Yelp Inc. Q2 FY2025 earnings call

• Yelp delivered record net revenue and strong profitability, with net income margin expanding by 1 percentage point and adjusted EBITDA margin by 2 percentage points year-over-year.
• Focused on product-led strategy with AI-powered updates, including Yelp Assistant where project submission increased by over 400% YOY, and integration with Zapier well-received by SMB and multi-location customers.
• AI initiatives: Yelp Assistant rollout continued, live testing of Yelp Host for restaurants initiated, and AI search API calls increased 20x YOY and 10x in last 2 months, with data licensing revenue from AI search reaching over $10 million run rate in last 2 months.
• Request-a-Quote projects increased by ~10% YOY, driven by improvements to request flow and Yelp Assistant, with further growth expected as entry points expand.

Yelp generated $370 million of net revenue in the quarter. Services revenue increased by 8% year-over-year to $241 million, contributing significantly to the top line. R&O revenue, which includes restaurant and retail categories, declined by 5% year-over-year to $113 million due to challenging operating environments. Services revenue accounted for a major portion of the net revenue, while R&O was impacted by macroeconomic factors.

• Net revenue expected to be approximately flat in Q3, ranging from $365 million to $370 million.
• Full-year net revenue guidance narrowed to between $1.465 billion and $1.475 billion.
• Third-quarter adjusted EBITDA expected to be in the range of $80 million to $85 million.
• Full-year adjusted EBITDA guidance narrowed to between $350 million and $360 million. Expenses to increase in the second half, with SBC reduction acting as a headwind to adjusted EBITDA but not net income.

• Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially.
• Macroeconomic uncertainties impacting revenue growth and margins.
• Challenging operating environment for businesses in restaurant, retail, and other categories continuing to pressure R&O revenue.

Q: Walk us through the deceleration in services revenue growth this quarter and the AI search API and data licensing momentum.

A: Jeremy Stoppelman noted softness attributed to macro and policy volatility, with budgets increasing but not at traditional seasonal levels, expected to persist in Q3. On AI search, API calls increased 20x YOY and 10x in last 2 months, with revenue from AI search data licensing reaching over $10 million run rate in recent months, seeing traction with AI search players needing local content.

Q: On restaurant competitive headwinds and Yelp Assistant expansion.

A: Jed Nachman stated the main story in RR&O is macro uncertainty. Jeremy Stoppelman mentioned Yelp Assistant's potential to boost activity, with expansion to more categories and entry points for logged-out users, and early testing of Yelp Host for restaurants showing promise, with potential to extend to other services like Yelp Receptionist