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Yelp Tops Forecasts - $250M Buyback

February 14, 2019

Yelp, the company that connects people with great local businesses, posted its financial results for the fourth quarter and full year ended December 31, 2018.

The firm had earnings per share of $0.37 per share vs. estimate of $0.10 per share. As to revenue, Yelp reported $244 million vs. estimate of $241 million.

“In 2018, we evolved our go-to-market strategy to capture more of our addressable market and reduce sales friction,” said Jeremy Stoppelman, co-founder and CEO of Yelp. “We also made significant progress in driving consumer usage in the Restaurants vertical and business-owner monetization in the Home & Local Services vertical. We plan to continue the transition in 2019, and expect to achieve stronger revenue growth and higher Adjusted EBITDA margins in the second half of 2019 as our growth initiatives begin to deliver. For the next five years, we see mid-teens revenue growth and Adjusted EBITDA margins in the 30-35% range by 2023. Our board of directors has increased our share repurchase authorization to $500 million and elected three experienced business leaders to our board of directors.”

Yelp has identified a detailed path toward long-term shareholder value. Key components include Yelp’s plans to:

Deliver long-term double-digit revenue growth: Yelp currently targets a compound annual revenue growth rate in the mid-teens from 2019 through 2023, driven by initiatives aimed at winning in key verticals, expanding business offerings, driving more value to business customers, capturing enterprise, and enhancing the consumer experience.

Drive margin expansion and optimize cost structure: Yelp has a clear strategy to deliver cost savings and continue its track record of margin expansion to achieve Adjusted EBITDA margin of 30-35% by 2023. This strategy includes initiatives to shift its emphasis to the most efficient sales channels, relocate its salesforce to more attractive locations, and optimize marketing spend.

Accelerate strategy through effective partnerships: Partnerships like Yelp’s long-term Grubhub relationship continue to deliver significant value and represent attractive growth drivers for its business. Yelp recently further expanded its partner relationships through new engagements with industry leaders like Visa and GoDaddy, among others, and plans to continue exploring such opportunities.

Increased Commitment to Return Capital to Shareholders

Yelp authorized an increase of $250 million to the company’s current share repurchase program, bringing the total outstanding authorization to $500 million. The company currently plans to repurchase approximately $250 million of its common stock in the first half of 2019. The company may repurchase shares at management’s discretion, with the amount and timing of any repurchases subject to liquidity, cash flow and market conditions, among other factors.

Additions to Board of Directors

As previously disclosed, the Board and its Nominating and Corporate Governance Committee initiated a process, with the support of the nationally-recognized director search firm Spencer Stuart, to evaluate the Board’s composition and identify additional director candidates to help drive the Yelp strategy. As a result of that process, the Board, following the recommendation of the Nominating and Corporate Governance Committee, appointed George Hu, Sharon Rothstein and Brian Sharples to serve as members of the Board, effective March 1, 2019. Hu, Rothstein and Sharples will replace directors Geoff Donaker, Jeremy Levine, and Peter Fenton, respectively, who will step down from the Board, effective March 1, 2019.

“We are excited to announce the appointment of George, Sharon and Brian to our Board,” said Diane Irvine, Chairperson of the Board. “As we work to capitalize on the opportunities before us to drive long-term growth and deliver value to our shareholders, we are committed to maintaining a Board that provides robust oversight and has the right skills to support Yelp. George, Sharon and Brian bring to our Board extensive experience as business leaders of relevant verticals at a variety of impressive companies and their expertise will be critical as we implement our strategy over the coming years. On behalf of the entire Board, I would like to thank Geoff Donaker, Jeremy Levine and Peter Fenton for their many contributions to Yelp over the years, including preparing for and taking the company public, and growing it to nearly $1 billion in annual revenues today.”

“George, Sharon and Brian are experienced business veterans who bring a wealth of practical, hands-on knowledge and skill sets to Yelp, including scaling operations, sales, marketing, product and monetization,” said Jeremy Stoppelman. “George has an extensive track record in operations, including 13 years at Salesforce prior to joining Twilio, where he currently serves as COO. Sharon is an accomplished marketing executive who most recently served as CMO of Starbucks, overseeing the growth of their mobile apps and loyalty programs. Brian is a successful technology CEO with significant experience operating e-commerce and marketplace businesses.”

