses and other current assets $ 60,458  $ 57,536 
Prepaid expenses included $0.6 million of short-term capitalized implementation costs related to cloud computing arrangements that are service contracts. The long-term portion of capitalized cloud computing implementation costs of $0.9 million are included in other non-current assets. The Company recorded an immaterial amount of amortization expense during the three months ended March 31, 2022 related to capitalized implementation costs. As of March 31, 2022, other current assets primarily consisted of non-trade receivables and deferred costs related to unsettled share repurchases.
5. PROPERTY, EQUIPMENT AND SOFTWARE, NET
Property, equipment and software, net as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Capitalized website and internal-use software development costs $ 209,685  $ 202,169 
Leasehold improvements 60,559  59,190 
Computer equipment 48,802  48,264 
Furniture and fixtures 12,277  12,573 
Telecommunication 4,950  4,953 
Software 1,703  1,703 
Total 337,976  328,852 
Less accumulated depreciation and amortization (254,838) (244,995)
Property, equipment and software, net $ 83,138  $ 83,857 
Depreciation and amortization expense related to property, equipment and software was $10.8 million and $12.4 million for the three months ended March 31, 2022 and 2021, respectively.
6. GOODWILL AND INTANGIBLE ASSETS
The Company’s goodwill is the result of its acquisitions of other businesses and represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. The Company performed its annual goodwill impairment analysis as of August 31, 2021 and concluded that goodwill was not impaired, as the fair value of the reporting unit exceeded its carrying value.
The changes in carrying amount of goodwill during the three months ended March 31, 2022 were as follows (in thousands):
Balance as of December 31, 2021 $ 105,128 
Effect of currency translation (811)
Balance as of March 31, 2022 $ 104,317 
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Intangible assets that were not fully amortized as of March 31, 2022 and December 31, 2021 consisted of the following (dollars in thousands):
March 31, 2022
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life
Business relationships $ 9,918  $ (5,019) $ 4,899  6.9 years
Developed technology 7,709  (7,709) —  0.0 years
Licensing agreements 6,129  (1,022) 5,107  7.9 years
Domains and data licenses 2,869  (2,855) 14  1.3 years
Total $ 26,625  $ (16,605) $ 10,020 
December 31, 2021
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life
Business relationships $ 9,918  $ (4,786) $ 5,132  7.1 years
Developed technology 7,709  (7,453) 256  0.2 years
Licensing agreements 6,129  (860) 5,269  8.2 years
Domain and data licenses 2,869  (2,853) 16  1.5 years
Total $ 26,625  $ (15,952) $ 10,673 
Amortization expense was $0.7 million in each of the three months ended March 31, 2022 and 2021.
As of March 31, 2022, estimated future amortization expenses were as follows (in thousands):
Remainder of 2022 $ 1,023 
2023 1,359 
2024 1,353 
2025 1,353 
2026 1,353 
2027 1,353 
Thereafter 2,226 
Total amortization $ 10,020 
7. LEASES
The components of lease cost, net for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three Months Ended
March 31,
2022 2021
Operating lease cost $ 10,667  $ 13,763 
Short-term lease cost (12 months or less) 254  137 
Sublease income (2,777) (1,628)
Total lease cost, net $ 8,144  $ 12,272 
The Company's leases and subleases do not include any variable lease payments, residual value guarantees, related-party leases, or restrictions or covenants that would limit or prevent the Company from exercising its right to obtain substantially all of the economic benefits from use of the respective assets during the lease term.
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Supplemental cash flow information related to leases for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
Three Months Ended
March 31,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases $ 11,899  $ 9,590 
As of March 31, 2022, maturities of lease liabilities were as follows (in thousands):
Remainder of 2022 $ 36,515 
2023 45,566 
2024 42,840 
2025 22,300 
2026 7,365 
2027 6,554 
Thereafter 16,653 
Total minimum lease payments 177,793 
Less imputed interest (19,265)
Present value of lease liabilities $ 158,528 
As of March 31, 2022 and December 31, 2021, the weighted-average remaining lease terms and weighted-average discount rates were as follows:
March 31,
2022
December 31,
2021
Weighted-average remaining lease term (years) — operating leases 4.6 4.8
Weighted-average discount rate — operating leases 5.3  % 5.4  %
8. OTHER NON-CURRENT ASSETS
Other non-current assets as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Deferred tax assets $ 51,668  $ 40,606 
Deferred contract costs 19,093  16,931 
Other non-current assets 6,506  7,013 
Total other non-current assets $ 77,267  $ 64,550 
Deferred contract costs as of March 31, 2022 and December 31, 2021, and changes in deferred contract costs during the three months ended March 31, 2022, were as follows (in thousands):
Three Months Ended
March 31, 2022
Balance, beginning of period $ 16,931 
Add: costs deferred on new contracts 6,180 
Less: amortization recorded in sales and marketing expenses (4,018)
Balance, end of period $ 19,093 
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9. CONTRACT BALANCES
The changes in the allowance for doubtful accounts during the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three Months Ended
March 31,
2022 2021
Balance, beginning of period $ 7,153  $ 11,559 
Add: provision for doubtful accounts 7,562  3,289 
Less: write-offs, net of recoveries (6,514) (5,168)
Balance, end of period $ 8,201  $ 9,680 
The net increase in the allowance for doubtful accounts in the three months ended March 31, 2022 was primarily related to an anticipated increase in customer delinquencies due to an increase in both advertisers and customer spend during the three month period. The net decrease in the allowance for doubtful accounts in the three months ended March 31, 2021 was primarily a result of a reduction in expected customer delinquencies as collection rates improved. In calculating the allowance for doubtful accounts as of March 31, 2022 and 2021, the Company considered expectations of probable credit losses, including probable credit losses associated with the COVID-19 pandemic, based on observed trends in cancellations, observed changes in the credit risk of specific customers, the impact of anticipated closures and bankruptcies using forecasted economic indicators in addition to historical experience and loss patterns during periods of macroeconomic uncertainty.
Contract liabilities consist of deferred revenue, which is recorded on the condensed consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.
