•Network Security. Computer viruses, malware, phishing attacks, denial-of-service and other attacks and similar disruptions from unauthorized use of computer systems have become more prevalent in our industry, have occurred on our systems in the past and we expect them to occur periodically on our systems in the future. For this reason, our platform includes a host of encryption, antivirus, firewall and patch-management technologies designed to help protect and maintain the systems located at data centers as well as other systems and computers across our business.

Consumer Protection Efforts

Our success depends on our ability to maintain consumer trust in our solutions and in the quality and integrity of the user content and other information found on our platform. We dedicate significant resources to the goal of maintaining and enhancing the quality, authenticity and integrity of the reviews on our platform, primarily through the following methods:

Automated Recommendation Software. We use proprietary software to analyze the relevance, reliability and utility of each review submitted to our platform. The software applies the same objective standards to each review based on a wide range of data associated with the review and reviewer, regardless of whether the business being reviewed advertises on Yelp. These objective standards include various measures of relevance, reliability and utility, such as the reviewer’s type and level of activity with Yelp (which might correspond to the reviewer’s reliability or suggest reviewer biases) and whether certain reviews originate from related Internet Protocol addresses (which might mean the reviews were submitted by the same person). The results of this analysis can change over time as the software factors in new information, which may result in reviews that were previously recommended becoming not recommended, and reviews that were previously not recommended being restored to recommended status. Reviews that the software deems to be the most useful and reliable are published directly on business listing pages, though neither we nor the software purport to establish whether or not any individual review is authentic. As of December 31, ~~2018,~~2019, our software recommended approximately 71% of the reviews submitted to our platform. Reviews that are not recommended are published on secondary pages and do not factor into a business’s overall star rating. As of December 31, ~~2018,~~2019, approximately 22% of the reviews submitted to our platform were not recommended but still accessible on our platform.

Education. We provide businesses with information and materials regarding our stance against review solicitation and work with businesses to ensure that any they are aware that Yelp does not work with third-party review solicitation companies that offer to artificially inflate search rankings and online reputations. By working to educate businesses about why review solicitation harms consumers and can undermine a business’ reputation, we believe we can reduce the frequency with which businesses engage in such activities.

Sting Operations. We routinely conduct sting operations to identify businesses and individuals who offer or receive cash, discounts or other benefits in exchange for reviews. For example, we may respond to advertisements offering to pay for reviews that are posted on Craigslist, Facebook and other platforms. We also receive and investigate tips from our users about potential paid reviews. If we identify or confirm any such issues through our investigations, we typically pursue one or more of the courses of action described below (each of which we may also employ on a stand-alone basis).

Consumer Alerts Program. We issue consumer alert warnings on business listing pages from time to time when we encounter suspicious activity that we believe is indicative of attempts to deceive or mislead consumers. For example, we may issue a consumer alert if we encounter a business attempting to purchase favorable reviews, or if a large number of favorable reviews are submitted from the same Internet Protocol address. Consumer alerts generally remain in effect for 90 days, or longer if the deceptive practices continue.

Coordination with Law Enforcement. We regularly cooperate with law enforcement and consumer protection agencies to investigate and identify businesses and individuals who may be engaged in false advertising or deceptive business practices relating to reviews. For example, in 2013, we assisted the New York Attorney General with “Operation Clean Turf,” an undercover investigation targeting review manipulation that resulted in 19 companies agreeing to pay more than $350,000 in fines to the State of New York. In 2016, in a continuation of this investigation, the New York Attorney General announced settlements with six additional businesses that tried to mislead consumers, resulting in the businesses agreeing to pay fines and to take measures to increase the honesty and transparency of their online reviews.

Legal Action. Our terms of service prohibit the buying and selling of reviews, as well as writing fake reviews. In egregious cases, we take legal action against businesses we believe to be engaged in deceptive practices based on these prohibitions.

Removal of Reviews. We regularly remove reviews from our platform that we believe violate our terms of service, including, without limitation: fake or defamatory reviews; content that has been bought, sold or traded; threatening, harassing or lewd content, as well as hate speech and other displays of bigotry; and content that violates the rights of any third party or any applicable law. Consumers can access information about reviews that we have removed for a particular business by clicking on a link on the

business’s listing page. As of December 31, ~~2018,~~2019, approximately 7% of the reviews submitted to our platform had been removed.

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Intellectual Property

We rely on federal, state, common law and international rights, as well as contractual restrictions, to protect our intellectual property. We control access to our proprietary technology and algorithms by entering into confidentiality and inventions assignment agreements with our employees and contractors, as well as confidentiality agreements with third parties.

In addition to these contractual arrangements, we also rely on a combination of patent, trade secrets, copyrights, trademarks, service marks and domain names to protect our intellectual property. We pursue the registration of our copyrights, trademarks, service marks and domain names in the United States and in certain locations internationally. Our registration efforts have focused on gaining protection of our trademarks for Yelp and the Yelp burst logo, among others. These marks are material to our business and essential to our brand identity as they enable others to easily identify us as the source of the services offered under these marks. We currently have limited patent protection for our core business, which may make it more difficult to assert certain of our intellectual property rights. For example, the contractual restrictions and trade secrets that protect our proprietary technology and algorithms provide only a limited safeguard against infringement.

Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in the United States or other countries in which we operate. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Protecting our intellectual property rights is also costly and time consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.

Companies in the Internet, technology and media industries own large numbers of patents and other intellectual property rights, and frequently request license agreements or threaten to enter into litigation based on allegations of infringement or other violations of such rights. From time to time, we receive notice letters from patent holders alleging that certain of our products and services infringe their patent rights. We are also currently subject to, and expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors and non-practicing entities. As we face increasing competition and as our business grows, we will likely face more claims of infringement.

Competition

We compete in rapidly evolving and intensely competitive markets, and we expect competition to intensify further in the future with the emergence of new technologies and market entrants. Our competitors consist of companies that help businesses — particularly businesses in our strategically important restaurants and home & local services categories — connect and engage with consumers, including:

•online search engines and directories, such as Google, as well as traditional, offline business guides and directories;

•online and offline providers of consumer ratings, reviews and referrals, such as TripAdvisor;

•providers of online marketing and tools for managing and optimizing advertising campaigns, such as Google, Facebook and Twitter, as well as various forms of traditional offline advertising, including radio, direct marketing campaigns, yellow pages and newspapers;

•restaurant reservation and seating tools, such as OpenTable, as well as food ordering and delivery services; and

•home and/or local services-related platforms and offerings, such as ANGI Homeservices.

Our competitors may enjoy competitive advantages, such as greater name recognition, longer operating histories, substantially greater market share, established marketing relationships with, and access to, large existing user bases and substantially greater financial, technical and other resources. These companies may use these advantages to offer products similar to ours at a lower price, develop different products to compete with our current solutions and respond more quickly and effectively than we do to new or changing opportunities, technologies, standards or client requirements. Certain competitors could also use strong or dominant positions in one or more markets to gain competitive advantage against us in markets in which we operate.

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We believe our ability to compete successfully for users, content, and advertising and other customers depends upon many factors both within and beyond our control, including:

•the popularity, usefulness, ease of use, performance and reliability of our products and services compared to those of our competitors;

•our ability, in and of itself as well as in comparison to the ability of our competitors, to develop new products and services and enhancements to existing products and services;

•the quantity, quality and reliability of our content, including its breadth, depth and timeliness;

•our ad targeting and measurement capabilities, and those of our competitors;

•the size, composition and level of engagement of our consumer audience relative to those of our competitors;

•our marketing and selling efforts, and those of our competitors;

•the pricing of our products and services relative to those of our competitors;

•the actual or perceived return our customers receive from our products and services relative to returns from our competitors;

•the frequency and relative prominence of the ads displayed by us or our competitors;

•acquisitions or consolidation within our industry, which may result in more formidable competitors; and

•our reputation and brand strength relative to our competitors.

Government Regulation

As a company conducting business on the Internet, we are subject to a variety of laws in the United States and abroad that involve matters central to our business, including laws regarding privacy, data retention, distribution of user-generated content, consumer protection and data protection, among others. For example:

•Privacy. Because we receive, store and process personal information and other user data, including credit card information in certain cases, we are subject to numerous federal, state and local laws around the world regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other user data.

•Liability for Third-Party Action. We rely on laws limiting the liability of providers of online services for activities of their users and other third parties.

•Advertising. We are subject to a variety of laws, regulations and guidelines that regulate the way we distinguish paid search results and other types of advertising from unpaid search results.

•Information Security and Data Protection. The laws in many jurisdictions require companies to implement specific information security controls to protect certain types of information. Likewise, many jurisdictions have laws in place requiring companies to notify users if there is a security breach that compromises certain categories of their information.

Many of these laws and regulations are still evolving and could be interpreted in ways that harm our business. The application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. They may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. For example, laws providing immunity to websites that publish user-generated content are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users.

Similarly, new legislation and regulations may significantly impact our business. There have been various Congressional efforts to restrict the scope of the protections available to online platforms under Section 230 of the Communications Decency Act, and our current protections from liability for third-party content in the United States could decrease or change as a result.

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Regulatory frameworks for privacy issues in particular are also currently in flux worldwide, and are likely to remain so for the foreseeable future. For example, the European Union’s General Data Protection Regulation, or GDPR, which took effect in May 2018, and the California Consumer Privacy Act, which took effect in January 2020, may be subject to varying interpretations and evolving practices that ~~would~~ create uncertainty ~~for us. Similarly, the recently passed California Consumer Privacy Act, which is expected to become effective in 2020, also creates new data privacy rights for users~~

~~that may~~or result in significantly greater compliance burdens for us.

Changes in existing laws or regulations or their interpretations, as well as new legislation or regulations, may be costly to comply with and may delay or impede the development of new products, increase our operating costs and require significant management time and attention. Such changes could also make it more difficult for consumers to use our platform, resulting in less traffic and revenue, or make it more difficult for us to provide effective advertising tools to businesses on our platform, resulting in fewer advertisers and less revenue. As our business grows and evolves, we will also become subject to additional laws and regulations, including in jurisdictions outside of the United States. Foreign data protection, privacy and other laws and regulations can be more restrictive than those in the United States, as is the case with GDPR. Any failure on our part to comply with these laws may subject us to significant liabilities.

Our Culture and Employees

We take great pride in our company culture and consider it to be one of our competitive strengths. Our culture is at the foundation of our success, and it continues to help drive our business forward as a pivotal part of our everyday operations. It allows us to attract and retain a talented group of employees, create an energetic work environment and continue to innovate in a highly competitive market. As of December 31, ~~2018,~~2019, we had ~~6,030~~5,950 employees globally.

Our culture extends beyond our offices and into the local communities in which people use Yelp. Our community management team’s responsibilities include supporting the sharing of experiences by consumers in the local markets that they serve and increasing brand awareness. We organize events several times a year to recognize our most important contributors, facilitating face-to-face interactions, building the Yelp brand and fostering the sense of true community in which we believe so strongly. We also engage with small businesses. For example, we ~~established the Yelp Small Business Advisory Council as a way~~attend conferences and events hosted by industry groups to interact with and get feedback from our core community of local business owners. ~~We also work with the U.S. Small Business Administration and other partners to educate small business owners across the United States on best practices for online marketing.~~

In addition, The Yelp Foundation, or the Foundation, a non-profit organization established by our board of directors in November 2011, ~~(the "Foundation"),~~ directly supports consumers and local businesses in the communities in which we operate. In 2011, our board of directors approved the contribution and issuance to the Foundation of 520,000 shares of our common stock, of which the Foundation had sold ~~217,500~~247,500 shares as of December 31, ~~2018.~~2019. The Foundation uses the proceeds from the sale of its shares of our common stock to make grants to local non-profit organizations that are actively engaged in supporting community and small business growth. As of December 31, ~~2018,~~2019, the Foundation held ~~302,500~~272,500 shares of common stock, representing less than 1% of our outstanding capital stock.

Seasonality and Cyclicality

Our business is affected ~~both by cyclicality in business activity and~~ by seasonal fluctuations in Internet usage and advertising ~~spending. We believe our rapid growth has masked most of the~~spending, as well as cyclicality ~~and seasonality of our business. As our business matures, we expect that the cyclicality and seasonality~~ in ~~our business may become more pronounced, causing our operating results to fluctuate. In particular, based~~economic activity. Based on historical trends, we expect traffic numbers to be weakest in the fourth quarter of the year in connection with end of the year holidays. In addition, although our multi-location customers tend to increase spending on advertising in the fourth quarter, the small and medium-sized business, or SMBs, on which we rely heavily typically decrease their advertising spending during this quarter. In 2019, we experienced a more pronounced impact on our fourth quarter advertising revenue from seasonal decreases in advertising spending by SMBs than in prior years, which we believe was the result of more customers being on non-term contracts.

SMBs have also historically experienced high failure rates, and we must continually add new advertisers to replace those who do not renew their advertising due to factors outside of our control, such as declining advertising budgets, closures or bankruptcies. As a result, SMBs may be disproportionately affected by negative fluctuations in the business cycle, and a worsening economic outlook would likely cause such businesses to decrease investments in advertising, which would adversely affect our revenue.

We believe our rapid growth has masked most of the seasonality and cyclicality of our business. As our business matures and the proportion of our customers who can cancel their ad campaigns at any time increases, we expect that the seasonality and cyclicality in our business may become more pronounced, causing our operating results to fluctuate.

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Corporate and Available Information

We were incorporated in Delaware on September 3, 2004 under the name Yelp, Inc. We changed our name to Yelp! Inc. in late September 2004 and to Yelp Inc. in February 2012. Our principal executive offices are located at 140 New Montgomery Street, 9th Floor, San Francisco, California 94105, and our telephone number is (415) 908-3801. Our website is located at www.yelp.com, and our investor relations website is located at www.yelp-ir.com.

We file or furnish electronically with the U.S. Securities and Exchange Commission, or SEC, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make copies of these reports available free of charge through our investor relations website as soon as reasonably practicable after we file or furnish them with the SEC. These reports are also accessible through the SEC website at www.sec.gov.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including filings with the SEC, investor events, press and earnings releases, and blogs as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for e-mail alerts and RSS feeds.

Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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Item 1A. Risk Factors

Risks Related to Our Business and Industry

If we are unable to increase traffic to our mobile app and website, or user engagement on our platform declines, our revenue, business and operating results may be harmed.

We derive a substantial majority of our revenue based on our users' engagement with the ads that we display. Because traffic to our platform and user engagement on our platform together determine the number of ads we are able to show, affect the value of those ads to businesses and support the content creation that drives further traffic, our ability to attract, retain and engage visitors on our platform is critical to our business and financial success. A number of factors could adversely affect our traffic and user engagement, including, but not limited to:


•	~~our reliance on Internet search engines~~;

•our reliance on Internet search engines;

•if users engage with other products, services or activities as an alternative to our platform;


•	if we fail to introduce new and improved products or features that users find engaging, or we introduce new products or features that do not effectively address consumer needs or otherwise alienate consumers;


•	~~the quantity and quality of the content contributed by our users, as well as the perceived distribution of such content across the categories of businesses on our platform~~;


•	~~increasing competition in the market for information regarding local businesses~~;

•if we fail to introduce new and improved products or features that users find engaging, or we introduce new products or features that do not effectively address consumer needs or otherwise alienate consumers;

•the quantity and quality of the content contributed by our users, as well as the perceived distribution of such content across the categories of businesses on our platform;

•increasing competition in the market for information regarding local businesses;

•our ability to manage and prioritize information to ensure users are presented with content that is relevant and helpful to them, including through the effective operation of our automated recommendation software;


•	~~technical or other problems that negatively impact the availability and reliability of our platform or otherwise affect the user experience, including as a result of~~ ~~infrastructure performance problems~~ ~~and~~ ~~security breaches~~;


•	~~if users have difficulty installing, updating or otherwise accessing our platform as a result of actions by us or third parties that we rely on to distribute our products, such as~~ ~~application marketplaces and device manufacturers~~;

•technical or other problems that negatively impact the availability and reliability of our platform or otherwise affect the user experience, including as a result of infrastructure performance problems and security breaches;

•if users have difficulty installing, updating or otherwise accessing our platform as a result of actions by us or third parties that we rely on to distribute our products, such as application marketplaces and device manufacturers ;

•if users believe that their experience is diminished as a result of the decisions we make with respect to the frequency, relevance and prominence of the advertising we display;

•adverse macroeconomic conditions and their negative impact on consumer spending at local businesses;

•the adoption of any laws or regulations that adversely affect the growth, popularity or use of our platform or the Internet in general, such as the repeal of Internet neutrality regulations in the United States;

•any actions taken by companies with significant market power in the broadband and Internet marketplace that degrade, disrupt or increase the cost of user access to our products and services; and


•	~~if we do not maintain our brand image or our reputation is damaged~~. •if we do not maintain our brand image or our reputation is damaged.

