Yelp Inc. Q4 FY2025 earnings call

Product Innovation in 2025 - Introduced over 55 new products and features, many powered by AI. - Yelp Assistant saw significant growth, with Request-A-Quote projects through it up over 400% year-over-year in 2025. - Launched Yelp Host, an AI-powered call answering service for restaurants, which has answered over 190,000 calls and handled thousands of reservations. - Closed acquisition of Hatch, a leading AI lead management platform for service pros. - Signed an agreement with OpenAI, leveraging first-party data including 330 million reviews, nearly 500 million photos, and over 8 million business listings for data licensing. ### 2026 Strategic Initiatives - Reconceive the Yelp experience to focus on delivering answers and actions, with plans to fully roll out expanded Yelp Assistant across categories and entry points by end of Q1 2026. - Roll out further upgrades to Yelp Host, including ability to take food orders over the phone. - Extend reach to power local discovery across the AI ecosystem, building on first-party data and partnerships like with OpenAI.

In 2025, Yelp delivered record net revenue of $1.46 billion, up 4% year-over-year. Net income grew 10% year-over-year to $146 million, representing a 10% net income margin. Adjusted EBITDA increased 3% year-over-year to $369 million, with a 25% adjusted EBITDA margin. RR&O categories saw revenue decline 6% year-over-year to $444 million. Services advertising revenue grew 8% year-over-year to a record $948 million. Other revenue accelerated 17% year-over-year. For the fourth quarter of 2025, net revenue decreased 1% year-over-year to $360 million. Adjusted EBITDA decreased 15% year-over-year to $86 million. Paying advertising locations declined 5% year-over-year to 496,000.

• For Q1 2026, expect net revenue in the range of $350 million to $355 million. - For full year 2026, expect net revenue in the range of $1.455 billion to $1.475 billion. - Expect first quarter adjusted EBITDA in the range of $58 million to $63 million. - For full year 2026, expect adjusted EBITDA in the range of $310 million to $330 million.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. Refer to SEC filings and shareholder letter for detailed risk factors affecting results. Risks related to macroeconomic conditions impacting advertising revenue and performance of strategic initiatives like AI transformation and acquisition of Hatch.

Q: Just wanted to ask about the environment for services, both on the consumer and the service provider side. You saw some deceleration in Q4 in revenue and a little bit steeper sequential decline in services sales this year versus last. Just wondering if you could maybe comment on that a bit and what you're looking for from the services business in '26.

A: Services demand has softened, especially in RR&O. We're leaning in with Yelp Assistant, which we rolled out last year and plan to bring cross-category. Expect to begin launch of expanded Yelp Assistant towards end of Q1 2026. Also continuing to lean into multi-location services.

Q: Just on OpenAI. Anything you could tell us maybe about the general outline of the deal if that could be a positive factor for traffic, exposure to younger user cohorts and so forth in addition to whatever monetization opportunity there might be?

A: Yelp has great content with millions of human written reviews. 50% of traditional search queries have local intent. Our agreement with OpenAI is a milestone, and other revenue including data licensing is up, with 30% - 33% growth in fourth quarter.

Q: So AI innovation is accelerating at a very rapid pace, particularly as large platform disturb traditional advertising and software models. As you expand your SaaS offerings with Hatch, what gives you confidence that your product innovation can keep up with the leading players and you will be able to achieve the adoption level that you're targeting for?

A: Hatch is laser focused on their space, understands customers and ecosystem. They have key partnerships and are growing rapidly at 70% year-over-year. We're bringing resources and distribution to help them grow, and it's hard for larger players with other opportunities to replicate their focus.

Q: Looking out five years from now, how do you envision Yelp's revenue mix to evolve between like recurring subscription revenue versus variable ad revenue? And what would it mean for your like overall top line growth and margin profile like three to five years down the line?

A: We see opportunity to diversify revenue by driving other revenue, which includes licensing, transaction, and subscription. Other revenue has a better margin profile than ad revenue. SaaS margins are attractive and we expect our ability to drive SaaS margins to converge or be better than ad revenue.

Q: In restaurants and retail, what do you think needs to change for that advertiser base to stabilize and then improve? And how would you prioritize these changes over the next few quarters?

A: Restaurants and retail face headwinds from weakened consumer and high input costs. We'll continue to invest in consumer experience with Yelp Assistant cross-category, and see opportunities with AI-based SaaS tools like Yelp Host, which will have food ordering available soon.

Q: Can you provide more color on the margin trajectory goals for Hatch after closing given the cash flow disclosure and how that impacts the full year EBITDA outlook versus the core business?

A: Hatch is growing rapidly, so immediate focus is on top line growth. Margin driving is not immediate, but over time margin profile will converge to typical SaaS margin profile. Retention amounts paid out are added back to EBITDA, and we're focused on realizing the opportunity from the acquisition.