The changes in deferred revenue during the three months ended March 31, 2022 were as follows (in thousands):
Three Months Ended
March 31, 2022
Balance, beginning of period $ 4,156 
      Less: recognition of deferred revenue from beginning balance (2,905)
      Add: net increase in current period contract liabilities 6,967 
Balance, end of period $ 8,218 
The majority of the deferred revenue balance as of March 31, 2022 is expected to be recognized as revenue in the subsequent three-month period ending June 30, 2022. An immaterial amount of long-term deferred revenue is included in other long-term liabilities as of March 31, 2022. No other contract assets or liabilities were recorded on the Company's condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Accounts payable $ 11,386  $ 16,127 
Employee-related liabilities 68,153  50,132 
Accrued sales and marketing expenses 8,595  5,455 
Accrued cost of revenue 9,092  9,537 
Accrued legal settlements 26,000  26,037 
Other accrued liabilities 23,057  12,332 
Total accounts payable and accrued liabilities $ 146,283  $ 119,620 
As of March 31, 2022, other accrued liabilities primarily consisted of income taxes payable, accrued costs related to unsettled share repurchases and accrued workplace costs.
14

11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings—In January 2018, a putative class action lawsuit alleging violations of the federal securities laws was filed in the U.S. District Court for the Northern District of California, naming as defendants the Company and certain of its officers (the “Securities Class Action”). The complaint, which the plaintiff amended on June 25, 2018, alleges violations of the Securities Exchange Act of 1934, as amended, by the Company and its officers for allegedly making materially false and misleading statements regarding its business and operations on February 9, 2017. The plaintiff seeks unspecified monetary damages and other relief. On November 27, 2018, the Court granted in part and denied in part the defendants’ motion to dismiss. On October 22, 2019, the Court approved a stipulation to certify a class in this action and, on September 9, 2021, it denied the defendants’ motion for summary judgment. The case was scheduled for trial to begin on February 7, 2022. However, on December 3, 2021, the defendants reached a preliminary agreement with the plaintiff to settle this matter for $22.25 million, which payment the Company expects to be funded by defendants’ insurers. The proposed settlement would resolve all claims asserted against all defendants in the Securities Class Action without any liability or wrongdoing attributed to them. The plaintiff submitted the proposed settlement to the Court for preliminary approval on April 21, 2022.
On December 2, 2021, the Company reached a preliminary agreement to settle a pending stockholder derivative lawsuit (the “Derivative Action”) asserting claims against certain current and former officers, and naming the Company as a nominal defendant, which arose out of the same facts as the Securities Class Action and is pending before the same Court in the U.S. District Court for the Northern District of California. The proposed settlement would resolve all claims asserted against all defendants in the Derivative Action without any liability or wrongdoing attributed to them personally or to the Company. Under the terms of the proposed settlement, the Company’s board of directors would adopt and implement certain corporate governance modifications and the Company would receive $18.0 million of insurance proceeds, of which the Company has agreed to pay $3.75 million to the plaintiff’s attorneys as fees. The plaintiff submitted the proposed settlement to the Court for preliminary approval on January 28, 2022.
The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies, which it will accrue when it believes a loss is probable and the amount can be reasonably estimated. While the proposed settlement terms for both the Securities Class Action and the Derivative Action are subject to Court approval, the Company believes the loss for both are probable and the payment amounts described above, which total $26.0 million, represent reasonable estimates of loss contingencies. The Company also believes that the anticipated insurance proceeds related to each action described above, which also total $26.0 million, are probable and represent reasonable estimates for loss recovery. Accordingly, the Company recorded a $26.0 million accrual for loss contingency within accounts payable and accrued liabilities as well as a $26.0 million receivable for loss recovery within prepaid expenses and other current assets on its condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.
The Company is subject to other 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 other matters will have a material effect on the Company’s business, financial position, results of operations or cash flows.
Indemnification Agreements—In 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 to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.
While the outcome of claims cannot be predicted with certainty, the Company does not believe that the outcome of any claims under the indemnification arrangements will have a material effect on the Company’s business, financial position, results of operations or cash flows.
15

Revolving Credit Facility—The Company is a party to a Credit Agreement with Wells Fargo Bank, National Association (the "Credit Agreement"), which provides for a three-year, $75.0 million senior unsecured revolving credit facility including a letter of credit sub-limit of $25.0 million. As of March 31, 2022, the Company had $21.5 million of letters of credit under the sub-limit related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $53.5 million remained available under the revolving credit facility as of this date. The Company was in compliance with all covenants associated with the credit facility and there were no loans outstanding under the Credit Agreement as of March 31, 2022. For additional information on the terms of the Credit Agreement, including fees payable by the Company, financial covenants, events of default and other limitations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" included under Part II, Item 7 in our Annual Report.
got12. STOCKHOLDERS’ EQUITY
The following table presents the number of shares authorized and issued as of the dates indicated (in thousands):
March 31, 2022 December 31, 2021
Shares Authorized Shares Issued Shares Authorized Shares Issued
Stockholders’ equity:    
Common stock, $0.000001 par value
200,000  71,641  200,000  72,171 
Undesignated preferred stock 10,000  —  10,000  — 
Stock Repurchase Program
As of March 31, 2022, the Company's board of directors had authorized it to repurchase up to an aggregate of $1.2 billion of its outstanding common stock, $181.7 million of which remained available as of March 31, 2022. The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing.
During the three months ended March 31, 2022, the Company repurchased on the open market 1,464,614 shares for an aggregate purchase price of $50.0 million and retired 1,382,078 shares. As of March 31, 2022, the Company had a treasury stock balance of 82,536 shares, which were excluded from its outstanding share count as of such date and subsequently retired in April 2022.
During the three months ended March 31, 2021, the Company repurchased on the open market 1,401,000 shares for an aggregate purchase price of $49.5 million and retired 1,412,188 shares. As of March 31, 2021, the Company had a treasury stock balance of 87,830 shares, which were excluded from its outstanding share count as of such date and subsequently retired in April 2021.
Equity Incentive Plans
Stock Options
Stock options are granted at a price per share not less than the fair value of a share of the Company’s common stock on the grant date. Options generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining shares vesting monthly thereafter or (b) ratably on a monthly basis. Options granted are generally exercisable for contractual terms of up to 10 years. The Company issues new shares when stock options are exercised.
16

A summary of stock option activity for the three months ended March 31, 2022 is as follows:
Number of Shares (in thousands) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021 3,979  $ 32.59  4.4 $ 24,580 
Exercised (27) 22.45   
Canceled (14) 11.68 
Outstanding at March 31, 2022 3,938  $ 32.68  4.2 $ 19,264 
Options vested and exercisable at March 31, 2022 3,693  $ 32.49  4.0 $ 19,000 
Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock as quoted on the New York Stock Exchange on a given date and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $0.3 million and $11.1 million for the three months ended March 31, 2022 and 2021, respectively.
There were no options granted during the three months ended March 31, 2022 and 2021.