We anticipate that our traffic growth rate will continue to slow over time, and potentially decrease in certain periods due to the maturation of our business and our high penetration rates in most major geographic markets within the United States and Canada. As our traffic growth rate slows, our business and financial performance will become increasingly dependent on our ability to increase levels of user engagement with our platform and the ads that we display.

We generate substantially all of our revenue from advertising. If we fail to maintain and expand our base of advertisers, our revenue and our business will be harmed.

In order to maintain and expand our advertiser base, we must convince existing and prospective advertisers alike that our advertising products offer them a material benefit and generate a competitive return relative to other alternatives. We sell ads primarily on a CPC basis, the pricing of which depends, in part, on competition among advertisers through an auction mechanism. Demand for ads in certain business categories that receive lower levels of traffic can exceed our inventory,

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resulting in relatively

high prices for ads in those categories. Such prices reduce our competitiveness and we may not be able to retain advertisers who frequently encounter them. This issue may be exacerbated by any changes to search engine algorithms and methodologies that have the effect of further reducing traffic to impacted categories. For example, we believe that updates Google made late in the third quarter of 2018 may be disproportionately negatively impacting traffic to our home & local services category, which may in turn be driving up CPC prices and harming advertiser retention in that category.

Advertisers will not advertise with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver compelling ad products in an effective manner, or if we do not provide accurate, easy-to-use analytics and measurement solutions that demonstrate the effectiveness and value of our products. As is typical in our industry, our advertisers generally do not have long-term obligations to purchase our products; in fact, ~~an increasing portion~~as a result of our ~~advertisers, including substantially all~~transition to non-term contracts for most of our new local advertising customers ~~since~~in May 2018, a substantial and increasing portion of our advertisers have the ability to cancel their ad campaigns at any time without penalty. As a result, any decrease in customer satisfaction, economic downturn or other change negatively affecting our ability to retain advertisers may have an earlier and more concentrated effect on our results going forward than prior to our transition to non-term contracts, when our multi-month advertising contracts imposed a fee for early cancellations. If we are unable to quickly and effectively respond to such developments, our ability to maintain and expand our advertiser base will be harmed. In addition, the negative impact of attrition on our financial results may be greater with respect to advertisers who are billed in arrears, as the vast majority of our advertisers now are, if they fail to make payment on ads that have already been delivered.

In addition, our advertiser base consists primarily of ~~small and medium-sized businesses, or~~ SMBs, which are subject to increased challenges and risks. SMBs often have limited advertising budgets and view online advertising products like ours as experimental and unproven; as a result, we may need to devote additional time and resources to educate them about our products and services. Such businesses have also historically experienced high failure rates, and we must continually add new advertisers to replace those who do not renew their advertising due to factors outside of our control, such as declining advertising budgets, closures and bankruptcies.

Our advertising revenue could be impacted by a number of other factors, including, but not limited to:

•the perceived effectiveness and acceptance of online advertising generally, particularly among SMBs that may have less experience with it;

•our ability to increase traffic to our platform and user engagement, including engagement with the ads displayed on our platform;

•the effectiveness of our ad targeting technology and tools for advertisers to optimize their campaigns;

•our ability to innovate and introduce enhanced products meeting advertiser expectations;

•product changes or inventory management decisions we may make that change the size, format, frequency or relative prominence of ads displayed on our platform;

•the widespread adoption of any technologies that make it more difficult for us to deliver ads, such as ad-blocking programs;

•loss of advertising business to our competitors, including if competitors offer lower priced or more integrated products;

•the prevalence of low-quality or invalid traffic on our platform, such as robots and spiders, which we have discovered in the past and expect to discover in the future, and our ability to detect and prevent click fraud or other invalid clicks on ads;

•our reputation and perceptions regarding our platform, including of the ratings and reviews that businesses receive from our users — favorable ratings and reviews could be perceived as obviating the need to advertise, while unfavorable ratings and reviews could discourage businesses from advertising to an audience that they perceive as hostile;

•the size and effectiveness of our sales ~~force's ability to connect with potential customers' key decision makers,~~force, which may be affected by a range of factors, not all of which are within our control, ~~including~~including:

◦the employment market in cities where our sales offices are located;

◦our sales force's ability to connect with potential customers' key decision makers, which may be harmed if such decision makers, their telecommunications carriers or their mobile operating systems increase their use of call

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blocking technologies, or decision makers answer their phones less frequently to avoid, for example, calls from unknown numbers, telemarketing calls, calls from political campaigns and other solicitations; and

◦catastrophic occurrences, such as earthquakes or fires, and major public health issues that negatively impact the productivity of our sales force;

•the degree to which businesses choose to reach users through our free products in lieu of our paid products and services; and

•adverse macroeconomic conditions, which may disproportionately affect the SMBs on which we rely.

Any of these or other factors could result in a reduction in demand for our products, which may reduce the prices we are able to charge, either of which would negatively affect our revenue and operating results.

Our ability to increase our revenue depends on our ability to introduce successful new products and services. Our ongoing investments in developing products and services, including products and services outside of our historical core business, involve significant risks, could disrupt our current operations and may not produce the long-term benefits that we expect.

Our industry is rapidly evolving and intensely competitive; our ability to compete successfully and increase our revenue depends on our ability to continue to deliver innovative, relevant and useful products to our customers in a timely manner. As a result, we have invested, and expect to continue to invest, significant resources in developing products and services to drive traffic to our platform and engage our users. Our product development efforts may include significant changes to our existing products or new products that are unproven or that are outside of our historical core business, such as our investments in Yelp Reservations and Yelp Waitlist. Such investments may not prioritize short-term financial results and may involve significant risks and uncertainties, including distracting management and disrupting our current operations. We cannot assure you that any resulting new or enhanced products and services will engage users and advertisers. We may fail to generate sufficient revenue, operating margin or other value to justify our investments in such products, thereby harming our ability to generate revenue directly and, with respect to investments in products outside of our core business, indirectly as a result of foregoing the opportunity for higher investment in our advertising business, in other product lines and other initiatives.

We rely on Internet search engines and application marketplaces to drive traffic to our platform, certain providers of which offer products and services that compete directly with our products. If links to our applications and website are not displayed prominently, traffic to our platform could decline and our business would be adversely affected.

We rely heavily on Internet search engines, such as Google, to drive traffic to our platform through their unpaid search results and on application marketplaces, such as Apple’s App Store and Google’s Play, to drive downloads of our applications. Although search results and application marketplaces have allowed us to attract a large audience with low organic traffic acquisition costs to date, if they fail to drive sufficient traffic to our platform, we may need to increase our marketing spend to acquire additional traffic. We cannot assure you that the value we ultimately derive from any such additional traffic would exceed the cost of acquisition, and any increase in marketing expense may in turn harm our operating results.

The amount of traffic we attract from search engines is due in large part to how and where information from and links to our website are displayed on search engine result pages. The display, including rankings, of unpaid search results can be affected by a number of factors, many of which are not in our direct control, and may change frequently. Search engines have made changes in the past to their ranking algorithms, methodologies and design layouts that have reduced the prominence of links to our platform and negatively impacted our traffic, and we expect they will continue to make such changes from time to time in the future. For example, we believe Google's update to its search algorithm in the fourth quarter of 2019 may have harmed and may be continuing to harm our traffic. Similarly, Apple, Google or other marketplace operators may make changes to their marketplaces that make access to our products more difficult. For example, our applications may receive unfavorable treatment compared to the promotion and placement of competing applications, such as the order in which they appear within marketplaces.

~~However, we~~We may not know how or otherwise be in a position to influence search results or our treatment in application marketplaces. With respect to search results in particular, even when search engines announce the details of their methodologies, their parameters may change from time to time, be poorly defined or be inconsistently interpreted. For example, Google previously announced that the rankings of sites showing certain types of app install interstitials could be penalized on its mobile search results pages. While we believe the type of interstitial we currently use is not being penalized, we cannot guarantee that Google will not unexpectedly penalize our app install interstitials, causing links to our mobile website to be featured less prominently in Google’s mobile search results and harming traffic to our platform as a result.

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In some instances, search engine companies and application marketplaces may change their displays or rankings in order to promote their own competing products or services or the products or services of one or more of our competitors. For example, Google has integrated its local product offering with certain of its products, including search and maps. The resulting promotion of Google’s own competing products in its web search results has negatively impacted the search ranking of our website. Because Google in particular is the most significant source of traffic to our website, accounting for a substantial portion of the visits to our website, our success depends on our ability to maintain a prominent presence in search results for queries regarding local businesses on Google. As a result, Google’s promotion of its own competing products, or similar actions by Google in the future that have the effect of reducing our prominence or ranking on its search results, could have a substantial negative effect on our business and results of operations.

We face intense competition in rapidly evolving markets, and expect competition to increase in the future.

We compete in rapidly evolving and intensely competitive markets, and we expect competition to intensify further in the future with the emergence of new technologies and market entrants. We face competition for users, content, and advertising and other customers, including from: online search engines and directories; traditional, offline business guides and directories; online and offline providers of consumer ratings, reviews and referrals; providers of online marketing and tools for managing and optimizing advertising campaigns; various forms of traditional offline advertising; restaurant reservation and seating tools; food ordering and delivery services; and home and/or local services-related platforms and offerings.

Our competitors may enjoy competitive advantages, such as greater name recognition, longer operating histories, substantially greater market share, large existing user bases and substantially greater financial, technical and other resources. These companies may use these advantages to offer products similar to ours at a lower price, develop different products to compete with our current solutions and respond more quickly and effectively than we do to new or changing opportunities, technologies, standards or client requirements. In particular, major Internet companies, such as Google, Facebook, Amazon and Microsoft, may be more successful than us in developing and marketing online advertising and other services directly to local businesses, and may leverage their relationships based on other products or services to gain additional share of advertising budgets.

Certain competitors could also use strong or dominant positions in one or more markets to gain competitive advantage against us in areas in which we operate, including by:

•integrating review platforms or features into products they control, such as search engines, web browsers or mobile device operating systems;

•making acquisitions;

•changing their unpaid search result rankings to promote their own products;

•refusing to enter into or renew licenses on which we depend;

•limiting or denying our access to advertising measurement or delivery systems;

•limiting our ability to target or measure the effectiveness of ads; or

•making access to our platform more difficult.

These risks may be exacerbated by the trend in recent years toward consolidation among online media companies, potentially allowing our larger competitors to offer bundled or integrated products that feature alternatives to our platform.

To compete effectively, we must continue to invest significant resources in product development to enhance user experience and engagement, as well as sales and marketing to expand our base of advertisers. However, there can be no assurance that we will be able to compete successfully for users and customers against existing or new competitors, and failure to do so could result in loss of existing users, reduced revenue, increased marketing expenses or diminished brand strength, any of which could harm our business.

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We rely on third-party service providers and strategic partners for many aspects of our business, and any failure to maintain these relationships could harm our business.

We rely on relationships with various third parties to grow our business, including strategic partners and technology and content providers. For example, we rely on third parties for data about local businesses, mapping functionality, payment processing, information technology and systems, network infrastructure and administrative software solutions. We also rely on partnership integrations for various transactions available through Yelp, including Grubhub for food-ordering services. Identifying, negotiating and maintaining relationships with third parties require significant time and resources, as does integrating their data, services and technologies onto our platform. For example, the ongoing maintenance of the Grubhub integration may require significant time, resources and expense, and may divert the attention of our management and employees from other aspects of our business operations. In addition, there can be no assurance that we will be able to continue to realize the intended benefits of the Grubhub partnership.

It is possible that ~~these~~ third-party providers and strategic partners may not be able to devote the resources we expect to the relationships. We may also have competing interests and obligations with respect to certain of our partners, which may make it difficult to maintain, grow or maximize the benefit for each partnership. For example, our entry into the online reservations space

with our acquisition of SeatMe, Inc. in 2013 put us in competition with OpenTable, which led to the end of our partnership with OpenTable in 2015. Our focus on establishing additional partnerships to help accelerate our growth initiatives may exacerbate this risk. If our relationships with our partners and providers deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with content or similar services. As in the case of the expiration or termination of any of our agreements with third-party providers, transitioning from one partner or provider to another could subject us to operational delays and inefficiencies and we may not be able to replace the services provided to us in a timely manner or on terms that are favorable to us, if at all.

In addition, we exercise limited control over our third-party partners and vendors, which makes us vulnerable to any errors, interruptions or delays in their operations. If these third parties experience any service disruptions, financial distress or other business disruption, or difficulties meeting our requirements or standards, it could make it difficult for us to operate some aspects of our business. For example, we rely on a single supplier to process payments of all transactions made through Yelp. Any disruption or problems with this supplier or its services could have an adverse effect on our reputation, results of operations and financial results. Similarly, the actions of our partners may affect our brand if users or customers do not have a positive experience interacting with or through them. For example, if advertisers do not have a positive experience purchasing our advertising products through our resale partners, such as ~~DexYP,~~Thryv, or the agency participants in our Yelp Ads Certified Partners Program, they may not continue advertising with us, which would negatively affect our revenue and operating results. Although such partners are contractually obligated to observe certain standards and best practices while selling our advertising products, our ability to ensure their compliance is limited. Any disagreements or disputes with these or other partners about our respective contractual obligations — which we have had in the past and may have again from time to time in the future — could result in legal proceedings or negatively affect our brand and reputation.

Our strategy to grow our business may not be successful and may expose us to additional risks.

Our strategy to grow our business includes priorities such as winning in our key ~~verticals~~categories of restaurants and home & local services, providing more value to our business customers and focusing on our ~~national,~~multi-location and self-serve ~~and sales partnership~~ sales channels. These initiatives involve risks and executing on them may prove more difficult than we currently anticipate. We may not succeed in realizing the benefits of these efforts, including growing our revenue and improving our margins, within the time frame we expect or at all.

We will face both ~~executional~~execution and industry challenges in our efforts to win in our key ~~verticals.~~categories. For example, developing comprehensive restaurant and home & local services solutions may require substantial investments and significant changes to our existing platform, products and content, and our development efforts in one category may not translate to the other. The restaurants and home & local services markets themselves will also present significant hurdles. In addition to being highly competitive, fragmented industries, neither has yet fully embraced online solutions of the type we offer. The majority of restaurants and diners continue to use the traditional offline ordering and booking methods involving the telephone, paper menus that restaurants distribute to diners and pen-and-paper or other offline reservation books. Similarly, ~~most~~many of our consumers continue to search for, select and hire service professionals offline through word-of-mouth and referrals. Changing traditional habits is difficult, and the speed and ultimate outcome of the shift of these markets online for consumers and businesses alike is uncertain and may not occur as quickly as we expect, or at all. Even if we are successful in developing comprehensive solutions and overcoming industry challenges in these ~~verticals,~~categories, we may not realize the benefits that we expected from pursuing this strategy or may not realize them within a reasonable time. For example, the traffic and engagement

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driven by our offerings in the restaurants category may not result in higher traffic and engagement in our higher-value home & local services category as we expect.

Although our initiatives to provide more value to our customers and emphasize alternative sales channels are more similar to our historical advertising business than our restaurants and home & local services initiatives, both ~~also~~ involve unfamiliar risks. Our efforts to optimize CPC prices and provide advertisers more value for their money may include lowering prices while making significant investments in product development. We cannot guarantee that any resulting increase in demand for our products or customer retention will offset lower prices or otherwise generate sufficient revenue to justify our investments. Likewise, emphasizing our ~~national,~~multi-location and self-serve ~~and sales partnership~~ channels involves changes to our sales organization and sales force hiring priorities. These changes may be disruptive to our sales operations ~~— particularly coming so soon after our transition to non-term contracts, another major operational change —~~ and affect our ability to generate revenue.

