Yelp’s Earnings Call: Growth Amid Challenges

Yelp Inc ((YELP)) has held its Q1 earnings call. Read on for the main highlights of the call.

Yelp’s recent earnings call conveyed a balanced sentiment, highlighting robust revenue growth and profitability driven by their services business and AI innovations. Despite these positive trends, challenges in the Restaurant, Retail, and Other (RR&O) categories and macroeconomic uncertainties were noted, tempering the overall optimism.

Revenue Growth and Profitability

Yelp reported an impressive 8% year-over-year revenue growth, achieving $359 million in net revenue. The company also saw a significant expansion in net income margin by three percentage points and adjusted EBITDA margin by four percentage points from the previous year. Notably, adjusted EBITDA surged by 32% year-over-year to $85 million, representing a 24% margin, underscoring the company’s strong financial performance.

Services Business Performance

The services segment emerged as a key growth driver for Yelp, with revenue increasing by 14% year-over-year. This marks the 16th consecutive quarter of double-digit growth for this segment. Additionally, Request to Quote projects saw a more than 15% increase year-over-year, excluding projects acquired through paid search, highlighting the segment’s robust momentum.

AI and Product Innovations

Yelp introduced 15 new features and updates, including AI-powered photo recognition in Yelp Assistant and response quality badges. The company also announced upcoming AI-powered call answering services for service professionals and restaurants, showcasing its commitment to leveraging technology to enhance user experience and operational efficiency.

Stock Repurchase Program

In a move to return value to shareholders, Yelp repurchased $62.5 million worth of shares at an average price of $37.01 per share. As of March 31, 2025, the company has $268 million remaining under the existing repurchase authorization, reflecting its strong cash position and confidence in its future prospects.

Decline in RR&O Revenue

Revenue from the Restaurant, Retail, and Other (RR&O) categories experienced a 3% decline year-over-year, totaling $110 million. This downturn was attributed to macroeconomic pressures, indicating challenges in these sectors despite overall company growth.

Ad Clicks and Paying Locations Decline

Ad clicks and overall paying advertising locations both declined by 3% year-over-year, with the decrease attributed to macroeconomic pressures in the RR&O categories. This highlights the challenges Yelp faces in maintaining advertising revenue amidst broader economic uncertainties.

Macro Uncertainties Impacting Outlook

Despite a strong first-quarter performance, Yelp acknowledged increased macroeconomic uncertainties, leading to a wider revenue and adjusted EBITDA outlook range for the full year. This cautious stance reflects the unpredictable economic environment and its potential impact on future performance.

Forward-Looking Guidance

Looking ahead, Yelp adjusted its full-year net revenue outlook to between $1.465 billion and $1.485 billion, with an adjusted EBITDA forecast ranging from $345 million to $365 million. These projections reflect both the company’s strong first-quarter performance and the ongoing macroeconomic uncertainties that could influence future results.

In conclusion, Yelp’s earnings call painted a picture of strong growth and profitability, particularly in its services segment and through AI innovations. However, challenges in specific categories and broader economic uncertainties present hurdles that the company must navigate moving forward. Investors will be keenly watching how Yelp manages these dynamics to sustain its growth trajectory.