As of March 31, 2022, total unrecognized compensation costs related to nonvested stock options were approximately $3.7 million, which the Company expects to recognize over a weighted-average time period of 1.7 years.
RSUs
RSUs generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining vesting quarterly thereafter or (b) ratably on a quarterly basis.
RSUs also include performance-based restricted stock units ("PRSUs"), which are subject to either (a) a market condition or (b) the achievement of performance goals. PRSUs may also be subject to a time-based vesting schedule of quarterly over four years (the "Time-Based Vesting Schedule"). For PRSUs subject to a market condition, the Company recognizes expense from the date of grant. For PRSUs subject to performance goals, the Company recognizes expense when it is probable that the performance condition will be achieved.
The Company granted PRSUs subject to market conditions in 2019 and 2022. The shares underlying each PRSU award granted in 2019 will be eligible to vest only if the average closing price of the Company's common stock equals or exceeds $45.3125 over any 60-day trading period during the four years following the grant date of February 7, 2019. If this market condition is met, the shares underlying each PRSU award will vest according to the Time-Based Vesting Schedule. Any shares subject to the PRSUs that have met the Time-Based Vesting Schedule at the time the market condition is achieved will fully vest as of such date; thereafter, any remaining nonvested shares subject to the PRSUs will continue vesting solely according to the Time-Based Vesting Schedule, subject to the applicable employee's continued service as of each such vesting date.
The shares underlying each PRSU award granted in 2022 that is subject to market conditions vest based on the relative performance of the Company's total stockholder return ("TSR") over a three-year period. A percentage of the target number of shares underlying each award, ranging from zero to 200%, will vest based on the percentile rank of the Company's TSR relative to that of the other companies in the Russell 2000 Index over the period beginning January 1, 2022 and ending December 31, 2024. The Company’s TSR, as well as the TSR of the other companies in the Russell 2000 Index, will be calculated based on the average closing price of each company's stock over the last 20 trading days of the performance period compared to the average closing price over the first 20 trading days of the performance period. Any shares that become eligible to vest based on the Company's level of achievement of the market goal will fully vest on or following certification of the Company's performance on February 20, 2025 or, if certification occurs following such date, March 15, 2025, subject to the applicable employee's continued service as of such vesting date.
For PRSUs subject to performance goals, a percentage of the target number of shares, ranging from zero to 200%, will become eligible to vest based on the Company's level of achievement of certain financial targets, subject to the Time-Based Vesting Schedule. The shares subject to performance goals become eligible to vest once the achievement against the financial targets is known, which will be no later than March of the following year. On the quarterly vest date immediately following such determination (or a vest date otherwise specified in the agreement), the eligible shares, if any, will vest to the extent that the employee has met the Time-Based Vesting Schedule as of such date. Thereafter, the eligible shares will continue to vest in accordance with the Time-Based Vesting Schedule, subject to the applicable employee's continued service as of each such
17

vesting date. The Company performed an analysis as of March 31, 2022 to assess the probability of achievement of the PRSU financial targets and, as a result, recorded compensation costs in the three months ended March 31, 2022 for the PRSUs that it expected to vest.
As the PRSU activity during the three months ended March 31, 2022 was not material, it is presented together with the RSU activity in the table below. A summary of RSU and PRSU activity for the three months ended March 31, 2022 is as follows (in thousands, except per share amounts):
Number of Shares Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2021 10,016  $ 32.39 
Granted 4,818  36.06 
Vested(1)
(1,371) 33.80 
Canceled (728) 32.93 
Nonvested at March 31, 2022 12,735  $ 33.59 
(1) Includes 545,701 shares that vested but were not issued due to net share settlement for payment of employee taxes.
The aggregate fair value as of the vest date of RSUs and PRSUs that vested during the three months ended March 31, 2022 and 2021 was $46.7 million and $42.1 million, respectively. As of March 31, 2022, the Company had approximately $403.4 million of unrecognized stock-based compensation expense related to RSUs and PRSUs, which it expects to recognize over the remaining weighted-average vesting period of approximately 2.8 years.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan ("ESPP") allows eligible employees to purchase shares of the Company’s 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, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of the offering period, based on the closing sales price of the Company's common stock as quoted on the New York Stock Exchange on such date.
There were no shares purchased by employees under the ESPP in the three months ended March 31, 2022 or 2021. The Company recognized stock-based compensation expense related to the ESPP of $0.8 million in each of the three months ended March 31, 2022 and 2021.
Stock-Based Compensation
The following table summarizes the effects of stock-based compensation expense related to stock-based awards in the condensed consolidated statements of operations during the periods presented (in thousands):
Three Months Ended
March 31,
2022 2021
Cost of revenue $ 1,305  $ 1,108 
Sales and marketing 8,655  8,397 
Product development 23,125  20,753 
General and administrative 7,975  8,987 
Total stock-based compensation recorded to loss before income taxes 41,060  39,245 
Benefit from income taxes (9,138) (10,065)
Total stock-based compensation recorded to net loss $ 31,922  $ 29,180 
During the three months ended March 31, 2022 and 2021, the Company capitalized $2.5 million and $2.8 million, respectively, of stock-based compensation expense as website development costs and, to a lesser extent, implementation costs incurred related to cloud computing arrangements that are service contracts.
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13. OTHER INCOME, NET
Other income, net for the three months ended March 31, 2022 and 2021 consisted of the following (in thousands):
Three Months Ended
March 31,
2022 2021
Interest income (expense), net $ 22  $ (18)
Transaction gain on foreign exchange, net 71  257 
Other non-operating income, net 836  466 
Other income, net $ 929  $ 705 
14. INCOME TAXES
The Company is subject to income taxes in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income taxes. The benefit from income taxes for the three months ended March 31, 2022 was $2.6 million, which was due to $1.6 million of U.S. federal, state and foreign benefit from income taxes, and $1.0 million of net discrete tax benefit primarily related to stock-based compensation. The benefit from income taxes for the three months ended March 31, 2021 was $2.1 million, which was due to $1.8 million of U.S. federal, state and foreign income tax expense, offset by $3.9 million of net discrete tax benefit.
Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, excluding unusual or infrequently occurring discrete items, for the reporting period. For the three months ended March 31, 2022, the difference between the effective tax rate and the federal statutory tax rate primarily related to stock-based compensation and the inclusion of global intangible low-taxed income ("GILTI"), offset by tax credits. As currently enacted, beginning in 2022, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which is expected to increase the amount of the Company's GILTI. For the three months ended March 31, 2021, the difference between the effective tax rate and the federal statutory tax rate primarily related to tax credits, offset by non-deductible expenses.