Certain of our past strategic decisions may also continue to impact our opportunities and long-term prospects. For example, while our sale of Eat24 has resulted in cost savings, it has also resulted in a substantial reduction in our transactions revenue, which will not be fully offset by revenue from our Grubhub partnership for the foreseeable future. We cannot predict the impact that fully outsourcing food ordering on our platform may have on our brand and reputation. In addition, we wound down our international sales and marketing operations in 2016 and reallocated the associated resources primarily to our U.S. and Canadian markets. While our decision to focus our sales and marketing resources primarily on the United States and Canada has resulted

in some cost savings, it also limits the markets from which we generate revenue and our ability to expand internationally in the future. Our continued growth depends on our ability to further develop our U.S. and Canadian communities and operations for the foreseeable future. However, our communities in many of the largest markets in the United States and Canada are in a relatively late stage of development, and further development of smaller markets may not yield similar results. If we are not able to develop these markets as we expect, or if we fail to address the needs of those markets, our business will be harmed.

Consumers are increasingly accessing online services through a variety of platforms other than desktop computers, including mobile devices. If we are unable to operate effectively on such devices or our products for such devices are not compelling, our business could be adversely affected.

The number of people who access the Internet through devices other than desktop computers, including mobile phones, tablets, handheld computers, voice-assisted speakers, automobiles and television set-top devices, has increased dramatically in the past several years. We generate a substantial majority of our revenue from advertising delivered on mobile devices and anticipate that growth in use of our mobile platform will continue to be the driver of our growth for the foreseeable future. As a result, we must continue to drive adoption of and user engagement on our mobile platform, and on our mobile app in particular, which is less reliant on search results for traffic than our website. If we are unable to drive continued adoption of and engagement on our mobile app, our business may be harmed and we may be unable to decrease our reliance on traffic from Google and other search engines.

In order to attract and retain engaged users of our platform on mobile and other alternative devices, the products and services we introduce on such devices must be compelling. However, the functionality and user experience associated with some alternative devices may make the use of our platform and products more difficult than through a desktop computer. For example, devices with small screen sizes or that lack a screen may exacerbate the risks associated with how and where our website is displayed in search results because they display or otherwise present fewer search results than desktop computers. We also expect that the ways in which users engage with our platform will continue to change over time as users increasingly engage via alternative devices. This may make it more difficult to develop products that consumers find useful, may make it more difficult for us to monetize our products and may also negatively affect our content if users do not continue to contribute high quality content through such devices.

Similarly, as new devices and platforms develop, advertiser demand may increase for products that we do not offer or that may alienate our user base, which we must balance against our commitment to prioritizing the quality of user experience over short-term monetization. If we are not able to balance these competing considerations successfully to develop compelling advertising products, advertisers may stop or reduce their advertising with us and we may not be able to generate meaningful revenue from alternative devices despite the expected growth in their usage.

As new devices and platforms are continually being released, it is also difficult to predict the problems we may encounter in adapting our products and services — and developing competitive new products and services — to them, and we may need to devote significant resources to the creation, support and maintenance of such products. Our success will be dependent on the interoperability of our products with a range of technologies, systems, networks and standards that we do not control, such as mobile operating systems like Android and iOS. We may not be successful in developing products that operate effectively with these technologies, systems, networks and standards or in creating, maintaining and developing relationships with key

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participants in related industries, some of which may be our competitors. If we experience difficulties or increased costs in integrating our products into alternative devices, or if manufacturers elect not to include our products on their devices, make changes that degrade the functionality of our products, give preferential treatment to competitive products or prevent us from delivering advertising, our user growth and operating results may be harmed. This risk may be exacerbated by the frequency with which users change or upgrade their devices; in the event users choose devices that do not already include or support our platform or do not install our products when they change or upgrade their devices, our traffic and user engagement may be harmed.

If we fail to generate, maintain and recommend sufficient content from our users that consumers find relevant, helpful and reliable, our traffic and revenue will be negatively affected.

Our success depends on our ability to attract consumer traffic with valuable content, which in turn depends on the quantity and quality of the content provided by our users, as well as consumer perceptions of the relevance, helpfulness and reliability of that content. We may be unable to provide consumers with valuable information if our users do not contribute sufficient content or if our users remove content they previously submitted. For example, users may be unwilling to contribute content as a result of concerns that they may be harassed or sued by the businesses they review, instances of which have occurred in the past and may occur again in the future. Consumers also may not find the content on our platform to be valuable if they do not perceive it as relevant, helpful or reliable. For example, we do not phase out or remove dated reviews, and consumers may view older reviews as less relevant or reliable than more recent reviews. If the high concentration of reviews in our restaurants and shopping categories creates a perception that our platform is primarily limited to these categories, consumers may not believe that we can provide them with helpful information about businesses in other categories and seek that information elsewhere.

Our automated recommendation software is a critical part of our efforts to provide consumers with relevant, helpful and reliable content. However, although we have designed our technology to avoid recommending content that we believe to be biased, unreliable or otherwise unhelpful, we cannot guarantee that our efforts will be successful, or that each of the recommended reviews available on our platform at any given time is useful or reliable. If our automated software does not recommend helpful content or recommends unhelpful content, consumers may reduce or stop their use of our platform. For example, if robots, shills or other spam accounts are able to contribute a significant amount of recommended content, or consumers perceive a significant amount of our recommended content to be from such accounts, our traffic and revenue could be negatively affected. Although we do not believe content from these sources has had a material impact to date, if our automated software recommends a substantial amount of such content in the future, our ability to provide high quality content would be harmed and the consumer trust essential to our success could be undermined.

Even if we are successful in our efforts to generate, maintain and recommend valuable content, our ability to attract consumer traffic may nonetheless be harmed if consumers can find equivalent content through other services. From time to time, other companies copy information from our platform without our permission, through website scraping, robots or other means, and publish or aggregate it with other information for their own benefit. This may make them more competitive and may decrease the likelihood that consumers will visit our platform to find the local businesses and information they seek. Though we strive to detect and prevent this third-party conduct, we may not be able to detect it in a timely manner and, even if we could, may not be able to prevent it. In some cases, particularly in the case of third parties operating outside of the United States, our available remedies may be inadequate to protect us against such conduct.

We may acquire or invest in other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results. We may also be unable to realize the expected benefits and synergies of any acquisitions or investments.

Our success will depend, in part, on our ability to expand our product offerings and grow our business in response to changing technologies, user and advertiser demands and competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses or technologies rather than through internal development. For example, in February 2017, we acquired Nowait to obtain waitlist system and seating tool technology and in April 2017, we acquired Turnstyle to obtain a wifi-based marketing tool for customer retention and loyalty. Similarly, we may pursue investments in privately held companies in furtherance of our strategic objectives, as we did with our investment in Nowait prior to our acquisition of that company. We have limited experience as a company in the complex processes of acquiring and investing in businesses and technologies. The pursuit of potential future acquisitions or investments may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing transactions, whether or not they are consummated.

Acquisitions that are consummated could result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. The incurrence of debt in particular could result in increased fixed obligations or include covenants or other restrictions that would impede our ability to manage our operations. In addition, any transactions

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we announce could be viewed negatively by users, businesses or investors. We may also fail to accurately forecast the financial impact of a transaction, including tax and accounting charges.

We may also discover liabilities or deficiencies associated with the companies or assets we acquire or invest in that we did not identify in advance, which may result in significant unanticipated costs or losses. For example, in 2015, two lawsuits were filed against us by former Eat24 employees alleging that Eat24 failed to comply with certain labor laws prior to the acquisition. The effectiveness of our due diligence review and our ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made by the companies we acquire or their representatives, as well as the limited amount of time in which acquisitions are executed.

In order to realize the expected benefits and synergies of any acquisition that is consummated, we must meet a number of significant challenges that may create unforeseen operating difficulties and expenditures, including:

•integrating operations, strategies, services, sites and technologies of an acquired company;

•managing the post-transaction business effectively;

•retaining and assimilating the employees of an acquired company;

•retaining existing customers and strategic partners, and minimizing disruption to existing relationships, as a result of any integration of new personnel or departure of existing personnel;

•difficulties in the assimilation of corporate cultures;

•implementing and retaining uniform standards, controls, procedures, policies and information systems; and

•addressing risks related to the business of an acquired company that may continue to impact the business following the acquisition.

Any inability to integrate services, sites and technologies, operations or personnel in an efficient and timely manner could harm our results of operations. Transition activities are complex and require significant time and resources, and we may not manage the process successfully, particularly if we are managing multiple transactions concurrently.

Our ability to integrate complex acquisitions is unproven, particularly with respect to companies that have significant operations or that develop products with which we do not have prior experience. We expect to invest resources to support any future acquisitions, which will result in ongoing operating expenses and may divert resources and management attention from other areas of our business. We cannot assure you that these investments will be successful. Even if we are able to integrate the operations of any acquired company successfully, we may not realize the full benefits of synergies, cost savings, innovation and operational efficiencies that may be possible from the transaction, or we may not achieve these benefits within a reasonable period of time.

Similarly, investments in private companies are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market. The success of any such investment is typically dependent on a liquidity event, such as a public offering or acquisition. If any company in which we invest decreases in value, we could lose all or part of our investment. These risks would be heightened to the extent any such investment is a minority investment in which we have limited management or operational control over the business.

Our business depends on a strong brand. Maintaining, protecting and enhancing our brand requires significant resources and our efforts to do so may not be successful.

We have developed a strong brand that we believe has contributed significantly to the success of our business. Maintaining, protecting and enhancing the “Yelp” brand are critical to expanding our base of users and advertisers and increasing the frequency with which they use our solutions. If we fail to maintain and enhance our brand successfully, or if we incur excessive expenses in this effort, our business and financial results may be adversely affected.

Our ability to do so will depend largely on our ability to maintain business owner and consumer trust in the integrity of our products and in the quality of the user content and other information found on our platform, which we may not do successfully.

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We dedicate significant resources to these goals, including through business owner outreach and education, our automated recommendation software, our consumer alerts program and our efforts to remove content from our platform that violates our terms of service. Despite these efforts, we may fail to respond to user or business owner concerns expeditiously or in a manner they perceive to be appropriate, which could erode confidence in our brand. For example, some consumers and businesses have alternately expressed concern that our technology either recommends too many reviews, thereby recommending some reviews that may not be legitimate, or too few reviews, thereby not recommending some reviews that may be legitimate. The actions of our partners, over whom we have limited, if any, control, may also affect the perceived integrity of our brand if users or advertisers do not have a positive experience interacting with or through them. In addition, our website and mobile app serve as a platform for expression by our users, and third parties or the public at large may attribute the political or other sentiments expressed by users on our platform to us, which could harm our reputation.

Negative publicity about our company, including our technology, sales practices, personnel, customer service, litigation, strategic plans or political activities, could also diminish confidence in our brand and the use of our products. Certain media outlets have previously reported allegations that we manipulate our reviews, rankings and ratings in favor of our advertisers and against non-advertisers. Although we have taken action to combat this perception, our reputation and brand, and our traffic and business in turn, may suffer if negative publicity about our company persists or if users otherwise perceive that our content is manipulated or biased. Allegations and complaints regarding our business practices, and any resulting negative publicity, may also result in increased regulatory scrutiny of our company. In addition to requiring management time and attention, any regulatory inquiry or investigation could itself result in further negative publicity regardless of its merit or outcome.

Trademarks are also an important element of our brand and require substantial investments to maintain, which may not be successful. We have faced in the past, and may face in the future, oppositions from third parties to our applications to register key trademarks. If we are unsuccessful in defending against these oppositions, our trademark applications may be denied. Whether or not our trademark applications are denied, third parties may claim that our trademarks infringe their rights. As a result, we could

be forced to pay significant settlement costs or cease the use of these trademarks and associated elements of our brand. Doing so could harm our brand recognition and adversely affect our business. Conversely, if we are unable to prevent others from misusing our brand or passing themselves off as being endorsed or affiliated with us, it could harm our reputation and our business could suffer. For example, we have encountered instances of reputation management companies falsely representing themselves as being affiliated with us when soliciting customers; this practice could be contributing to the perception that business owners can pay to manipulate reviews, rankings and ratings.

If we fail to manage our ~~growth~~employee operations and organization effectively, our brand, results of operations and business could be harmed.

~~We have experienced rapid growth in our headcount~~Our employee operations are complex and ~~operations, including through our acquisitions of other businesses, which places~~place substantial demands on management and our operational infrastructure. Most of our employees have been with us for fewer than two years; to ~~manage the expected~~execute on our growth ~~of our operations,~~strategy, we will need to continue to increase the productivity of our current employees and hire, train and manage new employees. In particular, we intend to continue to make substantial investments in our engineering, ~~organization as well as our~~ sales and marketing organizations. As a result, we must effectively integrate, develop and motivate a large number of new employees while maintaining the beneficial aspects of our company culture.

As our business matures, we make periodic changes and adjustments to our organization in response to various internal and external considerations, including market opportunities, the competitive landscape, new and enhanced products, acquisitions, sales performance, ~~increases in headcount~~availability of employee talent and ~~cost levels.~~costs. In some instances, these changes have resulted in a temporary lack of focus and reduced productivity, which may occur again in connection with any future changes to our organization and may negatively affect our results of operations. For example, it may take time for our sales, customer success and other organizations to adapt to selling, supporting and retaining non-term contracts, which give advertisers the ability to cancel their plans at any time and which comprise substantially all new sales of local advertising plans. If these organizations are unable to ~~do so~~adapt quickly and effectively to changes or adjustments to our organization, our business will be harmed. Similarly, we are increasingly focused on achieving greater cost-effectiveness in our advertising business; while we plan to continue investing in our direct sales force, we also plan to emphasize other, more efficient sales channels, such as ~~self-serve~~multi-location and ~~sales partnerships,~~self-serve, and may otherwise pursue new strategies for high-margin revenue ~~growth.~~growth, such as investing in our direct sales force in different, lower-cost markets than where we historically had large sales presences. These and other changes in our sales organization, sales force hiring priorities or in the way we structure compensation of our sales organization may be disruptive and may affect our ability to generate revenue.

Our employee operations may also be negatively affected by a range of external factors that are not within our control. For example, if catastrophic events, such as earthquakes or fires, or public health issues, such as the recent COVID-19 coronavirus outbreak, have a substantial impact on employee attendance or productivity, our results of operations may be harmed. The extent and duration of impacts from such events are typically uncertain; the duration and extent of the impact from the coronavirus outbreak, for example, depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other

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factors on our employees. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

To ~~manage~~execute on our growth strategy, we may need to improve our operational, financial and management systems and processes, which may require significant capital expenditures and allocation of valuable management and employee resources, as well as subject us to the risk of over-expanding our operating infrastructure. For example, it can be difficult to train thousands of sales employees across multiple offices according to the same business standards, practices and laws, and we have been the subject of lawsuits alleging that we have failed to do so. For example, we were the subject of a lawsuit alleging that our sales force does not properly disclose that calls may be monitored or recorded for quality assurance. If we fail to scale our operations successfully and increase productivity, the quality of our platform and efficiency of our operations could suffer, which could harm our brand, results of operations and business.

We are committed to providing a great consumer experience, which may cause us to forgo short-term gains and advertising revenue.

We base many of our decisions on our commitment to providing the consumers who use our platform with a great experience. In the past, we have forgone, and we may in the future forgo, certain expansion or revenue opportunities that we believe excessively degrade the consumer experience, even if such decisions negatively impact our results of operations in the short term. For example, we phased out our brand advertising products in part because demand in the brand advertising market ~~has~~ shifted toward products disruptive to the consumer ~~experience, such as video ads.~~experience. Any decisions we make that prioritize consumers may negatively impact our relationship with existing or prospective advertisers. For example, unless we believe that a review violates our terms of service, such as reviews that contain hate speech or bigotry, we will allow the review to remain on our platform, even if the business disputes its accuracy. Certain advertisers may therefore perceive us as an impediment to their success as a result of negative reviews and ratings. This practice could result in a loss of advertisers, which in turn could harm our results of operations. However, we believe that this approach has been essential to our success in attracting users and increasing the frequency with which they use our platform. As a result, we believe this approach has served the long-term interests of our company and our stockholders and will continue to do so in the future.

We rely on the performance of highly skilled personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of our employees, including our senior management team, software engineers, marketing professionals and advertising sales staff. All of our officers and other

U.S. employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. Any changes in our senior management team in particular, even in the ordinary course of business, may be disruptive to our business. For example, our former Chief Financial Officer left the Company in the third quarter of 2019, and we recently hired a new Chief Financial Officer. While we seek to manage these transitions carefully, including by establishing strong processes and procedures and succession planning, such changes may result in a loss of institutional knowledge and cause disruptions to our business. If our senior management team fails to work together effectively or execute our plans and strategies on a timely basis as a result of management turnover or otherwise, our business could be harmed.