George Hu

Mr. Hu is an accomplished leader with extensive experience as a software and operations executive at leading technology companies including Twilio and Salesforce. Throughout his career he has helped lead companies through hyper-growth, scale businesses and has extensive experience operating large complex organizations. He currently serves as Chief Operating Officer of Twilio, the leading cloud communications platform, where he has overseen and executed the Company’s strategy, including guiding the Company towards new market opportunities. Previously Mr. Hu spent over 13 years at Salesforce, where he served in multiple roles spanning products, marketing and customer education, and the company grew from generating $20 million to $5 billion in revenue. He most recently served as Chief Operating Officer for four years, during which the company delivered 78% total shareholder return. Earlier in his career, Mr. Hu held product management and strategic consulting roles at North Point Communications and The Boston Consulting Group. Mr. Hu holds an A.B. from Harvard University and an MBA from the Stanford Graduate School of Business.

Sharon Rothstein

Ms. Rothstein is a veteran marketing executive having led brand, product and omni-channel marketing at some of the world’s most iconic global consumer-facing companies. Ms. Rothstein currently serves as Operating Partner of Stripes Group, a leading growth equity firm that has been investing in high growth consumer and SaaS companies for over a decade. Prior to joining Stripes, Ms. Rothstein served as Executive Vice President, Global Chief Marketing Officer and subsequently, Executive Vice President, Global Chief Product Officer for Starbucks, the specialty coffee retailer, where she had responsibility for the Starbucks brand and go-to-market plan as well as the company’s portfolio of product platforms. Ms. Rothstein led the creation of the narrative for Starbucks’ global retail experiences and directed all product initiatives, creative expressions, advertising, and omni channel marketing and merchandising. In addition, Ms. Rothstein held senior marketing and brand management positions at Sephora, Godiva, Starwood Hotels & Resorts, Nabisco Biscuit Company and Procter & Gamble. She currently serves as a Board member of True Food Kitchen, a fast-growing healthy lifestyle restaurant company, and Levain Cookies, a premium bakery famous for its decadent cookies. Ms. Rothstein earned a Bachelor of Commerce from the University of British Columbia and an MBA from the Anderson School of Management of the University of California, Los Angeles.

Brian Sharples

Mr. Sharples is a successful serial entrepreneur, angel investor and executive with extensive experience in startup and well-established technology and e-commerce companies, both as a board member and in leading operations and executive roles. Mr. Sharples has founded and scaled several high-growth startups and oversaw their strategic exits. Mr. Sharples co-founded and served as Chairman and CEO of HomeAway, Inc., a global online marketplace for the vacation rental industry, where he led the company's successful public offering in 2011, and the $3.9 billion acquisition by Expedia in 2015. Prior to HomeAway, Mr. Sharples was President and CEO of IntelliQuest Information Group, Inc., a supplier of marketing data and research to technology companies that went public in 1996 and was sold to WPP Group in 2000. In addition to his operational leadership, Mr. Sharples has served on the boards of several global technology companies specializing in the consumer space, including KAYAK and RetailMeNot, Inc., and currently serves on the boards of GoDaddy and Ally Financial Group. Mr. Sharples also helped oversee the successful acquisitions of KAYAK (by Priceline) and RetailMeNot Inc. (by Harland Clarke) during his board tenures. Mr. Sharples also has served on the boards of several private companies, including most recently as Chairman of Twyla, Inc., a company he co-founded in 2015 that offers a software platform to license and sell limited edition artwork. He also serves as Chairman of private-equity backed Fexy Media, and on the board of RVShare, a leading online marketplace for RV rentals. Early in his career, Mr. Sharples founded I Motors, an event-based marketplace for used cars, and served as a consultant at Bain & Co. Mr. Sharples holds a B.S. in Economics and Math from Colby College and an MBA from the Stanford Graduate School of Business of Stanford University.

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