As of March 31, 2022, the total amount of gross unrecognized tax benefits was $55.3 million, $28.1 million of which was subject to a full valuation allowance and would not affect the Company’s effective tax rate if recognized. In the three months ended March 31, 2022, the Company recorded an immaterial amount of interest and penalties.
As of March 31, 2022, the Company estimated that it had accumulated undistributed earnings generated by its foreign subsidiaries of approximately $11.7 million. Any taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of the Company's foreign investments would generally be limited to foreign and state taxes. The Company has not recognized a deferred tax liability related to unremitted foreign earnings, as it intends to indefinitely reinvest these earnings, and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs.
In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company’s federal and state income tax returns for tax years subsequent to 2003 remain open to examination. In the Company’s foreign jurisdictions — Canada, Germany, Ireland and the United Kingdom — the tax years subsequent to 2016 remain open to examination. The Company regularly assesses the likelihood of adverse outcomes resulting from examinations to determine the adequacy of its provision for income taxes and monitors the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. As of March 31, 2022, although the timing of the resolution or closure of audits is not certain, the Company believes it is reasonably possible that its unrecognized tax benefits could be reduced by $0.9 million over the next 12 months.
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15. NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted net loss per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Potential common shares consist of the incremental shares of common stock issuable upon the exercise of stock options, shares issuable upon the vesting of RSUs (including PRSUs) and, to a lesser extent, purchase rights related to the ESPP.
The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
Three Months Ended
March 31,
2022 2021
Basic net loss per share:
Net loss $ (915) $ (5,796)
Shares used in computation:
Weighted-average common shares outstanding 71,639  75,245 
Basic net loss per share attributable to common stockholders $ (0.01) $ (0.08)
Three Months Ended
March 31,
2022 2021
Diluted net loss per share:
Net loss $ (915) $ (5,796)
Shares used in computation:
    Weighted-average common shares outstanding 71,639  75,245 
Diluted net loss per share attributable to common stockholders $ (0.01) $ (0.08)
The following stock-based instruments were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (in thousands):
Three Months Ended
March 31,
2022 2021
Stock options 3,938  4,089 
RSUs 12,735  12,199 
ESPP 226  213 
16. INFORMATION ABOUT REVENUE AND GEOGRAPHIC AREAS
The Company considers operating segments to be components of the Company for which separate financial information is available and evaluated regularly by the Company’s 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 determined that it has a single operating and reporting segment. When the Company communicates results externally, it disaggregates net revenue into major product lines and primary geographical markets, which is based on the billing address of the customer. The disaggregation of net revenue by major product lines is based on the type of service provided and also aligns with the timing of revenue recognition for each. To reflect the Company's strategic focus on creating differentiated experiences for its Services categories and Restaurants, Retail & Other categories, the Company further disaggregates advertising revenue to reflect these two high-level category groupings. The Services categories consist of the following businesses: home, local, auto, professional, pets, events, real estate and financial services. The Restaurants, Retail & Other categories consist of the following businesses: restaurants, shopping, beauty & fitness, health and other.
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Net Revenue
The following table presents the Company’s net revenue by major product line (and by category for advertising revenue) for the periods presented (in thousands):
Three Months Ended
March 31,
2022 2021
Net revenue by product:
Advertising revenue by category(1):
Services $ 160,263  $ 140,687 
Restaurants, Retail & Other 102,974  81,300 
Advertising 263,237  221,987 
Transactions 3,180  3,804 
Other 10,211  6,305 
Total net revenue $ 276,628  $ 232,096 
(1) Advertising revenue by category in 2022 reflects an updated method of disaggregation. Prior-period amounts have not been updated as it is impracticable to do so, given certain historical information was not available.
During the three months ended March 31, 2022 and 2021, no individual customer accounted for 10% or more of consolidated net revenue.
As a result of the COVID-19 pandemic, the Company considered whether there was any impact to the manner in which revenue is recognized, in particular with respect to the collectability criteria for recognizing revenue from contracts with customers. The Company did not change the manner in which it recognizes revenue as a result of that assessment.
The Company offered a number of relief incentives to advertising and other revenue customers most impacted by the COVID-19 pandemic totaling $0.3 million and $2.2 million during the three months ended March 31, 2022 and 2021, respectively. These incentives were primarily in the form of waived subscription and advertising fees. The Company accounted for these incentives as price concessions and reduced net revenue recognized in the three months ended March 31, 2022 and 2021 accordingly.
The following table presents the Company’s net revenue by major geographic region for the periods presented (in thousands):
Three Months Ended
March 31,
2022 2021
United States $ 274,644  $ 229,995 
All other countries 1,984  2,101 
Total net revenue $ 276,628  $ 232,096 
Long-Lived Assets
The following table presents the Company’s long-lived assets by major geographic region for the periods presented (in thousands):
March 31,
2022
December 31,
2021
United States $ 77,992  $ 79,027 
All other countries 5,146  4,830 
Total long-lived assets $ 83,138  $ 83,857 
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ITEM 2. MANAGEMENT’S 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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly 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 in our Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.
Overview
As one of the best known internet brands in the United States, Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust us for our more than 220 million ratings and reviews of businesses across a broad range of categories, while businesses advertise with us to reach our large audience of purchase-oriented and generally affluent consumers. We believe our ability to provide value to both consumers and businesses not only fulfills our mission to connect consumers with great local businesses, but also positions us well in the local, digital advertising market in the United States.
We generate substantially all of our revenue from the sale of performance-based advertising products, which our advertising platform matches to individual consumers through auctions priced on a cost-per-click ("CPC") basis. In the three months ended March 31, 2022, our net revenue was $276.6 million, up 19% from the three months ended March 31, 2021, and we recorded net loss of $0.9 million and adjusted EBITDA of $48.1 million. For information on how we define and calculate adjusted EBITDA, and a reconciliation of this non-GAAP financial measure to net income (loss), see "Non-GAAP Financial Measures" below.
In the first quarter of 2022, our strategic investments in product and marketing drove further progress on our revenue growth initiatives:
Grow quality leads and monetization in Services. We continued working to drive more high-quality leads to Services businesses in the first quarter, including through enhancements to Request-a-Quote. Product improvements to reduce friction in the Request-a-Quote flow and better match consumers with the right businesses for their projects drove increases in both the number of submitted projects and consumer response rates following their implementation in the first quarter, and contributed to advertising revenue from Services businesses increasing 14% year over year and 38% from the first quarter of 2019.