Our future also depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand and we expect to continue to face significant competition from other companies in hiring such personnel, particularly in the San Francisco Bay Area, where our headquarters is located and where the cost of living is high. Identifying, recruiting, training and integrating new hires will require significant time, expense and attention; as a result, we may incur significant costs to attract them before we can validate their productivity. As we continue to mature, the incentives to attract, retain and motivate employees provided by our equity awards may not be as effective as in the past, and if we issue significant equity to attract additional employees or to retain our existing employees, we would incur substantial additional stock-based compensation expense and the ownership of our existing stockholders would be further diluted. Volatility in the price of our common stock may also make it more difficult or costly in the future to use equity compensation to motivate, incentivize and retain our employees. If we fail to manage our hiring needs effectively, our efficiency and ability to meet our forecasts, as well as employee morale, productivity and retention, could suffer, and our business and operating results could be adversely affected.

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Risks Related to Our Technology and Intellectual Property

Our business is dependent on the uninterrupted and proper operation of our technology and network infrastructure. Any significant disruption in our service could damage our reputation, result in a potential loss of users and engagement and adversely affect our results of operations.

It is important to our success that users in all geographies be able to access our platform at all times. If our platform is unavailable when users attempt to access it or it does not load as quickly as they expect, users may seek other services to obtain the information for which they are looking, and may not return to our platform as often in the future, or at all. This would negatively impact our ability to attract users and advertisers and increase the frequency with which they use our platform.

We have previously experienced, and may experience in the future, service disruptions, outages and other performance problems. Such performance problems may be due to a variety of factors, including those set forth below; however, in some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.

•Infrastructure Changes and Capacity Constraints. We may experience capacity constraints due to an overwhelming number of users accessing our platform simultaneously. It may become increasingly difficult to maintain and improve the availability of our platform, especially during peak usage times, as our products become more complex and our traffic increases.

•Human or Software Errors. Our products and services are highly technical and complex, and may contain errors or vulnerabilities that could result in unanticipated downtime for our platform. Users may also use our products in unanticipated ways that may cause a disruption in service for other users attempting to access our platform. We may encounter such difficulties more frequently as we acquire companies and incorporate their technologies into our service.

•Catastrophic Occurrences. Our systems are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks and similar events. Our U.S. corporate offices and one of the facilities we lease to house our computer and telecommunications equipment are located in the San Francisco Bay Area, a region known for seismic activity. Acts of terrorism, which may be targeted at metropolitan areas that have higher population densities than rural areas, could cause disruptions in our or our advertisers’ businesses or the economy as a whole.

We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting the San Francisco Bay Area, and our business interruption insurance may be insufficient to compensate us for losses that may occur. Our disaster recovery program contemplates transitioning our platform and data to a backup center in the event of a catastrophe. Although this program is functional, if our primary data center shuts down, there will be a period of time that our services will remain shut down while the transition to the back-up data center takes place. During this time, our platform may be unavailable in whole or in part to our users.

We expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products. To the extent that we do not address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology in a cost-effective manner, while at the same time maintaining the reliability and integrity of our systems and infrastructure, our business and operating results may be harmed.

If our security measures are compromised, or if our platform is subject to attacks that degrade or deny the ability of users to access our content, users may curtail or stop use of our platform.

Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users’ data, or to disrupt our ability to provide our services. Any failure to prevent or mitigate security breaches could expose us to the risk of loss or misuse of private user and business information, which could result in potential liability and litigation. We may be a particularly compelling target for such attacks as a result of our brand recognition.

Computer viruses, break-ins, malware, social engineering (particularly spear phishing attacks), attempts to overload servers with denial-of-service or other attacks and similar disruptions from unauthorized use of computer systems have become more prevalent in our industry, have occurred on our systems in the past and are expected to occur periodically on our systems in the future. User and business owner accounts and listing pages could also be hacked, hijacked, altered or otherwise claimed or controlled by unauthorized persons. For example, we enable businesses to create free online accounts and claim the business

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listing pages for each of their business locations. Although we take steps to confirm that the person setting up the account is affiliated with the business, our verification systems could fail to confirm that such person is an authorized representative of the business, or mistakenly allow an unauthorized person to claim the business’s listing page. In addition, we face risks associated with security breaches affecting our third-party partners and service providers. A security breach at any such third party could be perceived by consumers as a security breach of our systems and result in negative publicity, damage to our reputation and expose us to other losses.

Cyber-attacks continue to evolve in sophistication and volume, and may be inherently difficult to detect for long periods of time. Although we have developed systems and processes that are designed to protect our data and prevent data loss and other security breaches, the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, often are not recognized until launched against a target or long after, and may originate from less regulated and more remote areas around the world. As a result, these preventative measures may not be adequate and we cannot assure you that they will provide absolute security. Although none of the disruptions we have experienced to date have had a material effect on our business, any future disruptions could lead to interruptions, delays or website shutdowns, causing loss of critical data or the unauthorized disclosure or use of personally identifiable or other confidential information. Even if we experience no significant shutdown or no critical data is lost, obtained or misused in connection with an attack, the occurrence of such attack or the perception that we are vulnerable to such attacks may harm our reputation, degrade the user experience, cause loss of confidence in our products or result in financial harm to us.

Any or all of these issues could negatively impact our ability to attract new users, deter current users from returning to our platform, cause existing or potential advertisers to cancel their contracts or subject us to third-party lawsuits or other liabilities. For example, we work with a third-party vendor to process credit card payments by users and businesses, and are subject to payment card association operating rules. Compliance with applicable operating rules, however, will not necessarily prevent illegal or improper use of our payment systems, or the theft, loss or misuse of payment information. If our security measures fail to prevent fraudulent credit card transactions and protect payment information adequately as a result of employee error, malfeasance or otherwise, or we fail to comply with the applicable operating rules, we could be liable to the users and businesses for their losses, as well as the vendor under our agreement with it, and be subject to fines and higher transaction fees. In addition, government authorities could also initiate legal or regulatory actions against us in connection with such incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.

Some of our products contain open source software, which may pose particular risks to our proprietary software and solutions.

We have used open source software in our products and will use open source software in the future. From time to time, we may face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business and operating results.

Failure to protect or enforce our intellectual property rights could harm our business and results of operations.

We regard the protection of our trade secrets, copyrights, trademarks, patent rights and domain names as critical to our success. In particular, we must maintain, protect and enhance the "Yelp" brand. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We pursue the registration of our domain

names, trademarks and service marks in the United States and in certain jurisdictions abroad. While we are pursuing a number of patent applications, we currently have only limited patent protection for our core business, which may make it more difficult to assert certain of our intellectual property rights. We typically enter into confidentiality and invention assignment agreements with our employees and contractors, as well as confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation or disclosure of our proprietary information or deter independent development of similar technologies by others, which may diminish the value of our brand and other intangible assets and allow competitors to more effectively mimic our products and services.

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Effective trade secret, copyright, trademark, patent and domain name protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and expenses and the costs of defending our rights. Seeking protection for our intellectual property, including trademarks and domain names, is an expensive process and may not be successful, and we may not do so in every location in which we operate. Similarly, the process of obtaining patent protection is expensive and time consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain. Litigation may become necessary to enforce our patent or other intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. For example, we may incur significant costs in enforcing our trademarks against those who attempt to imitate our "Yelp" brand. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business and operating results.

We may be unable to continue to use the domain names that we use in our business, or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks.

We have registered domain names for the websites that we use in our business, such as Yelp.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration or any other cause, we may be forced to market our products under a new domain name, which could cause us substantial harm or cause us to incur significant expense in order to purchase rights to the domain name in question. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. Domain names similar to ours have been registered by others in the United States and elsewhere. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to or otherwise decrease the value of our brand or our trademarks or service marks. Protecting and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of management’s attention.

Risks Related to Our Financial Statements and Tax Matters

We have incurred significant operating losses in the past, and we may not be able to generate sufficient revenue to maintain profitability. Our recent growth rate will likely not be sustainable, and a failure to maintain an adequate growth rate will adversely affect our business and results of operations.

You should not rely on the revenue growth of any prior quarterly or annual period, or the net income we realize from time to time, as an indication of our future performance. Although our revenues have grown rapidly in the last several years, increasing from $12.1 million in 2008 to ~~$942.8 million~~$1.0 billion in ~~2018,~~2019, our revenue growth rate has declined in recent periods as a result of a variety of factors, including the maturation of our business and the gradual decline in the number of major geographic markets within the United States and Canada to which we have not already expanded. Moreover, our strategy to grow our business involves significant risks and executing on it may prove more difficult than we currently anticipate.

Historically, our costs have increased each year and we expect our costs to increase in future periods as we continue to expend substantial financial resources on:

•product and feature development;

•sales and marketing;

•our technology infrastructure;

•market development efforts;

•strategic opportunities, including commercial relationships and acquisitions;

•our stock repurchase program; and

•general administration, including legal and accounting expenses related to being a public company.

These investments may not result in increased revenue or growth in our business. Our costs may also increase as we hire additional employees, particularly as a result of the significant competition that we face to attract and retain technical talent.

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Our expenses may grow faster than our revenue and may be greater than we anticipate in a particular period or over time. If we are unable to maintain adequate revenue growth and to manage our expenses, we may continue to incur significant losses in the future and may not be able to maintain profitability.

We have a limited operating history in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have a limited operating history at the current scale of our business in an evolving industry that may not develop as expected, if at all. As a result, our historical operating results may not be indicative of our future operating results, making it difficult to assess our future prospects. You should consider our business and prospects in light of the risks and difficulties we may encounter in this rapidly evolving industry, which we may not be able to address successfully. These risks and difficulties include numerous factors, many of which we are unable to predict or are outside of our control, such as our ability to, among other things:


•	~~attract and retain new advertising clients~~, many of which may have limited or no online advertising experience, which may become more difficult as an increasing portion of our advertisers have the ability to cancel their advertising plans at any time;


•	~~increase the number of users of our website and mobile app~~ ~~and~~ ~~the number of reviews and other content on our platform~~;

•attract and retain new advertising clients, many of which may have limited or no online advertising experience, which may become more difficult as an increasing portion of our advertisers have the ability to cancel their advertising plans at any time;

•increase the number of users of our website and mobile app and the number of reviews and other content on our platform;

•forecast revenue and adjusted EBITDA accurately, which is made more difficult by the large percentage of our revenue derived from performance-based CPC advertising and the increasing portion of our advertiser base with non-term contracts, as well as appropriately estimate and plan our expenses;

•continue to earn and preserve a reputation for providing meaningful and reliable reviews of local businesses;


•	~~effectively adapt our products and services to mobile and other alternative devices~~ ~~as usage of such devices continues to increase;~~


•	~~successfully compete with existing and future providers of other forms of offline and online advertising~~;

•effectively adapt our products and services to mobile and other alternative devices as usage of such devices continues to increase;

•successfully compete with existing and future providers of other forms of offline and online advertising;

•successfully compete with other companies that are currently in, or may in the future enter, the business of providing information regarding local businesses;


•	~~successfully manage our growth~~;


•	~~successfully develop and deploy new features and products~~;


•	~~manage and integrate successfully any acquisitions of businesses, solutions or technologies~~;


•	~~avoid interruptions or disruptions in our service or slower than expected load times~~;

•successfully manage our growth;

•successfully develop and deploy new features and products;

•manage and integrate successfully any acquisitions of businesses, solutions or technologies;

•avoid interruptions or disruptions in our service or slower than expected load times;

•develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and products;

•hire, integrate and retain talented ~~personnel;~~personnel;

•effectively manage ~~rapid growth in~~ our ~~personnel~~complex employee operations and ~~operations;~~organization; and


•	~~effectively identify, engage and manage third-party partners and service providers~~.

•effectively identify, engage and manage third-party partners and service providers.

If the demand for connecting consumers and local businesses does not develop as we expect, or if we fail to address the needs of this demand, our business will be harmed. We may not be able to address successfully these risks and difficulties or others, including those described elsewhere in these risk factors. Failure to address these risks and difficulties adequately could harm our business and cause our operating results to suffer.

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We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our operating results could vary significantly from period to period as a result of a variety of factors, many of which may be outside of our control. This volatility increases the difficulty in predicting our future performance and means comparing our operating results on a period-to-period basis may not be meaningful. In addition to the other risk factors discussed in this section, factors that may contribute to the volatility of our operating results include:

•changes in the products we offer, such as our transition to selling our local advertising products pursuant to non-term contracts;

•changes or updates to our business strategies;

•changes in our pricing policies and terms of contracts, whether initiated by us or as a result of competition;

•changes in the markets in which we operate, such as the wind down of our international sales and marketing operations to focus on our core markets of the United States and Canada;

•cyclicality and seasonality, which has become more pronounced since we transitioned to non-term contracts and may become ~~more~~further pronounced as our growth rate slows;

•the effects of changes in search engine placement and prominence;

•the adoption of any laws or regulations that adversely affect the growth, popularity or use of the Internet, such as the repeal of Internet neutrality regulations in the United States;

•the success of our sales and marketing efforts;

•adverse litigation judgments, settlements or other litigation-related costs, including the costs associated with investigating and defending claims;

•interruptions in service and any related impact on our reputation;

•changes in advertiser budgets or the market acceptance of online advertising solutions;

•changes in consumer behavior with respect to local businesses;

•changes in our tax rates or exposure to additional tax liabilities, including as a result of the U.S. Tax Cuts and Jobs Act;

•the impact of macroeconomic conditions, including the resulting effect on consumer spending at local businesses and the level of advertising spending by local businesses;


•	new accounting pronouncements or changes in existing accounting standards and practices, such as our adoption on January 1, 2018 of Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (ASC 606)" (additional information on the new guidance and its impact on us is set forth in ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements); and~~

•new accounting pronouncements or changes in existing accounting standards and practices; and

•the effects of natural or man-made catastrophic events.

The impact of these and other factors on our local advertising results may occur earlier and be more concentrated going forward than prior to our transition to non-term contracts, due to the increasing proportion of advertisers with the ability to terminate their ad campaigns at any time without penalty.

We rely on data from both internal tools and third parties to calculate certain of our performance metrics. Real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We track certain performance metrics — including the number of unique devices accessing our mobile app in a given period, active claimed local business locations, ~~page views~~ad clicks and ~~calls and clicks for directions and map views~~CPCs — with internal tools, which are not independently verified by any third party. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including key metrics that we report. If the internal tools we use to track these metrics over- or under-count performance or contain algorithm or other technical errors, the data we report may not be accurate and our understanding of certain details of our business may be distorted, which could affect our

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longer-term strategies. For example, in 2018, we discovered a software error that caused our previously reported claimed local business locations metric to be overstated for the third quarter of 2017 through the first quarter of 2018, and have revised them accordingly. Our metrics may also 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.

In addition, certain of our other key metrics — the number of our desktop unique visitors and mobile website unique visitors — are calculated based on data from third parties. While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, 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. We expect these challenges to continue to occur, and potentially to increase as our traffic grows. For example, we have discovered in the past, and expect to discover in the future, that portions of our desktop traffic, as measured by Google Analytics, have been attributable to robots. Because the traffic from robots does not represent valid consumer traffic, our reported desktop unique visitor metric for impacted periods reflects an adjustment to the Google Analytics measurement of our traffic to remove traffic identified as originating from robots to provide greater accuracy and transparency. We expect to continue to make similar adjustments in the future if we determine that our traffic metrics are materially impacted by robot or other invalid traffic.

There are also inherent challenges in measuring usage across our large user base. For example, because these metrics are based on users with unique cookies, 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. In addition, although we use technology designed to block low-quality traffic, such as robots, spiders and other software, we may not be able to prevent all such traffic, and such technology may have the effect of blocking some valid traffic. For these and other reasons, the calculations of our desktop unique visitors and mobile website unique visitors may not accurately reflect the number of people actually using our platform.

Our measures of traffic and other key metrics may differ from estimates published by third parties (other than those whose data we use to calculate our key 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. However, the improvement of our tools and methodologies could cause inconsistency between current data and previously reported data, which could confuse investors or raise questions about the integrity of our data. Similarly, as both the industry in which we operate and our business continue to evolve, so too might the metrics by which we evaluate our business. We may revise or cease reporting metrics if we determine such metrics are no longer accurate or appropriate measures of our performance. For example, we ~~have decided to stop~~stopped reporting our claimed local business locations metric and instead disclose the number of active claimed local business locations, which we believe provides a better measure of the number of businesses that represent the highest quality leads available to our local sales force than our claimed local business locations metric. We also ~~plan to phase~~phased out our paid advertising accounts metric and ~~replace~~replaced it with paid advertising locations, which we believe provides a better measurement of our market ~~penetration, each as described in greater detail under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics~~."penetration. If our users, advertisers, partners and stockholders do not perceive our metrics to be accurate representations, or if we discover material inaccuracies in our metrics, our reputation may be harmed.