Drive sales through the most efficient channels. Revenue from our Self-serve and Multi-location channels reached 46% of advertising revenue in the first quarter. Marketing investments and product improvements to the claim and ads purchase flows contributed to record Self-serve customer acquisition, which, together with continued strength in retention, resulted in advertising revenue from our Self-serve channel increasing by more than 30% year over year to reach a new record. Our Multi-location channel also gained momentum in the first quarter; revenue from this channel increased 35% year over year and paying advertising locations reached its highest quarterly level since the COVID-19 pandemic began in the first quarter of 2020.
Deliver more value to advertisers. Ad clicks increased by 4% year over year while Average CPC increased by 17% year over year. Growth in average CPC outpaced growth in ad clicks due to higher advertising demand than consumer engagement, particularly in Services. We believe this dynamic was driven by a combination of macroeconomic conditions, including inflation. Despite this, the first quarter marked another record in our retention rate for non-term advertiser budgets, demonstrating our continued ability to deliver more relevant, high-quality ad clicks to advertisers as we work to improve the efficiency of our ad system to better match consumers with the right advertisers.
Enhance the consumer experience. With an increased focus on consumer experience, we are investing in various product and marketing initiatives designed to expand Yelp's trusted content and drive targeted user engagement and growth. In the first quarter, we expanded the public health inspection information available on our platform, introduced new eco-friendly business attributes to help consumers make more informed decisions and entered into a new data licensing partnership that extends the reach of our content to Uber riders. With a view to bringing the user experience on our Android app to parity with the iOS experience, we significantly improved the map view search experience on the Android app and executed backend improvements, resulting in a 20% increase in Android ad clicks following their implementation in March 2022.
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As a result of the structural improvements to our business and continued expense management, our strong revenue performance in the first quarter benefited our bottom line: net loss improved year over year to $0.9 million and adjusted EBITDA increased 10% year over year to $48.1 million, even as we continued our strategic investments in product and marketing. We expect net revenue to increase sequentially in the second quarter and plan to further invest in our growth initiatives; accordingly, we expect second quarter adjusted EBITDA to be approximately flat with the first quarter.
Key Metrics
We regularly review a number of metrics, including the key metrics set forth below, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.
Ad Clicks
Ad clicks represent user interactions with our pay-for-performance advertising products, including clicks on advertisements on our website and mobile app, clicks on syndicated advertisements on third-party platforms and Request-a-Quote submissions. Ad clicks include only user interactions that we are able to track directly, and therefore do not include user interactions with ads sold through our advertising partnerships. We do not expect the exclusion of such user interactions to materially affect this metric.
Because we generate revenue primarily from the sale of performance-based ads, our ability to increase our revenue depends largely on our ability to increase ad clicks. We report the year-over-year percentage change in ad clicks on a quarterly basis as a measure of our success in monetizing more of our consumer traffic and delivering more value to advertisers.
The following table presents year-over-year changes in our ad clicks for the periods indicated (expressed as a percentage):
Three Months Ended
March 31,
2022 2021
Ad Clicks 4% (8)%
Average CPC
We define average CPC as revenue from our performance-based ad products — excluding certain revenue adjustments that do not impact the outcome of an auction for an individual ad click, such as refunds, as well as revenue from our advertising partnerships — divided by the total number of ad clicks for a given three-month period.
Average CPC, when viewed together with ad clicks, provides important insight into the value we deliver to advertisers, which we believe is a significant factor in our ability to retain both revenue and customers. For example, a positive change in ad clicks for a given three-month period combined with lower growth or a negative change in average CPC over the same period would indicate that we delivered more ad clicks at lower prices, thereby delivering more value to our advertisers; we would typically expect this to have a positive impact on retention. Although growth in average CPC outpaced growth in ad clicks in the three months ended March 31, 2022, we continued to have a high retention rate of non-term advertisers' budgets during the quarter. This dynamic was due to higher advertising demand than consumer engagement, particularly in Services, which we believe was driven by a combination of macro conditions, including inflation. We expect these complex macroeconomic conditions to continue to cause volatility in these metrics in the near term. We believe that average CPC and ad clicks together reflect one of the largest dynamics affecting our advertising revenue performance.
The following table presents year-over-year changes in our average CPC for the periods indicated (expressed as a percentage):
Three Months Ended
March 31,
2022 2021
Average CPC 17% (3)%
Advertising Revenue by Category
Our advertising revenue comprises revenue from the sale of our advertising products, including the resale of our advertising products by partners and syndicated ads appearing on third-party platforms.
To reflect our strategic focus on creating two differentiated experiences on Yelp, we provide a quarterly breakdown of our advertising revenue attributable to businesses in two high-level category groupings: Services and Restaurants, Retail & Other.
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Our Services categories consist of home, local, auto, professional, pets, events, real estate and financial services. Our Restaurants, Retail & Other categories consist of restaurants, shopping, beauty & fitness, health and other.
Advertising revenue by category for the three months ended March 31, 2022 reflects our updated methodology for determining the business category with which advertising revenue is associated based on the business category of each advertising location rather than the business category of the business account that paid for the advertising. While business locations associated with a single payment account are generally part of the same business, they may offer a variety or a combination of services that differ by location; accordingly, we believe our updated methodology provides a more precise breakdown of our advertising revenue between our Services and Restaurants, Retail & Other categories.
The categorization of business locations can change over time and historical business categories for individual business locations are not available; as a result, it is impracticable to apply our updated methodology to prior-year amounts based on the business categorizations in effect during the prior-year period. However, applying our updated methodology to the three months ended March 31, 2021 based on the current business categories of the associated advertising locations does not result in a materially different breakdown than previously reported for such periods. Due to the differences between the types of business categories comprising our Services and Restaurants, Retail & Other categories, we do not believe a significant number of businesses are re-categorized such that they move from one high-level category grouping to the other, and so do not believe the result would be materially different based on the then-current categorizations.
The following table presents our advertising revenue by category for the periods indicated (in thousands, except percentages):
Three Months Ended
March 31,
% Change
2022 2021
Services $ 160,263  $ 140,687  14%
Restaurants, Retail & Other 102,974  81,300  27%
Total Advertising Revenue $ 263,237  $ 221,987  19%
Paying Advertising Locations By Category
Paying advertising locations comprise all business locations associated with a business account from which we recognized advertising revenue in a given month, excluding business accounts that purchased advertising through partner programs other than Yelp Ads Certified Partners, averaged over a given three-month period. We also provide a breakdown of paying advertising locations between our Services categories and Restaurants, Retail & Other categories.