Because we recognize revenue from a portion of our advertising products over the term of an agreement, a significant downturn in our business may not be immediately reflected in our results of operations.

We recognize revenue from sales of our advertising products over the terms of the applicable agreements. Although an increasing portion of our advertising contracts are non-term contracts, a portion of our customers continue to be subject to contracts with ~~three-, six- and 12-month~~ terms. As a result, a significant portion of the revenue we report in each quarter is generated from agreements entered into during previous quarters. Consequently, a decline in new or renewed agreements in any one quarter may not significantly impact our revenue in that quarter but will negatively affect our revenue in future quarters. In addition, we may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in advertising sales may not be reflected in our short-term results of operations.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to our statements of operations.

We have recorded a significant amount of goodwill related to our acquisitions to date, and a significant portion of the purchase price of any companies we acquire in the future may be allocated to acquired goodwill and other intangible assets. Under ~~accounting principles generally accepted in the United States, or~~ GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value of our goodwill and other intangible assets may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered include declines in our stock price, market capitalization and future cash flow

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projections. If our acquisitions do not yield expected returns, our stock price declines or any other adverse change in market conditions occurs, a change to the estimation of fair value could result. Any such change could result in an impairment charge to our goodwill and intangible assets, particularly if such change impacts any of our critical assumptions or estimates, and may have a negative impact on our financial position and operating results.

We may require additional capital to support business growth, and such capital might not be available on acceptable terms, if at all.

We intend to continue to invest in our business and may require or otherwise seek additional funds to respond to business challenges, including the need to develop new features and products, enhance our existing services, improve our operating infrastructure and acquire complementary businesses and technologies. In addition, our board of directors has authorized us to repurchase of up to ~~$500~~$950 million of our common stock since we instituted our stock repurchase program in July 2017 and we currently settle employee tax liabilities associated with the vesting of RSUs through net share withholding, which requires us to cover such taxes with cash from our balance sheet. As a result, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our common stock. Any future debt financing we secure could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business may be harmed.

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate operating structure and intercompany arrangements, including the manner in which we develop, value and use our intellectual property and the valuations of our intercompany transactions. For example, our corporate structure includes legal entities located in jurisdictions with income tax rates lower than the U.S. statutory tax rate. Our intercompany arrangements allocate income to such entities in accordance with arm’s length principles and commensurate with functions performed, risks assumed and ownership of valuable corporate assets. We believe that income taxed in certain foreign jurisdictions at a lower rate relative to the U.S. statutory rate will have a beneficial impact on our worldwide effective tax rate.

However, significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by ~~earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by~~ changes in ~~foreign currency exchange rates~~the valuation of our deferred tax assets and liabilities, or by changes in ~~the~~ relevant tax, accounting and other laws, regulations, principles and interpretations.

In addition, the application of the tax laws of various jurisdictions, including the United States, to our international business activities is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our business does not achieve the intended tax consequences, which could increase our worldwide effective tax rate and harm our financial position and results of operations. As we operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.

Changes in tax laws or tax rulings, or the examination of our tax positions, could materially affect our financial position and results of operations.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. Our current practices, existing corporate structure and intercompany arrangements have been implemented in a manner we believe is in compliance with current prevailing tax laws. However, the tax benefits that we intend to eventually derive could be undermined due to changing tax laws or new interpretations of existing laws that are inconsistent with previous interpretations or positions taken by taxing authorities on which we have relied.

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In particular, the U.S. Tax Cuts and Jobs Act, or the Tax Act, which was enacted on December 22, 2017, made broad and complex changes to the U.S. tax code, including, among other things, reducing the federal corporate tax rate. Although we have concluded that the Tax Act had an immaterial net impact on our financial statements, we expect ~~further~~additional regulatory or accounting guidance ~~may be forthcoming~~ from the Financial Accounting Standards Board and the SEC, as well as regulations, interpretations and rulings from federal and state agencies, which could impact our consolidated financial statements. ~~Please refer~~

Some jurisdictions have enacted a tax on technology companies that generate revenues from the provision of digital services, and a number of other jurisdictions are considering enacting similar digital tax regimes. These efforts are alongside the Organization for Economic Co-operation and Development’s ongoing work, as part of its Base Erosion and Profit Shifting (BEPS) Action Plan, to ~~Note 16~~issue a final report in 2020 that provides a long-term, multilateral proposal on taxation of the ~~Notes to Consolidated Financial Statements for additional information regarding the Tax Act’s~~digital economy and could impact ~~on us.~~our consolidated financial statements.

In addition, the taxing authorities in the United States and other jurisdictions where we do business regularly examine our income and other tax returns. The ultimate outcome of these examinations cannot be predicted with certainty. Should the Internal Revenue Service or other taxing authorities assess additional taxes as a result of examinations or changes to applicable law or interpretations of the law, we may be required to record charges to our operations, which could harm our business, operating results and financial condition.

Our business and results of operations may be harmed if we are deemed responsible for the collection and remittance of state sales taxes for ~~food~~ orders placed through our platform.

If we are deemed an agent for the order-enabled ~~restaurants~~businesses on our platform under state tax law, we may be deemed responsible for collecting and remitting sales taxes directly to certain states. It is possible that one or more states could seek to impose sales, use or other tax collection obligations on us with regard to such ~~food~~ sales. These taxes may be applicable to past ~~sales, including sales completed through Eat24 prior to its sale, for which we may have indemnification obligations to Grubhub.~~sales. A successful assertion that we should be collecting additional sales, use or other taxes or remitting such taxes directly to states could result in substantial tax liabilities for past sales and additional administrative expenses, which would harm our business and results of operations.

Risks Related to Regulatory Compliance and Legal Matters

We are, and may be in the future, subject to disputes and assertions by third parties that we violate their rights. These disputes may be costly to defend and could harm our business and operating results.

We currently face, and we expect to face from time to time in the future, allegations that we have violated the rights of third parties, including patent, trademark, copyright and other intellectual property rights, and the rights of current and former employees, users and business owners. For example, various businesses have sued us alleging that we manipulate Yelp reviews in order to coerce them and other businesses to pay for Yelp advertising.

The nature of our business also exposes us to claims relating to the information posted on our platform, including claims for defamation, libel, negligence and copyright or trademark infringement, among others. For example, businesses have in the past claimed, and may in the future claim, that we are responsible for the defamatory reviews posted by our users. We expect claims like these to continue, and potentially increase in proportion to the amount of content on our platform. In some instances, we may elect or be compelled to remove the content that is the subject of such claims, or may be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims. For example, recently enacted legislation in Germany may impose significant fines for failure to comply with certain content removal and disclosure obligations. If we elect or are compelled to remove content from our platform, our products and services may become less useful to consumers and our traffic may decline, which would have a negative impact on our business. This risk may increase if Congressional efforts to restrict the protections afforded us by Section 230 of the Communications Decency Act are successful. This risk may also be greater in certain jurisdictions outside of the United States where our protection from such liability may be unclear.

We are also regularly exposed to claims based on allegations of infringement or other violations of intellectual property rights. Companies in the Internet, technology and media industries own large numbers of patent and other intellectual property rights, and frequently enter into litigation. Various “non-practicing entities” that own patents and other intellectual property rights also often aggressively attempt to assert their rights in order to extract value from technology companies. From time to time, we receive complaints that certain of our products and services may violate the intellectual property rights of others, and have previously been involved in patent lawsuits, including lawsuits involving plaintiffs targeting multiple defendants in the same or similar suits. While we are pursuing a number of patent applications, we currently have only limited patent protection for our core business,

and the contractual restrictions and trade secrets that protect our proprietary technology provide only

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limited safeguards against infringement. This may make it more difficult to defend certain of our intellectual property rights, particularly related to our core business.

We expect other claims to be made against us in the future, and as we face increasing competition and gain an increasingly high profile, we expect the number of claims against us to accelerate. The results of litigation and claims to which we may be subject cannot be predicted with any certainty. Even if the claims are without merit, the costs associated with defending against them may be substantial in terms of time, money and management distraction. In particular, patent and other intellectual property litigation may be protracted and expensive, and the results may require us to stop offering certain features, purchase licenses or modify our products and features while we develop non-infringing substitutes, or otherwise involve significant settlement costs. The development of alternative non-infringing technology or practices could require significant effort and expense or may not be feasible. Even if claims do not result in litigation or are resolved in our favor without significant cash settlements, such matters, and the time and resources necessary to resolve them, could harm our business, results of operations and reputation.

Our business is subject to complex and evolving U.S. and foreign regulations and other legal obligations related to privacy, data protection and other matters. Our actual or perceived failure to comply with such regulations and obligations could harm our business.

We are subject to a variety of laws in the United States and abroad that involve matters central to our business, including laws regarding privacy, data retention, distribution of user-generated content and consumer protection, among others. For example, because we receive, store and process personal information and other user data, including credit card information, we are subject to numerous federal, state and local laws around the world regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other user data. We are also subject to a variety of laws, regulations and guidelines that regulate the way we distinguish paid search results and other types of advertising from unpaid search results.

The application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. For example, we rely on laws limiting the liability of providers of online services for activities of their users and other third parties. These laws are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users. There have also been various Congressional efforts to restrict the scope of the protections available to online platforms under Section 230 of the Communications Decency Act, and our current protections from liability for third-party content in the United States could decrease or change as a result.

It is also possible that the interpretation and application of various laws and regulations may conflict with other rules or our practices, such as industry standards to which we adhere, our privacy policies and our privacy-related obligations to third parties (including, in certain instances, voluntary third-party certification bodies). Similarly, our business could be adversely affected if new legislation or regulations are adopted that require us to change our current practices or the design of our platform, products or features. For example, regulatory frameworks for privacy issues are currently in flux worldwide, and are likely to remain so for the foreseeable future due to increased public scrutiny of the practices of companies offering online services with respect to personal information of their users. The U.S. government, including the Federal Trade Commission and the Department of Commerce, and many state governments are reviewing the need for greater regulation of the collection, processing, storage and use of information about consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices. In April 2016, the European Commission approved a new safe harbor program, the E.U.-U.S. Privacy Shield, covering the transfer of personal data from the European Union to the United States, ~~and~~ a new general data protection regulation took effect in the European Union in May 2018, each of which may be subject to varying interpretations and evolving practices that would create uncertainty for us. ~~The recently passed~~Similarly, the California Consumer Privacy Act, or CCPA, which ~~is expected to become~~became effective in January 2020, ~~also creates~~created new data privacy rights for users ~~that may result in significantly greater compliance burdens for us. Though legislators have stated that they intend to propose amendments to the CCPA before it goes into effect,~~and it remains unclear ~~what, if any, modifications will be made to~~how this legislation ~~and how it~~ will be interpreted. Changes like these could increase our administrative costs and make it more difficult for consumers to use our platform, resulting in less traffic and revenue. Such changes could also make it more difficult for us to provide effective advertising tools to businesses on our platform, resulting in fewer advertisers and less revenue. For example, if privacy legislation negatively impacts our ability to measure the effectiveness of our products, such as our ability to offer store-level attribution through integrations with third-party data partners, our ability to maintain and expand our base of advertisers will be harmed.

We believe that our policies and practices comply with applicable laws and regulations. However, if our belief proves incorrect, if these guidelines, laws or regulations or their interpretations change or new legislation or regulations are enacted, or if the third parties with whom we share user information fail to comply with such guidelines, laws, regulations or their

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contractual obligations to us, we may be forced to implement new measures to reduce our legal exposure. This may require us to expend substantial resources, delay development of new products or discontinue certain products or features, which would negatively impact our business. For example, if we fail to comply with our privacy-related obligations to users or third parties, or any compromise of

security that results in the unauthorized release or transfer of personally identifiable information or other user data, we may be compelled to provide additional disclosures to our users, obtain additional consents from our users before collecting or using their information or implement new safeguards to help our users manage our use of their information, among other changes. We may also face litigation, governmental enforcement actions or negative publicity, which could cause our users and advertisers to lose trust in us and have an adverse effect on our business. For example, from time to time we receive inquiries from government agencies regarding our business practices. Although the internal resources expended and expenses incurred in connection with such inquiries and their resolutions have not been material to date, any resulting negative publicity could adversely affect our reputation and brand. Responding to and resolving any future litigation, investigations, settlements or other regulatory actions may require significant time and resources, and could diminish confidence in and the use of our products.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations has increased, and will likely continue to increase, our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and place significant strain on our personnel, systems and resources. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time. This could result in continuing uncertainty regarding compliance matters, higher administrative expenses and a diversion of management’s time and attention. Further, if our compliance efforts differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Being a public company that is subject to these rules and regulations also makes it more expensive for us to obtain and retain director and officer liability insurance, and we may in the future be required to accept reduced coverage or incur substantially higher costs to obtain or retain adequate coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

Risks Related to Ownership of Our Common Stock

Our share price has been and will likely continue to be volatile.

The trading price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, factors that may cause volatility in our share price include:

•actual or anticipated fluctuations in our financial condition and operating results;

•changes in projected operating and financial results;

•actual or anticipated changes in our growth rate relative to our competitors;

•repurchases of our common stock pursuant to our stock repurchase program, which could also cause our stock price to be higher that it would be in the absence of such a program and could potentially reduce the market liquidity for our stock;

•announcements of changes in strategy;

•announcements of technological innovations or new offerings by us or our competitors;

•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;

•additions or departures of key personnel;

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•actions of securities analysts who cover our company, such as publishing research or forecasts about our business (and our performance against such forecasts), changing the rating of our common stock or ceasing coverage of our company;

•investor sentiment with respect to us or our competitors, business partners and industry in general;

•any disruption to the proper operation of our network infrastructure or compromise of our security measures;

•any failure to maintain effective controls or difficulties encountered in their implementation or improvement;

•reporting on our business by the financial media, including television, radio and press reports and blogs;

•fluctuations in the value of companies perceived by investors to be comparable to us;

•changes in the way we measure our key metrics;

•sales of our common stock;

•changes in laws or regulations applicable to our solutions;

•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and

•general economic and market conditions such as recessions or interest rate changes.

Furthermore, the stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. For example, in January 2018, we and certain of our officers were sued in a putative class action lawsuit alleging violations of the federal securities laws for allegedly making materially false and misleading statements. We may be the target of additional litigation of this type in the future as well. Securities litigation against us could result in substantial costs and divert our management’s time and attention from other business concerns, which could harm our business.

We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves.

~~In November 2018 and February 2019,~~Since we implemented our stock repurchase program in July 2017, our board of directors has authorized the repurchase of up to an aggregate of ~~$500~~$950 million of our common stock, of which ~~we commenced in February 2019~~$269 million remains available and which does not have an expiration date. Although our board of directors has authorized this repurchase program, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. We cannot guarantee that the program will be fully consummated or that it will enhance long-term stockholder value. The program could affect the trading price of our stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition, this program could diminish our cash and cash equivalents, and marketable securities.

We do not intend to pay dividends for the foreseeable future, and as a result, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. ~~We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes.~~ Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize future gains on their investments.

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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our Company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change in control or changes in our board and management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•authorize our board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock;

•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•specify that special meetings of our stockholders can be called only by our board of directors, the Chair of our board of directors or our Chief Executive Officer;

•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

•establish that our board of directors is divided into three classes, with directors in each class serving three-year staggered terms;

•prohibit cumulative voting in the election of directors;

•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

•require the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our amended and restated certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for the adjudication of certain disputes, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for:

•any derivative action or proceeding brought on our behalf;

•any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Yelp to us or our stockholders;

•any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation or our amended and restated bylaws; and

•any action asserting a claim against us that is governed by the internal affairs doctrine.

This exclusive-forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any claim for which the U.S. federal courts have exclusive jurisdiction and further provides that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to the provisions of such provision. This exclusive-forum provision may limit a stockholder's ability to bring a claim in a judicial

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forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find this exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our business.

Future sales of our common stock in the public market could cause our share price to decline.

Sales of a substantial number of shares of our common stock in the public market, particularly sales by our directors, officers, employees and significant stockholders, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of December 31, ~~2018,~~2019, we had ~~81,996,839~~71,185,468 shares of common stock outstanding.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal executive offices in North America are currently located at 140 New Montgomery Street, San Francisco, California, where we lease office space pursuant to a lease agreement that expires in 2021. We lease additional office space in San Francisco, California; Scottsdale, Arizona; Chicago, Illinois; New York, New York; Pittsburgh, Pennsylvania; Washington, D.C.; and internationally in Toronto, Canada; London, England; and Hamburg, Germany. We believe that our properties are generally suitable to meet our needs for the foreseeable future. In addition, to the extent we require additional space in the future, we believe that it would be available on commercially reasonable terms.

Item 3. 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 us and certain of our officers. The complaint, which the plaintiff amended on June 25, 2018, alleges violations of the Exchange Act by us and our officers for allegedly making materially false and misleading statements regarding our business and operations on February 9, 2017. The plaintiff seeks unspecified monetary damages and other relief. On August 2, 2018, we and the other defendants filed a motion to dismiss the amended complaint, which the court granted in part and denied in part on November 27, 2018. On October 22, 2019, the Court approved a stipulation to certify a class in this action. The case remains pending.

In addition, we are subject to other 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 ~~adverse~~ effect on our business, financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock, par value $0.000001 per share, is listed on the New York Stock Exchange LLC, or NYSE, under the symbol “YELP.”

Stockholders

As of the close of business on February ~~20, 2019,~~21, 2020, there were 4442 stockholders of record of our common stock. The actual number of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors that our board of directors may deem relevant.

Performance Graph

We have presented below the cumulative total return to our stockholders during the period from December 31, ~~2013~~2014 through December 31, ~~2018~~2019 in comparison to the NYSE Composite Index and NYSE Arca Tech 100 Index. All values assume a $100 initial investment and data for the NYSE Composite Index and NYSE Arca Tech 100 Index assume reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock.

The information under “Performance Graph” is not deemed to be “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act, and is not to be incorporated by reference in any

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filing of Yelp under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report and irrespective of any general incorporation language in those filings.

Issuer Purchases of Equity Securities

The following table summarizes our stock repurchase activity for the three months ended December 31, ~~2018~~2019 (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
October 1 - October 31, 2019	—	$	—	—	$	25,007
November 1 - November 30, 2019	196	$	30.78	196	$	18,989
December 1 - December 31, 2019	—	$	—	—	$	18,989

Period
Total Number
of Shares Purchased⁽¹⁾

Weighted-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⁽¹⁾
October 1 - October 31, 2018 1,312
$ 42.25
1,312
$ 59,958
November 1 - November 30, 2018 1,832
$ 32.75
1,832
$ 250,000
December 1 - December 31, 2018 —
$ —
—
$ 250,000

~~(1)~~

On July 31, 2017, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $200 million of our outstanding common stock, which we commenced in August 2017 and completed in November 2018.⁽¹⁾ On November 27, 2018, ~~our board of directors authorized us to repurchase up to an additional $250 million of our outstanding stock, of which no shares had been repurchased as of December 31, 2018.~~

~~On February 11, 2019,~~ our board of directors authorized us to repurchase an additional $250 million of our outstanding common stock under our ongoing stock repurchase program, which the board initially authorized in July 2017. Following our completion of repurchases under this authorization, our board of directors approved a further $250 million increase to our stock repurchase program on February 11, 2019, $19 million of which remained available as of December 31, 2019.

On January 15, 2020, our board of directors authorized another $250 million increase to our stock repurchase program, bringing the total amount of repurchases authorized under our ~~outstanding authorization~~stock repurchase program to ~~$500 million.~~$950 million, of which approximately $269 million remains available. The timing of repurchases and number of shares repurchased depend on a variety of factors, including liquidity, cash flow and market conditions. See "Liquidity and Capital Resources—Stock Repurchase Program" included under Part II, Item 7 in this Annual ~~Report for further details.~~Report.


~~(2)~~	~~Average price paid per share includes costs associated with the repurchases.~~

⁽²⁾ Average price paid per share includes costs associated with the repurchases.

Item 6. Selected Consolidated Financial ~~and Other~~ Data.

The following selected consolidated financial ~~and other~~ data should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. The consolidated statements of operations data for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017 and the consolidated balance sheet data as of December 31, ~~2018, 2017~~2019 and ~~2016~~2018 are derived from the audited consolidated financial statements that are included elsewhere in this Annual Report. The consolidated statements of operations data for the years ended December 31, ~~2015~~2016 and ~~2014,~~2015, as well as the consolidated balance sheet data as of December 31, ~~2015~~2017, 2016 and ~~2014,~~2015 are derived from audited consolidated financial statements that are not included in this Annual Report. We have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in any period in the future.

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Consolidated Statements of Operations Data:


	Year Ended December 31,
	2019		2018		2017		2016		2015⁽¹⁾
	(in thousands, except per share amounts)
Net revenue	$	1,014,194	$	942,773	$	850,847	$	716,063	$	549,711
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)⁽	62,410		57,872		70,518		60,363		51,015
Sales and marketing	500,386		483,309		437,424		379,895		301,764
Product development	230,440		212,319		175,787		138,549		107,786
General and administrative	136,091		120,569		109,707		100,475		80,866
Depreciation and amortization	49,356		42,807		41,198		35,346		29,604
Restructuring and integration	—		—		288		3,455		—
Gain on disposal of a business unit	—		—		(163,697)		—		—
Total costs and expenses	978,683		916,876		671,225		718,083		571,035
Income (loss) from operations	35,511		25,897		179,622		(2,020)		(21,324)
Other income, net	14,256		14,109		4,864		1,694		386
Income (loss) before income taxes	49,767		40,006		184,486		(326)		(20,938)
Provision for (benefit from) income taxes	8,886		(15,344)		31,491		1,385		11,962
Net income (loss) attributable to common stockholders	$	40,881	$	55,350	$	152,995	(1,711)		(32,900)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.55	$	0.66	$	1.87	$	(0.02)	$	(0.44)
Diluted	$	0.52	$	0.62	$	1.76	$	(0.02)	$	(0.44)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic	74,627		83,573		81,602		77,186		74,683
Diluted	77,969		88,709		87,170		77,186		74,683

Year Ended December 31,
2018 2017 2016
2015⁽¹⁾

2014⁽¹⁾
(in thousands, except per share amounts)
Net revenue $ 942,773
$ 850,847
$ 716,063
$ 549,711
$ 377,536
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)⁽²⁾
57,872
70,518
60,363
51,015
24,382
Sales and marketing⁽²⁾
483,309
437,424
379,895
301,764
201,050
Product development⁽²⁾
212,319
175,787
138,549
107,786
65,181
General and administrative⁽²⁾
120,569
109,707
100,475
80,866
58,274
Depreciation and amortization⁽²⁾
42,807
41,198
35,346
29,604
17,590
Restructuring and integration⁽²⁾
—
288
3,455
—
—
Gain on disposal of a business unit —
(163,697 ) —

Total costs and expenses 916,876
671,225
718,083
571,035
366,477
Income (loss) from operations 25,897
179,622
(2,020 ) (21,324 ) 11,059
Other income, net 14,109
4,864
1,694
386
221
Income (loss) before income taxes 40,006
184,486
(326 ) (20,938 ) 11,280
Benefit from (provision for) income taxes 15,344
(31,491 ) (1,385 ) (11,962 ) 25,193
Net income (loss) attributable to common stockholders $ 55,350
$ 152,995
$ (1,711 ) (32,900 ) 36,473
Net income (loss) per share attributable to common stockholders:

Basic $ 0.66
$ 1.87
$ (0.02 ) $ (0.44 ) $ 0.51
Diluted $ 0.62
$ 1.76
$ (0.02 ) $ (0.44 ) $ 0.48
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:

Basic 83,573
81,602
77,186
74,683
71,936
Diluted 88,709
87,170
77,186
74,683
76,712


~~(1)~~	Amounts for 2015 and 2014 have not been recast to reflect the adoption of Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (ASC 606)," or ASC 606. Additional information regarding our adoption of ASC 606 is set forth in ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~


~~(2)~~	~~Stock-based compensation expense included in the consolidated statements of operations data above was as follows (in thousands):~~

Year Ended December 31,
2018 2017 2016 2015 2014
Cost of revenue $ 4,572
$ 4,010
$ 2,446
$ 1,117
$ 729
Sales and marketing 30,779
28,100
27,098
21,962
15,083
Product development 56,882
47,280
36,323
23,431
14,804
General and administrative 22,153
21,025
20,394
14,332
11,657
Total stock-based compensation $ 114,386
$ 100,415
$ 86,261
$ 60,842
$ 42,273

⁽¹⁾Amounts for 2015 have not been recast to reflect the adoption of Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (ASC 606)," or ASC 606. Refer to Note 2 ,"Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding adoption.

Consolidated Balance Sheet Data:


	As of December 31,
	2019		2018		2017		2016		2015⁽¹⁾
	(in thousands)
Cash and cash equivalents	$	170,281	$	332,764	$	547,850	$	272,201	$	171,613
Property, equipment and software, net	$	110,949	114,800		$	103,651	$	92,440	$	80,467
Working capital⁽²⁾	$	399,154	795,364		$	826,922	$	500,780	$	393,505
Total assets⁽³⁾	$	1,070,700	1,175,563		$	1,225,601	$	894,145	$	755,427
Total long-term liabilities⁽³⁾	$	181,554	35,140		$	30,737	$	17,621	$	12,030
Total stockholders’ equity	$	754,991	1,075,518		$	1,108,697	$	816,138	$	693,620

As of December 31,
2018 2017 2016
2015⁽¹⁾

2014⁽¹⁾
(in thousands)
Cash and cash equivalents $ 332,764
$ 547,850
$ 272,201
$ 171,613
$ 247,312
Property, equipment and software, net 114,800
103,651
92,440
80,467
62,761
Working capital⁽²⁾
795,364
826,922
500,780
393,505
386,785
Total assets 1,175,563
1,225,601
894,145
755,427
629,650
Total stockholders’ equity 1,075,518
1,108,697
816,138
693,620
588,150
⁽¹⁾ Amounts for 2015 have not been recast to reflect the adoption of ASC 606.


~~(1)~~	~~Amounts for 2015 and 2014 have not been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~

⁽²⁾ Working capital comprises total current assets less total current ~~liabilities~~liabilities.

~~Other~~⁽³⁾Amounts for 2019 reflect the adoption of Accounting Standards Update No. 2016-02, "Leases (Topic 842)." Refer to Note 2,"Summary of Significant Accounting Policies," of the Notes to Consolidated Financial ~~and Operational Data:~~Statements for additional information regarding adoption.

Year Ended December 31,
2018 2017 2016 2015 2014
(in thousands)
Reviews⁽¹⁾
177,385
148,298
121,022
95,210
71,232
App Unique Devices⁽²⁾
32,891
28,845
24,073
20,006
14,541
Mobile Web Unique Visitors⁽³⁾
69,148
64,221
65,351
65,860
57,770
Desktop Unique Visitors⁽⁴⁾
62,140
76,748
67,888
74,607
77,628
Claimed Local Business Locations⁽⁵⁾
4,979
4,156
3,363
2,648
2,029
Paying Advertising Accounts⁽⁶⁾
191
163
135
109
83
Adjusted EBITDA⁽⁷⁾
$ 183,090
$ 157,826
$ 123,042
$ 69,122
$ 70,922

~~(1)~~

Represents the cumulative number of reviews submitted on Yelp since inception, as of the period end, including reviews that were not recommended or that had been removed from our platform. We define a review as each individually written assessment submitted by a user who has registered by creating a public profile on our platform. For more information, including information regarding reviews that are not recommended and removed reviews, see “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Reviews~~.”


~~(2)~~	Represents the average number of unique mobile devices using our mobile app for the last three months of the period, calculated as the number of unique mobile devices that used our mobile app in a given month, averaged over the three month period. For more information, see “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Traffic~~.”

~~(3)~~

Represents the average number of mobile website unique visitors for the last three months of the period, calculated as the number of “users,” as measured by Google Analytics, who visited our mobile-optimized website at least once in a given month, averaged over the three-month period. For more information, see “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Traffic~~.”

~~(4)~~

Represents the average number of desktop unique visitors for the last three months of the period, calculated as the number of “users,” as measured by Google Analytics, who visited our non-mobile optimized website at least once in a given month, averaged over the three-month period. For more information, see “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Traffic~~.”


~~(5)~~	Represents the cumulative number of business locations that had been claimed on Yelp worldwide since 2008, as of the period end. We define a claimed local business location as each business address for which a business representative has visited our website and claimed the free business listing page for the business located at that address. For more information, see

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“~~Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Claimed Local Business Locations and Active Claimed Local Business Locations~~."


~~(6)~~	~~Represents the number of business accounts from which we recognized advertising revenue during the last three months of the period. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics—Paying Advertising Accounts and Paying Advertising Locations~~."

~~(7)~~

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, restructuring and integration costs, any gain (loss) on disposal of a business unit and, in certain periods, certain other income and expense items. We believe that adjusted EBITDA provides useful information to investors for understanding and evaluating our operating results in the same manner as our management and our board of directors. This non-GAAP information is not necessarily comparable to non-GAAP information of other companies, and should not be viewed as a substitute for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of our profitability. Users of this financial information should consider the types of events and transactions for which adjustments have been made. Amounts for 2015 and 2014 have not been recast to reflect the adoption of ASC 606. For more information about adjusted EBITDA, as well as a reconciliation of net income (loss) to this non-GAAP financial measure, see “~~Management’s Discussion and Analysis of Financial Condition and Results of Operation—Non-GAAP Financial Measures—Adjusted EBITDA~~.~~” Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual 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 and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

Overview

As a trusted local ~~platform,~~resource, we deliver significant value to both consumers and businesses by helping each discover and interact with the ~~other: our~~other. Our unrivaled content ~~and transaction capabilities help~~helps consumers save time and ~~money, while our~~money. Our advertising and other products help business owners ~~gain~~increase their visibility and ~~engage~~connect with our large audience of purchase-oriented consumers.

Our comprehensive, mobile-first platform offers ~~food-ordering, booking, and~~ reservation and waitlist, food ordering and quote request capabilities, among many other ~~transaction~~ opportunities for consumers to engage with businesses, in addition to the ~~164.3~~189.9 million ~~recommended~~ reviews available as of December 31, ~~2018. These~~2019. In the fourth quarter of 2019, these features attracted a monthly average audience of nearly 3335.6 million app unique devices, ~~in the fourth quarter of 2018,~~ allowed over ~~1.7~~8.8 million diners to make reservations or join a restaurant waitlist, ~~in December 2018,~~ and facilitated consumer submissions of ~~1.6~~2.1 million projects to service providers through ~~Request-A-Quote in~~Request-A-Quote. In the ~~fourth quarter of 2018. Business~~same period, business owners, in turn, promoted their businesses to our large audience by spending ~~12%~~10% more on our advertising products than in the fourth quarter of 2018, seated more than double the ~~fourth quarter~~number of ~~2017, received 27% more food orders in~~diners via Yelp compared to the fourth quarter of 2018, ~~than the same period in 2017, managed over 22 million total diners using our Yelp Reservations and Yelp Waitlist products in December 2018,~~ and received ~~4.4 million~~millions of leads through Request-A-Quote.

We derive substantially all of our revenue from the sale of advertising products. In the year ended December 31, 2019, our net revenue was $1.0 billion, which represented an increase of 8% from the year ended December 31, 2018, and we recorded net income of $40.9 million and adjusted EBITDA of $213.5 million. In the year ended December 31, 2018, our net revenue was $942.8 million, which represented an increase of 11% from the year ended December 31, 2017, and we recorded net income of $55.4 million and adjusted EBITDA of $183.1 million. ~~In the year ended December 31, 2017, our net revenue was $850.8 million, which represented an increase~~For information on how we define and calculate adjusted EBITDA and a reconciliation of ~~19% from the year ended December 31, 2016, and we recorded~~this non-GAAP financial measure to net income ~~of $153.0 million and adjusted EBITDA of $157.8 million.~~(loss), see “Non-GAAP Financial Measures” below.