We provide our paying advertising locations on a quarterly basis as a measure of the reach and scale of our business; however, this metric may exhibit short-term volatility as a result of factors such as seasonality and macroeconomic conditions. For example, macroeconomic factors, such as ongoing concerns about COVID-19 and its variants as well as labor and supply chain challenges, have had a predominant negative impact on Restaurants, Retail & Other paying advertising locations in recent quarters. Short-term fluctuations in paying advertising locations may also reflect the acquisition or loss of single advertising accounts associated with large numbers of locations, or the pausing/restarting of advertising campaigns by such multi-location advertisers.
The following table presents the number of paying advertising locations by category during the periods indicated (in thousands, except percentages):
Three Months Ended
March 31,
% Change
2022 2021
Services 223 224 —%
Restaurants, Retail & Other 323 279 16%
Total Paying Advertising Locations 546 503 9%
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Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates and assumptions are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from those estimates. Due to macroeconomic conditions and other factors, certain estimates and assumptions have required and may continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may materially change in future periods.
We believe that the assumptions and estimates associated with revenue recognition, website and internal-use software development costs, the incremental borrowing rate used with respect to leases, business combinations, allowance for doubtful accounts, income taxes and stock-based compensation expense have the greatest potential impact on our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report.
Results of Operations
The following table sets forth our results of operations for the periods indicated (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of the results of operations to be anticipated for the full year 2022 or any future period.
Three Months Ended
March 31,
2022 2021 $ Change
% Change(1)
Condensed Consolidated Statements of Operations Data:
Net revenue by product:
Advertising revenue by category(2):
Services $ 160,263  $ 140,687  $ 19,576  14  %
Restaurants, Retail & Other 102,974  81,300  21,674  27  %
Advertising 263,237  221,987  41,250  19  %
Transactions 3,180  3,804  (624) (16) %
Other 10,211  6,305  3,906  62  %
Total net revenue 276,628  232,096  44,532  19  %
Costs and expenses:
 Cost of revenue (exclusive of depreciation and amortization shown separately below) 23,429  14,874  8,555  58  %
Sales and marketing 126,097  112,909  13,188  12  %
Product development 80,685  67,992  12,693  19  %
General and administrative 39,383  31,861  7,522  24  %
Depreciation and amortization 11,490  13,083  (1,593) (12) %
Restructuring —  20  (20) (100) %
Total costs and expenses 281,084  240,739  40,345  17  %
Loss from operations (4,456) (8,643) 4,187  (48) %
Other income, net 929  705  224  32  %
Loss before income taxes (3,527) (7,938) 4,411  (56) %
Benefit from income taxes (2,612) (2,142) (470) 22  %
Net loss $ (915) $ (5,796) $ 4,881  (84) %
(1) Percentage changes are calculated based on rounded numbers and may not recalculate exactly due to rounding.
(2) Please refer to “—Key Metrics—Ad Revenue by Category” for information on a methodology change adopted in 2021.
Three Months Ended March 31, 2022 and 2021
Net Revenue
Advertising. We generate advertising revenue from the sale of our advertising products — including enhanced listing pages and performance and impression-based advertising in search results and elsewhere on our platform — to businesses of all sizes, from single-location local businesses to multi-location national businesses. Advertising revenue also includes revenue generated
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from the resale of our advertising products by certain partners and monetization of remnant advertising inventory through third-party ad networks. We present advertising revenue on a disaggregated basis for our high-level category groupings, Services and Restaurants, Retail & Other.
Advertising revenue for the three months ended March 31, 2022 increased compared to the prior-year period primarily due to higher customer spend as a result of an improved retention rate of non-term advertisers' budgets and higher average revenue per location, as well as an increase in paying advertising locations in our Restaurants, Retail & Other categories. Paying advertising locations in Restaurants, Retail & Other increased as these businesses were able to operate at a greater capacity than the prior-year period.
Transactions. We generate revenue from various transactions with consumers, primarily through our partnership integrations, which are mainly revenue-sharing arrangements that provide consumers with the ability to complete food ordering and delivery transactions through third parties directly on Yelp. We earn a fee for acting as an agent for transactions placed through these integrations, which we record on a net basis and include in revenue upon completion of a transaction.
Transactions revenue for the three months ended March 31, 2022 decreased compared to the prior-year period primarily due to a lower volume of food takeout and delivery orders as restaurants' dine-in capacity was greater than in the prior-year period. The decrease was partially offset by an increase in the per-order transaction fee that we receive from Grubhub following the renewal of our partnership in March 2022.
Other Revenue. We generate revenue through our subscription services, including our Yelp Reservations and Yelp Guest Manager products. We also generate revenue through our Yelp Knowledge and Yelp Fusion programs, which provide access to Yelp data for a fee, as well as other non-advertising partnerships.
Other revenue for the three months ended March 31, 2022 increased compared to the prior-year period, primarily reflecting higher revenue from the continued growth of our Yelp Fusion program. The increase also reflects lower COVID-19 relief incentives — mainly in the form of waived subscription fees — for our subscription product customers in the current-year period.
Trends and Uncertainties of Net Revenue. In contrast to historical seasonal trends, net revenue increased slightly in the three months ended March 31, 2022 compared to the three months ended December 31, 2021 due to increased advertiser demand and the continued execution of our strategic initiatives. We anticipate net revenue in the three months ending June 30, 2022 to increase from the first quarter of 2022.
Costs and Expenses
Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of credit card processing fees and website infrastructure expense, which includes website hosting costs and employee costs (including stock-based compensation expense) for the infrastructure teams responsible for operating our website and mobile app, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs.
Cost of revenue for the three months ended March 31, 2022 increased compared to the prior-year period, primarily due to:
an increase in website infrastructure expense of $4.1 million as a result of higher traffic;
an increase in advertising fulfillment costs of $3.2 million, primarily driven by the expansion of Yelp Audiences; and
an increase in merchant credit card fees of $0.9 million due to a higher volume of transactions associated with the increase in advertising revenue.
We expect cost of revenue to increase on an absolute dollar basis in 2022 compared to 2021.
Sales and Marketing. Our sales and marketing expenses primarily consist of employee costs (including sales commission and stock-based compensation expenses) for our sales and marketing employees. Sales and marketing expenses also include business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.
Sales and marketing expenses for the three months ended March 31, 2022 increased compared to the prior-year period due to:
an increase in marketing and advertising costs of $8.3 million, primarily reflecting our investment in consumer marketing; and
an increase of $7.5 million in employee costs due to higher average sales headcount as compared with the prior-year period.
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These increases were partially offset by a decrease in allocated workplace operating costs of $2.6 million due to reductions in our amount of leased office space, which began at the end of the first quarter of 2021 and continued throughout the remainder of the year.