~~We expect that 2018 will be~~

Following our transition to a ~~transition year for Yelp as~~multi-channel, on-demand business model, which we ~~continue the repositioning of our business and strategy that we began~~completed in 2018 with our ~~transition~~move to ~~selling~~ non-term advertising contracts, ~~significant investments in restaurant-specific products,~~we embarked on an ambitious, multi-year business transformation plan designed to drive and ~~implementation of an improved go-to-market strategy for national advertising. We plan to build on these efforts and drive~~sustain profitable long-term ~~growth by focusing on three broad areas:~~

~~Increasing Our Focus on Advertisers and Business Owners.~~ ~~While consumers will always be at the heart of our business, and~~growth. As we ~~plan to~~ continue ~~working to enhance their experience~~executing on our ~~platform,~~plan in 2020, we ~~plan~~will look to ~~increase~~further advance the ~~amount of attention and resources that~~strategic initiatives we ~~devote to advertisers and business owners. Our strategies for driving revenue growth~~began in ~~2019 reflect~~

2019:

~~this shift. Our efforts to win~~•Winning in Key Categories. We made significant accomplishments in 2019 in our key ~~verticals~~categories of restaurants and home & local services. In restaurants, we more than doubled the number of diners seated via Yelp and increased the combined revenue attributable to Yelp Reservations and Yelp Waitlist by a double-digit percentage compared to 2018, while in home & local services include building out our restaurant-specific solutions to address business owners' operational needs, as well as working to make the Request-A-Quote submission process easier and offering new ways for service providers to drivewe significantly increased paid leads to ~~their businesses.~~advertisers and increased revenue attributable to Request-A-Quote by nearly 60% compared to 2018. We believe these categories continue to present substantial opportunities for revenue growth, and plan to pursue those opportunities in 2020 by increasing monetization of our restaurants offerings through price optimization and cross selling, and increasing the number of paid leads delivered to home & local services advertisers.

•Expanding Our ~~product development plans are similarly business-focused — we are developing new advertising~~Product Offerings. Our introduction of a range of paid products ~~and introducing more fixed-price offerings~~ at ~~different~~affordable price points over the course of 2019, including our Business Highlights, Portfolios and Yelp Connect products, attracted thousands of new customers and helped accelerate revenue growth in our self-serve channel to ~~provide business owners with~~30% in 2019. Matching advertisers to the right products at the right prices will be a ~~wider range of options~~top priority for ~~promoting their businesses on Yelp. Finally,~~us in 2020, and we plan to ~~provide~~introduce additional profile products in 2020 that will help business owners tell their stories and build trust with customers.

•Providing More Value to Business Owners. In 2019, we delivered significantly more value to our customers — we generated 34% more ad clicks for Yelp advertisers at an average CPC 18% lower than in 2018 — and saw improved retention among non-term advertisers as a result. We accomplished this through improvements to our advertising auction system and ad targeting, as well as by expanding advertising inventory in certain categories such as home & local services. In 2020, we plan to continue generating more value for our business customers through ~~lower CPC prices, improved analytics~~initiatives including further enhancements to our auction system, improvements to our Request-A-Quote lead matching and introducing new types of advertising inventory.

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•Capturing the Multi-location Opportunity. Our multi-location advertising business grew 22% in 2019 from the prior year, and our initiatives to increase our business with the top 250 restaurants and retailers by revenue successfully resulted in a ~~significantly increased~~substantial number of ~~leads delivered to our~~such businesses becoming paying customers ~~which we aim to double in the home & local services category~~ by the end of ~~2019.~~

~~Enhancing our Go-to-Market Strategy.~~ the year. We ~~are working~~plan to implement a more diversified, modern and efficient go-to-market strategy by integrating product and product marketing with our people-driven sales efforts. Although these efforts build on our 2018 transition to selling non-term contractsdrive continued momentum in our ~~local~~multi-location advertising business in ~~2019 they will be~~2020 by growing our multi-location sales team to expand our coverage to the services category, as well as by continuing to integrate product development with sales efforts through the introduction of new ad formats tailored to the needs of multi-location businesses.

•Enhancing the Consumer Experience. In addition to successfully increasing the number of paid leads we delivered to advertisers while maintaining an engaging experience for consumers, we enhanced the consumer experience through more personalized recommendations, new Yelp Waitlist features and expanded restaurant health inspection scores. An engaged consumer base is at the heart of our value proposition to businesses, and we plan to drive engagement in 2020 through an updated user interface for our mobile app (where we find our most ~~relevant~~engaged users) that offers improved convenience and ease of use.

•Improved Profitability. In the first year of our multi-year business transformation plan, we improved the structural economics of our business. Our focus on growth and retention in our highest-margin sales channels allowed us to increase revenue growth without expanding our ~~other advertising categories~~local sales force; in fact, we reduced local sales headcount by 10% in 2019. We expect these structural improvements to help drive profitable growth again in 2020 as we ~~turn our focus toward capturing the opportunity in national and emphasizing~~continue to emphasize our most efficient sales channels. In addition to our plans to grow our national and multi-location sales force in 2019, we are developing more products to meet the needs of large advertisers, such as expanded attribution offerings. Beyond national, we are also continuing to refine our high-margin self-serve and sales partnership channels. For example, we plan to continue to adapt our Yelp Ads Certified Partners Program, a product-driven customer acquisition program that allows partner agencies to independently sell and manage ad campaigns for their small and medium-sized business clients. Leveraging partners to complement our sales force in this way also dovetails with our planned emphasis in 2019 on accelerating our strategies through partnerships that provide great experiences while generating attractive economics for our business.

~~Establishing and Pursuing Long-Term Growth Targets.~~ The transition we are undertaking is designed to drive significant long-term stockholder value. We believe that by focusing on the areas described above, we will drive long-term growth, allowing us to continue to return capital to stockholders. Although we expect revenue growth in 2019 to be slower than in 2018channels as well as ~~compared~~work to improve retention, optimize our ~~expected five-year average as we continue the repositioning of our business, we have confidence in our ability to re-accelerate revenue growth in subsequent years~~cost structure and achieve a mid-teens percentage compound annual growth rate over the five-year period ending in 2023. By reducing local sales hiring, optimizing our consumer marketing spend and controlling other corporate expenses, we also expect to increase our profitability; we believe we can achieve two to three percentage points of adjusted EBITDA margin improvement in 2019 and are targeting adjusted EBITDA margins in the 30% to 35% range by 2023. With our confidence in the long-term potential of our business and strong balance sheet, we plan to continue our stock repurchase program in 2019, which our board of directors recently increased to $500 million.

control expenses.

We expect to continue to invest in product development, personnel and the facilities to support them in ~~2019~~2020 as we work to grow our business, including investments to increase our office space, upgrade our technology and infrastructure to improve the ability of our platform to handle the projected increase in usage, and enable the release of new products and features. As a result of this investment philosophy, we expect that our operating expenses will continue to increase for the foreseeable future.

Factors Affecting Our Performance

Our Ability to Attract and Retain Advertisers. Our revenue growth is driven by our ability to attract and retain advertising customers. To do so, we must deliver compelling ad products in an effective manner, at prices that compare favorably to those of our competitors. Our advertisers typically do not have long-term obligations to purchase our ~~products,~~products. A substantial and an increasing portion also have the ability to cancel their ad campaigns at any time. Their decisions to renew depend on the degree of satisfaction with our products as well as a number of factors that are outside of our control, including their ability to continue their operations and spending levels. ~~The small and medium-sized~~Although we have shifted our focus to the opportunity presented by multi-location businesses recently, we continue to rely heavily on ~~which we heavily rely~~SMBs that often have limited advertising budgets and that may ~~be disproportionately affected by economic downturns. As a result, a worsening economic outlook would likely cause businesses to decrease investments in~~view online advertising ~~which could adversely affect our revenue.~~products like ours as experimental and unproven.

Our ability to maintain and expand our advertiser base also depends on the size and productivity of our sales force and customer success team. As we continue to invest in expanding our multi-location sales organization while maintaining ~~our~~a large local sales force, ~~and expanding our national and multi-location sales organization,~~ we must efficiently scale our operations while at the same time recruiting, training and integrating new hires and developing, motivating and retaining existing employees. Similarly, in order to retain, and take advantage of opportunities to deepen our relationships with, our existing customers, we must continue our efforts to build out our customer success team. Developing our account retention processes will be particularly important as an increasing portion of our advertisers have the ability to cancel their contracts at any time. In addition, as we make periodic adjustments to our sales organization to respond to market opportunities and to pursue initiatives to increase productivity, such changes may result in a temporary lack of focus or disruption to our operations. For example, it ~~may take~~took time for our sales and customer success organizations to adapt to selling and supporting advertising contracts with flexible cancellation terms. Our increased emphasis on our multi-location and self-serve channels involves changes to our sales organization and sales force hiring priorities, which may be disruptive to our sales operations.

Traffic and User Engagement. We derive substantially all of our revenue from advertising, and traffic to our platform determines the number of ads we are able to show, affects the value of those ads to businesses and influences the content creation that drives further traffic. As a result, our ability to grow our business depends on our ability to increase traffic on our platform, which in turn depends on, among other things, the quality of our content and the prominence of links to our platform in Internet search engine results and application marketplaces. The number of users we attract from search engines in particular can be affected by a number of factors not in our direct control; changes in a search engine’s ranking algorithms, methodologies or design layouts may result in links to our website not being prominent enough to drive traffic to our website and mobile app. In addition, certain providers of Internet search engines and application marketplaces offer products and services that compete

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directly with our products and, in some instances, such providers may change their displays or rankings in order to promote their own competing products or services.

We anticipate that our traffic growth will continue to slow over time, and potentially decrease in certain periods, as our business matures and we achieve higher penetration rates in our core markets of the United States and Canada. ~~We also expect the cyclicality and seasonality in our business to become more pronounced as our business matures, including weaker traffic in the fourth quarter of the year.~~ As our traffic growth rate slows, our success will become increasingly dependent on our ability to increase levels of user engagement on our platform, which itself depends on the quality of our content and our ability to introduce new and improved products that effectively address consumer needs, among other things.

Product Innovation. We must deliver innovative, relevant and useful products to consumers and businesses — including products for mobile and other alternative devices — to expand the size and engagement of our user base, attract advertisers and increase our revenue. We plan to continue investing in new product development as we introduce new advertising and e-commerce products, explore new platforms and distribution channels, and develop partner arrangements that provide incremental value to our users and advertisers to encourage them to increase their usage of, and the portion of their advertising budgets allocated to, our platform. As our industry evolves and competition intensifies, our investments may increasingly include products and services outside of our historical core business, such as our continued development of Yelp Reservations and Yelp ~~Waitlist in 2019.~~Waitlist. These investments involve significant risks and uncertainties, such as distracting management, and may ultimately fail to generate sufficient revenue or other value to justify our investments in them.

Investment in Growth. We have invested, and intend to continue to invest, aggressively to support the growth of our platform. We dedicate significant resources to areas such as: marketing; consumer protection; maintaining and enhancing the Yelp brand; and upgrading our systems, technology and network infrastructure to accommodate growth. Our investment plans for ~~2019~~2020 include developing new advertising ~~and attribution~~ products, ~~expanding~~further developing our analytics tools for advertisers, improving our Request-A-Quote matching capabilities and refining our ~~Request-A-Quote product to deliver the best lead opportunities to highly responsive and highly rated advertisers as well as to improve our matching capabilities.~~advertising auction system. While we believe these initiatives will ultimately drive revenue growth, our investments in them will increase our operating expenses, and any increase in revenue resulting from these product innovations will likely trail the increase in expenses.

Stock Repurchases. In July 2017, our board of directors authorized a stock repurchase program for the repurchase up to $200 million of our outstanding common stock. During the years ended December 31, 2018 and 2017, we repurchased on the open market and subsequently retired 4,896,003 shares and 302,206 shares, respectively, for aggregate purchase prices of $187.4 million and $12.6 million, respectively. InOn each of November 27, 2018 and February 11, 2019, our board of directors authorized us to repurchase up to an additional $250 million of our outstanding common stock pursuant to the stock repurchase program, of which nowe repurchased on the open market and subsequently retired 14,190,409 shares ~~had been repurchased as~~for an aggregate purchase price of $481.0 million during the year ended December 31, ~~2018.~~2019. On ~~February 11, 2019,~~January 15, 2020, our board approved a further increase of ~~directors increased the amount authorized for repurchase by~~ $250 million ~~bringing the total amount subject~~ to our stock repurchase program, bringing the total amount of repurchases authorized under our stock repurchase program to ~~$500 million.~~$950 million, of which approximately $269 million remains available. We have funded the repurchases, and expect to fund ~~any~~ future repurchases under the stock repurchase program, with cash available on our balance sheet. As a result, this program could diminish our cash reserves and reduce our ability to invest in our business, in addition to affecting the trading price and volatility of our stock.

Corporate Development Activities. As part of our business strategy, we may decide to expand our product offerings and grow our business through the acquisition of complementary businesses or technologies, as well as through partnerships. In addition to diverting our management's attention and otherwise disrupting our operations, our corporate development activities will affect our future financial results due to factors such as expenses incurred in identifying, investigating and pursuing transactions, whether or not they are consummated, possible dilutive issuances of equity securities or the incurrence of debt, unidentified liabilities and the amortization of acquired intangible assets. Maintaining relationships with partners also requires significant time and resources, as does integrating their data, services and technologies onto our platform. We may not realize the full benefits of synergies, innovation and operational efficiencies that may be possible from a corporate transaction; similarly, if our relationships with partners deteriorate, we could suffer increased costs and delays in our ability to provide consumers and advertisers with our content or services.

Seasonality and Cyclicality. Our business is affected by seasonal fluctuations in Internet usage and advertising spending, as well as cyclicality in economic activity. Based on historical trends, we expect traffic numbers to be weakest in the fourth quarter of the year in connection with end of the year holidays. In addition, although our multi-location customers tend to increase spending on advertising in the fourth quarter, the SMBs on which we rely heavily typically decrease their advertising spending during this quarter. SMBs may be disproportionately affected by negative fluctuations in the business cycle, and a worsening economic outlook would likely cause such businesses to decrease investments in advertising, which would adversely affect our revenue. As our business matures and the proportion of our customers who can cancel their ad campaigns at any time

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increases, we expect that the seasonality and cyclicality in our business may become more pronounced, causing our operating results to fluctuate.

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. Unless otherwise stated,

these metrics do not include metrics for Yelp Reservations, Yelp Waitlist, Yelp WiFi Marketing, our business owner products or Yelp Eat24, which we sold on October 10, 2017.

Reviews

Number of reviews represents the cumulative number of reviews submitted to Yelp since inception, as of the period end, including reviews that were not recommended or had been removed from our platform. In addition to the text of the review, each review includes a rating of one to five stars. We include reviews that are not recommended and that have been removed because all of them are either currently accessible on our platform or were accessible at some point in time, providing information that may be useful to users to evaluate businesses and individual reviewers. Because our automated recommendation software continually reassesses which reviews to recommend based on new information that becomes available, the “recommended” or “not recommended” status of reviews may change over time. Reviews that are not recommended or that have been removed do not factor into a business’s overall star rating. By clicking on a link on a reviewed business’s page on our website, users can access the reviews that are not currently recommended for the business, as well as the star rating and other information about reviews that were removed for violation of our terms of service.

As of December 31, ~~2018,~~2019, approximately ~~164.3~~189.9 million reviews were available on business listing pages, including approximately ~~39.5~~44.4 million reviews that were not recommended, after ~~13.1~~15.5 million reviews had been removed from our platform, either by us for violation of our terms of service or by the users who contributed them. The following table presents the number of cumulative reviews as of the dates indicated (in thousands):

As of December 31,
2018 2017 2016
Reviews 177,385 148,298 121,022


	As of December 31,
	2019	2018	2017
Reviews	205,381	177,385	148,298

Traffic

Traffic to our website and mobile app has three components: mobile devices accessing our mobile app, visitors to our non-mobile optimized website, which we refer to as our desktop website, and visitors to our mobile-optimized website, which we refer to as our mobile website. App users generate a substantial majority of activity on Yelp, including the page views and ad clicks that we monetize. We anticipate that our mobile traffic will be the driver of our growth for the foreseeable future and that traffic to our website will fluctuate and generally decline as we focus on driving traffic to our mobile app, where we have our most engaged users and which reduces our reliance on Google and other search engines.

We use the metrics set forth below to measure each of our traffic streams. An individual user who accesses our platform through multiple traffic streams will be counted in each applicable traffic metric; as a result, the sum of our traffic metrics will not accurately represent the number of people who visit our platform on an average monthly basis.

App Unique Devices. We calculate app unique devices as the number of unique mobile devices using our mobile app in a given month, averaged over a given three-month period. Under this method of calculation, an individual who accesses our mobile app from multiple mobile devices will be counted as multiple app unique devices. Multiple individuals who access our mobile app from a shared device will be counted as a single app unique device.