We expect sales and marketing expenses to continue to increase in 2022 compared to 2021 as we hire across our sales and marketing teams and invest in marketing initiatives. However, we expect sales and marketing expenses to decrease as a percentage of net revenue in 2022 compared to 2021 as the composition of our sales force shifts toward more tenured and multi-location sales reps.
Product Development. Our product development expenses primarily consist of employee costs (including stock-based compensation expense, net of capitalized employee costs associated with capitalized website and internal-use software development) for our engineers, product management and corporate infrastructure employees. In addition, product development expenses include allocated workplace and other supporting overhead costs.
Product development expenses for the three months ended March 31, 2022 increased compared to the prior-year period primarily due to an increase in employee costs of $13.0 million, which includes bonuses and stock-based compensation, reflecting higher average headcount.
We expect product development expenses to increase in 2022 compared to 2021 as we expand our product and engineering teams and invest to support our product initiatives, but decrease as a percentage of net revenue as our distributed operations provide leverage.
General and Administrative. Our general and administrative expenses primarily consist of employee costs (including stock-based compensation expense) for our executive, finance, user operations, legal, people operations and other administrative employees. Our general and administrative expenses also include our provision for doubtful accounts, consulting costs, as well as workplace and other supporting overhead costs.
General and administrative expenses for the three months ended March 31, 2022 increased compared to the prior-year period primarily due to an increase of $4.3 million in our provision for doubtful accounts as a result of the increase in advertising revenue and an increase in employee costs of $3.2 million due to higher average headcount.
We expect general and administrative expenses to increase in 2022 compared to 2021 due to increased headcount to support business growth and an increase in provision for bad debt as a result of continued macroeconomic challenges, partially offset by savings from our office space reductions as we continue to operate on a distributed basis. We expect general and administrative expenses as a percentage of net revenue to remain relatively consistent in 2022 compared to 2021.
Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation on computer equipment, software, leasehold improvements, capitalized website and software development costs, and amortization of purchased intangible assets.
Depreciation and amortization expense for the three months ended March 31, 2022 decreased compared to the prior-year period, primarily due to decreases in depreciation of leasehold improvements from asset retirements related to lease terminations and expirations that have occurred since prior year.
Other Income, Net
Other income, net consists primarily of the interest income earned on our cash, cash equivalents and previously held marketable securities, the portion of our sublease income in excess of our lease cost, amortization of debt issuance costs, credit facility fees and foreign exchange gains and losses.
Other income, net for the three months ended March 31, 2022 increased compared to the prior-year period, primarily due to increases in tax incentives related to research and development activity in the United Kingdom.
Benefit from Income Taxes
Benefit from 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.
The increase in benefit from income taxes for the three months ended March 31, 2022 compared to the prior-year period was primarily due to the positive annual effective tax rate estimated for 2022 applied to a quarterly loss, compared to a negative annual effective tax rate for 2021 applied to a larger quarterly loss in the year-ago period, offset by a decrease in year-to-date excess tax benefits from stock-based compensation in the current period.
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As of December 31, 2021, we had approximately $40.5 million in net deferred tax assets ("DTAs"). As of March 31, 2022, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs. However, it is possible that some or all of these DTAs will not be realized. Therefore, unless we are able to generate sufficient taxable income from our operations, a substantial valuation allowance may be required to reduce our DTAs, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our consolidated financial statements. The exact timing and amount of the valuation allowance recognition are subject to change on the basis of the net income that we are able to actually achieve. We will continue to evaluate the possible recognition of a valuation allowance on a quarterly basis.
Our GAAP tax rate is impacted by a number of factors that are not in our direct control and that are subject to quarterly variability, which limits our visibility into the applicable rate for future fiscal periods. While we currently expect our GAAP tax rate for 2022 to be a substantial positive rate — potentially exceeding our previous estimate of 38% — it ultimately depends on, among other things, the status of legislative efforts to repeal the requirement under the U.S. Tax Cuts and Jobs Act (the "Tax Act") to capitalize and amortize research and development expenses, which may result in a substantially lower rate if successful, as well as the amount of our stock-based compensation expense, which fluctuates based on our stock price. We do not plan to provide regular updates to our estimate of our 2022 GAAP tax rate given the uncertainty inherent in it as a result of these factors; however, we note that it may have a material and adverse impact on our cash flows in 2022 as well as future years.
Non-GAAP Financial Measures
Our condensed consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA and adjusted EBITDA margin, each of which is a non-GAAP financial measure.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. In particular, adjusted EBITDA should not be viewed as a substitute for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of profitability or liquidity. 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 does not reflect all 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 does not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;
adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
adjusted EBITDA does not take into account any income or costs that management determines are not indicative of ongoing operating performance, such as restructuring costs; and
other companies, including those in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, net income (loss) and our other GAAP results.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: provision for (benefit from) income taxes; other income, net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items, such as restructuring costs.
Adjusted EBITDA margin. Adjusted EBITDA margin is a non-GAAP financial measure that we calculate as adjusted EBITDA divided by net revenue.
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The following is a reconciliation of net loss to adjusted EBITDA, as well as the calculation of net loss margin and adjusted EBITDA margin, for each of the periods indicated (in thousands, except percentages):
Three Months Ended
March 31,
2022 2021
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss $ (915) $ (5,796)
Benefit from income taxes (2,612) (2,142)
Other income, net (929) (705)
Depreciation and amortization 11,490  13,083 
Stock-based compensation 41,060  39,245 
Restructuring —  20 
Adjusted EBITDA $ 48,094  $ 43,705 
Net revenue $ 276,628  $ 232,096 
Net loss margin —  % (2) %
Adjusted EBITDA margin 17  % 19  %
Liquidity and Capital Resources
Sources of Cash
As of March 31, 2022, we had cash and cash equivalents of $465.1 million, which consisted of cash and money market funds. Our cash held internationally as of March 31, 2022 was $10.9 million. As of March 31, 2022, we also had $10.0 million of investments in certificates of deposit with minority-owned financial institutions.
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 and 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 the Employee Stock Purchase Plan, as amended, as well as proceeds from our sale of Eat24 to Grubhub in October 2017.
We continue to hold the majority of our investments in highly liquid money market funds following the liquidation of our portfolio of marketable securities in the first half of 2020, which we undertook as a result of our change in investment strategy to preserve liquidity in response to the COVID-19 pandemic. Our remaining investments that were not held in money market funds as of March 31, 2022 were held in certificates of deposit.
We have the ability to access backup liquidity to fund working capital and for other capital requirements, as needed, through a three-year, $75.0 million senior unsecured revolving credit facility (including a $25.0 million letter of credit sub-limit) as part of our Credit Agreement with Wells Fargo Bank, National Association which we entered into in May 2020 (the "Credit Agreement"). As of March 31, 2022, we had $21.5 million of letters of credit under the sub-limit related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $53.5 million remained available under the revolving credit facility as of that date. The cost of capital associated with this credit facility was not significantly more than the cost of capital that we would have expected prior to the onset of the COVID-19 pandemic. As of March 31, 2022, we were in compliance with all covenants and there were no loans outstanding under the Credit Agreement. For more information about the terms of the Credit Agreement, including financial covenants, events of default and other limitations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" included under Part II, Item 7 in our Annual Report.
Material Cash Requirements
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" included under Part I, Item 1A in our Annual Report. We believe that our existing cash and cash equivalents, together with any cash generated from operations, will be sufficient to meet our material cash requirements in the next 12 months and beyond, including: working capital requirements; our anticipated repurchases of common stock pursuant to our stock repurchase program; payment of taxes related to the net share settlement of equity awards; payment of lease costs related to our operating leases; the potential payment of a higher amount of income taxes beginning in 2022, primarily due to the new requirement to amortize certain research and development expenses under the Tax Act; and purchases of property,
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equipment and software and website hosting services. However, this estimate is based on a number of assumptions that may prove to be materially different and we could exhaust our available cash and cash equivalents earlier than presently anticipated. We may be required to draw down funds from our revolving credit facility or seek additional funds through equity or debt financings to respond to business challenges associated with the impact of macroeconomic conditions, including the ongoing COVID-19 pandemic, or other challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies.
We lease office facilities under operating lease agreements that expire from 2022 to 2031. Our cash requirements related to these lease agreements are $177.8 million, of which $48.6 million is expected to be paid within the next 12 months. The total lease obligations are partially offset by our future minimum rental receipts to be received under non-cancelable subleases of $41.3 million. See Note 7, "Leases," of the Notes to Condensed Consolidated Financial Statements for further detail on our operating lease obligations.
Our cash requirements related to purchase obligations consisting of non-cancelable agreements to purchase goods and services required in the ordinary course of business — primarily website hosting services — are approximately $57.7 million, of which approximately $42.7 million is expected to be paid within the next 12 months.
The cost of capital associated with any additional funds sought in the future might be adversely impacted by the impact of macroeconomic conditions on our business. Additionally, 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 indicated (in thousands):
Three Months Ended
March 31,
2022 2021
Condensed Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities $ 59,903  $ 58,931 
Net cash used in investing activities $ (6,575) $ (5,976)
Net cash used in financing activities $ (67,953) $ (60,282)
Operating Activities. Net cash provided by operating activities during the three months ended March 31, 2022 was relatively consistent with the prior-year period. There was an increase in accrued income taxes driven by a requirement under the Tax Act to capitalize and amortize research and development expenses and an increase in accrued commissions due to higher performance of sales representatives. These movements were offset by an increase in receivables from customers driven by higher revenue and an increase in prepaid expenses due to timing of payments to third parties.
Investing Activities. Net cash used in investing activities during the three months ended March 31, 2022 increased compared to the prior-year period primarily due to an increase in purchases of property, equipment and software.
Financing Activities. Net cash used in financing activities during the three months ended March 31, 2022 increased compared to the prior-year period primarily due to a decrease in cash proceeds from stock option exercises as there were fewer options exercised during the three months ended March 31, 2022 as compared to the prior-year period.
Stock Repurchase Program
As of March 31, 2022, our board of directors had authorized us to repurchase up to an aggregate of $1.2 billion of our outstanding common stock since it initially authorized our stock repurchase program in July 2017. As of April 29, 2022, approximately $156.9 million remained available for stock repurchases under these authorizations.
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We may repurchase shares at our discretion in the open market, privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. The program is not subject to any time limit and may be modified, suspended or discontinued at any time. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow and market conditions.
We have funded all repurchases to date and expect to fund any future repurchases with cash available on our balance sheet. During the three months ended March 31, 2022, we repurchased on the open market 1,464,614 shares for an aggregate purchase price of $50.0 million. During the three months ended March 31, 2021, we repurchased on the open market 1,401,000 shares for an aggregate purchase price of $49.5 million.
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ITEM 3. 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 primarily include interest rate, foreign exchange risks and inflation, and have not changed materially from the market risks we were exposed to in the year ended December 31, 2021.
ITEM 4. 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 SEC's 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 company’s 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 Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
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 March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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 is also 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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings in which we are involved, see "Legal Proceedings" in Note 11, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report, which is incorporated herein by reference. We are also 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 other matters will have a material effect on our business, financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes to the risks factors set forth in the section titled "Risk Factors" included under Part I, Item 1A of our Annual Report, which describes various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. You should carefully consider the risks and uncertainties described in the Annual Report and below before making an investment decision.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table summarizes our stock repurchase activity for the three months ended March 31, 2022 (in thousands, except for price per share):
Period
Total Number
of Shares Purchased(1)
Average Price Paid per Share(2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program
January 1 – January 31, 2022 907  $ 34.60  907  $ 200,276 
February 1 – February 28, 2022 168  $ 33.45  168  $ 194,658 
March 1 – March 31, 2022 390  $ 33.37  390  $ 181,658 
(1)    Between July 2017 and September 2021, our board of directors authorized us to repurchase up to $1.2 billion of our outstanding common stock, $156.9 million of which remained available as of April 29, 2022. The actual timing and amount of repurchases depend on a variety of factors, including liquidity, cash flow and market conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Stock Repurchase Program" included under Part I, Item 2 in this Quarterly Report.
(2)    Average price paid per share includes costs associated with the repurchases.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS.
Exhibit Incorporated by Reference Filed Herewith
Number Exhibit Description Form File No. Exhibit Filing Date
8-K 001-35444 3.1 7/8/2020
8-K 001-35444 3.1 1/31/2022
4.1
Reference is made to Exhibits 3.1 and 3.2.
8-A/A 001-35444 4.1 9/23/2016
X
X
X
X
X
X
101.INS Inline XBRL Instance Document (embedded within the Inline XBRL document).
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. X
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
X
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Yelp Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in such filing.

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SIGNATURES
Pursuant to the requirements 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.
YELP INC.
Date: May 6, 2022 /s/ David Schwarzbach
David Schwarzbach
Chief Financial Officer
  (Principal Financial and Accounting Officer and Duly Authorized Signatory)


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