The following table presents app unique devices for the periods indicated (in thousands):


	Three Months Ended December 31,
	2019	2018	2017
App Unique Devices	35,599	32,891	28,845

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Three Months Ended December 31,
2018 2017 2016
App Unique Devices 32,891 28,845 24,073

Desktop and Mobile Website Unique Visitors. We calculate desktop unique visitors as the number of “users,” as measured by Google Analytics, who have visited our desktop website at least once in a given month, averaged over a given three-month period. Similarly, we calculate mobile website unique visitors as the number of “users” who have visited our mobile website at least once in a given month, averaged over a given three-month period.

Google Analytics, a product from Google Inc. that provides digital marketing intelligence, measures “users” based on unique cookie identifiers. Because the numbers of desktop unique visitors and mobile website unique visitors are therefore based on

unique cookies, an individual who accesses our desktop website or mobile website from multiple devices with different cookies may be counted as multiple desktop unique visitors or mobile website unique visitors, as applicable, and multiple individuals who access our desktop website or mobile website from a shared device with a single cookie may be counted as a single desktop unique visitor or mobile website unique visitor.

The following table presents our web traffic for the periods indicated (in thousands):


	Three Months Ended December 31,
	2019	2018	2017
Desktop Unique Visitors	54,006	62,140	76,748
Mobile Web Unique Visitors	68,756	69,148	64,221

Three Months Ended December 31,
2018 2017 2016
Desktop Unique Visitors 62,140 76,748 67,888
Mobile Web Unique Visitors 69,148 64,221 65,351

We have discovered in the past, and expect to discover in the future, that portions of our desktop traffic, as measured by Google Analytics, have been attributable to robots and other invalid sources. Because traffic from such sources does not represent valid consumer traffic, our reported desktop unique visitor metric for impacted periods reflects an adjustment to the Google Analytics measurement of our traffic to remove traffic that we have identified as originating from invalid sources to provide greater accuracy and transparency. However, we cannot assure you that we will be able to identify all such traffic for any particular period. For additional information, please see the risk factor included under Part I, Item 1A under the heading “We rely on data from both internal tools and third parties to calculate certain of our performance metrics. Real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

~~Claimed Local Business Locations and~~ Active Claimed Local Business Locations

The number of claimed local business locations represents the cumulative number of business locations that have been claimed on Yelp worldwide since 2008, as of a given date. We define a claimed local business location as each business address for which a business representative has visited our website and claimed the free business listing page for the business located at that address.

~~The following table presents the number of cumulative claimed local business locations as of the dates presented (in thousands):~~

As of December 31,
2018 2017 2016
Claimed Local Business Locations 4,979 4,156 3,363

The number of active claimed local business locations represents the number of claimed local business locations — business addresses for which a business representative has visited our platform and claimed the free business listing page for the business located at that address — that are both (a) active on Yelp and (b) associated with an active business owner account as of a given date. We consider a claimed local business location to be active if it has not closed, been removed from our platform or merged with another claimed local business.

The following table presents the number of active claimed ~~active~~ locations as of the dates presented (in thousands):

As of December 31,
2018 2017 2016
Active Claimed Local Business Locations 4,342 3,682 3,009

~~We believe~~. The December 31, 2018 and 2017 numbers have been updated to reflect our current methodology for calculating active claimed local business locations provides a better measure of the number of businesses that represent the highest quality leads available to our local sales force than our claimed local business locations metric, which may include business locations no longer associated with an active business owner account and other less valuable customer leads. Accordingly, we will not disclose our claimed local business locations metric going forward and will instead disclose active claimed local business locations, as described above.locations.


	As of December 31,
	2019	2018	2017
Active Claimed Local Business Locations	4,913	4,310	3,681

Paying Advertising ~~Accounts and Paying Advertising~~ Locations

Paying advertising accounts comprise all business accounts from which we recognized advertising revenue in a given three-month period. As with our advertising revenue classification, paying advertising accounts excludes subscription and other services

~~customers that are not also advertising customers. The following table presents the number of paying advertising accounts during the periods presented (in thousands):~~

Three Months Ended December 31,
2018 2017 2016
Paying Advertising Accounts 191 163 135

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. The following table presents the number of paying advertising locations ~~during~~for the periods presented (in thousands):


	Three Months Ended December 31,
	2019	2018	2017
Paying Advertising Locations	565	541	478

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Three Months Ended December 31,
2018 2017 2016
Paying Advertising Locations 541 478 425

As we increasingly focus on our national and multi-location advertising business, we believe that paying advertising locations provides a better measurement of our market penetration than paying advertising accounts because the paying advertising accounts metric does not capture the greater impact of adding a multi-location business as an advertiser compared to adding a single-location business as an advertiser. For example, a national chain that purchases advertising for its hundreds of locations would constitute one paying advertising account, the same as a single-location small business advertiser. As a result, we plan to phase out our paying advertising accounts metric by the end of 2019.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with 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.

We believe that the assumptions and estimates associated with revenue recognition, website and internal-use software development costs, the incremental borrowing rate used in adopting the new leasing standard, business combinations, allowance for doubtful accounts, income taxes and stock-based compensation expense have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on these and our other significant accounting policies, see Note 2,"Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Results of Operations

The following tables set forth our results of operations for ~~the periods indicated as a percentage of net revenue for those periods.~~2019, 2018 and 2017 (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of future results.


	Year Ended December 31,										$ Change				% Change⁽¹⁾
	2019		2018		2017		2019 vs. 2018		2018 vs. 2017		2019 vs. 2018		2018 vs. 2017

Consolidated Statements of Operations Data:
Net revenue by product:
Advertising	$	976,925	$	907,487	$	775,678	$	69,438	$	131,809	8	%	17	%
Transactions	12,436		13,694		60,251		(1,258)		(46,557)		(9)	%	(77)	%
Other services	24,833		21,592		14,918		3,241		6,674		15	%	45	%
Total net revenue	$	1,014,194	$	942,773	$	850,847	$	71,421	$	91,926	8	%	11	%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	$	62,410	$	57,872	$	70,518	$	4,538	$	(12,646)	8	%	(18)	%
Sales and marketing	500,386		483,309		437,424		17,077		45,885		4	%	10	%
Product development	230,440		212,319		175,787		18,121		36,532		9	%	21	%
General and administrative	136,091		120,569		109,707		15,522		10,862		13	%	10	%
Depreciation and amortization	49,356		42,807		41,198		6,549		1,609		15	%	4	%
Restructuring and integration cost	—		—		288		—		(288)		NM⁽²⁾		(100)	%
Gain on disposal of a business unit	—		—		(163,697)		—		163,697		NM⁽²⁾		(100)	%
Total costs and expenses	978,683		916,876		671,225		61,807		245,651		7	%	37	%
Income from operations	35,511		25,897		179,622		9,614		(153,725)		37	%	(86)	%
Other income, net	14,256		14,109		4,864		147		9,245		1	%	190	%
Income before income taxes	49,767		40,006		184,486		9,761		(144,480)		24	%	(78)	%
Provision for (benefit from) income taxes	8,886		(15,344)		31,491		24,230		(46,835)		(158)	%	(149)	%
Net income	$	40,881	$	55,350	$	152,995	$	(14,469)	$	(97,645)	(26)	%	(64)	%

⁽¹⁾ Percentage changes are calculated based on rounded numbers and may not recalculate exactly due to rounding.

Year Ended December 31,
2018
2017⁽¹⁾

2016⁽¹⁾
Amount % of revenue Amount % of revenue Amount % of revenue
Consolidated Statements of Operations Data:
Net revenue by product:
Advertising $ 907,487
97 % $ 775,678
91 % $ 648,235
90 %
Transactions 13,694
1
60,251
7
62,495
9
Other services 21,592
2
14,918
2
5,333
1
Total net revenue $ 942,773
100 % $ 850,847
100 % $ 716,063
100 %
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 57,872
6 % 70,518
8 % 60,363
9 %
Sales and marketing 483,309
51
437,424
51
379,895
53
Product development 212,319
23
175,787
21
138,549
19
General and administrative 120,569
13
109,707
13
100,475
14
Depreciation and amortization 42,807
5
41,198
5
35,346
5
Restructuring and integration cost —
—
288
—
3,455
—
Gain on disposal of a business unit —
—
(163,697 ) (19 ) —
—
Total costs and expenses 916,876
98
671,225
79
718,083
100
Income (loss) from operations 25,897
2
179,622
21
(2,020 ) —
Other income, net 14,109
2
4,864
1
1,694
—
Income (loss) before income taxes 40,006
4
184,486
22
(326 ) —
Provision for income taxes 15,344
2
(31,491 ) (4 ) (1,385 ) —
Net income (loss) 55,350
6 % 152,995
18 % (1,711 ) — %
⁽²⁾ Percentage change is not meaningful.


~~(1)~~	~~Amounts for 2017 and 2016 have been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~

Years Ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017

Net Revenue

We generate revenue from our advertising products, transactions and other services. Total net revenue increased $91.9 million, or 11%, in 2018 compared to 2017, and $134.8 million, or 19%, in 2017 compared to 2016.

Advertising. We generate advertising revenue from the sale of our advertising products — including enhanced listing pages and ~~performance-~~performance and impression-based advertising in search results and elsewhere on our platform — to businesses of all ~~sizes.~~sizes, from single-location local businesses to multi-location national businesses. Advertising revenue also includes revenue generated from the resale of our advertising products by certain partners and monetization of remnant advertising inventory through third-party ad networks.

~~Advertising~~

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The increase in advertising revenue in 2019 compared to 2018 was primarily due to growth in the number of paying advertiser locations, improved local customer retention and increased ~~$131.8 million, or 17%,~~revenue from existing multi-location customers. The growth in paying advertiser locations on the local business side resulted from stronger sales force productivity. The improvements in retention were driven by delivering more value to local customers through the efficiency of our advertising auction system and our ad targeting. Our new multi-location advertising products and larger multi-location sales force drove the increase in revenue from multi-location customers, particularly from more tenured national customers.

The increase in 2018 compared to 2017 ~~and $127.4 million, or 20%, in 2017 compared to 2016. The increase in each period~~ was primarily due to a significant increase in the number of paying advertising accounts, ~~and, to a lesser extent, an increase in revenue from existing accounts. The growth in paying advertising accounts in 2018~~which was driven by the sale of non-term contracts and the expansion of our local sales ~~force, while the growth in 2017 was driven primarily by the expansion of our sales force to reach more businesses.~~ force.

The growth in both periods primarily consisted of sales of CPC advertising and a majority of ad clicks were delivered on mobile in both years.

Although we have observed higher turnover rates for customers on non-term contracts, which provide advertisers with the ability to cancel their ad campaigns at any time, the increase in revenue associated with the increase in paying advertising accounts in 2018 compared to 2017 more than offset the impact from cancellations in the year ended December 31, 2018.

We expect our ~~net~~advertising revenue to continue to increase as we ~~continue~~pursue initiatives to ~~add paying advertising accounts. Any operational or performance issues that impact~~expand our ~~local advertising~~multi-location business, ~~may also have a more immediate~~increase sales force productivity and more concentrated effect on advertising revenue going forward than was the case prior to our transition to non-term contracts, due to the increasing proportion of advertisers with the ability to terminate their ad campaigns at any time without penalty.improve customer retention.

Transactions. We generate revenue from various transactions with consumers, primarily through transactions placed through our partner integrations, and, through October 10, 2017, Yelp Eat24 transactions. On October 10, 2017, we began generating revenue from transactions placed through the Grubhub restaurant network, including Eat24 restaurants, that originated on Yelp pursuant to our partnership ~~agreement with Grubhub.~~

integrations. Our partnership integrations are primarily revenue-sharing arrangements that provide consumers with the ability to complete food ordering and delivery transactions ~~purchase tickets to sporting events, and book auto repair services and medical appointments, among other transaction opportunities,~~ 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.

The decrease in transactions revenue in 2019 compared to 2018 was primarily due to a decrease in fees earned from Grubhub for processing credit card transactions related to Grubhub orders that originated on Yelp. Over the transition period following its acquisition of Eat24 from us in October 2017, Grubhub increasingly processed the credit card transactions related to such orders directly, thereby reducing the fees it paid us to process them on its behalf. Excluding the processing fees earned from Grubhub orders during the transition, transactions revenue from our revenue-sharing arrangements increased in 2019 compared to 2018.

The decrease in transactions revenue in 2018 compared to 2017 was due to the sale of Eat24. Prior to ~~our~~the sale, ~~of Eat24,~~ we generated revenue from our Yelp Eat24 business through arrangements with restaurants in which restaurants paid a commission percentage fee on orders placed through the Yelp Eat24 platform, which we recorded on a net basis. Following the sale, we no longer recognize revenue from Yelp Eat24 as a standalone product and instead earn fees on food orders placed through the Grubhub restaurant network that originate on Yelp. ~~Although we~~

We expect the revenue we generate under our partnership arrangement with Grubhub to grow over time as new restaurants are added to Grubhub's restaurant network, we expect it to continue to be lower than the revenue previously generated by Yelp Eat24 for the foreseeable future. Accordingly, ouramount of transactions revenue in ~~periods following our sale of Eat24 have been lower than in periods prior~~2020 to ~~the sale.~~remain consistent with 2019.

Our transactions revenue decreased $46.6 million, or 77%, in 2018 compared to 2017, and $2.2 million, or 4%, in 2017 compared to 2016. The decrease in each period was primarily the result of our sale of Eat24 in October 2017, partially offset by revenue earned from our partnership with Grubhub following the sale.

Other Services. We generate revenue through our subscription services, which include our Yelp Reservations, Yelp Waitlist and ~~Yelp WiFi Marketing~~other subscription products. We also generate revenue through our Yelp Knowledge program, which provides access to Yelp data for a licensing fee, as well as other non-advertising partnerships.

~~Our~~The increases in other services revenue ~~increased $6.7 million, or 45%,~~ in 2019 and 2018 compared to 2018 and 2017, ~~and $9.6 million, or 180%, in 2017 compared to 2016. The increase in 2018 was~~respectively, were primarily due to ~~an increase~~increases in the number of customers purchasing our subscription products ~~which was~~ driven ~~in part~~ by our ~~ownership of~~expanded Yelp Reservations and Yelp Waitlist ~~and Yelp WiFi Marketing for the entirety of 2018 compared to only a portion of 2017. The increase in 2018 also reflects~~sales force, as well as increases in revenue from our Yelp Knowledge program ~~and non-advertising partnerships~~mainly due to ~~a lesser extent. The~~an increase in ~~2017 was primarily due to~~ the ~~acquisitions~~number of ~~Nowait and Turnstyle as well as increased revenue from Yelp Reservations.~~partnerships.

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.~~app, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs, confirmation services costs associated with Yelp Reservations ~~Yelp Waitlist~~ and Yelp ~~WiFi Marketing,~~Waitlist, confirmation and delivery services associated with the fulfillment of orders placed through Yelp Eat24 prior to its sale, as well as video production costs for our advertising ~~customers.~~customers prior to mid-2018.

~~Cost~~The increase in cost of revenue ~~decreased $12.6~~in 2019 was primarily attributable to:

•an increase of $3.7 million ~~or 18%,~~ in ~~2018 compared~~advertising fulfillment costs primarily through third-party advertising networks; and

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•an increase in website infrastructure expense of $3.0 million due to ~~2017,~~increases in the use of our website and ~~increased $10.2~~in the number of employees supporting the website infrastructure.

These increases were partially offset by a decrease of $0.7 million ~~or 17%,~~ in ~~2017 compared~~merchant fees related to ~~2016.~~credit card transactions as a result of the decline in transactions revenue following the sale of Eat24 in October 2017.

The decrease in 2018 was primarily attributable to:

•a decrease of $6.8 million in merchant fees related to credit card transactions as a result of the decline in transactions revenue following the sale of Eat24 in October 2017, partially offset by an increase in merchant fees related to credit card transactions as a result of processing more payments from advertisers in connection with an increase in advertising revenue;

•a decrease of $4.7 million in confirmation services and third-party food delivery costs primarily due to the decline in food ordering fulfillment costs following the sale of Eat24, partially offset by an increase in confirmation services associated with Yelp Reservations and Yelp Waitlist; and

•a decrease of $3.8 million in set up and creative design costs, primarily associated with video production costs as a result of our transition to selling non-term advertising contracts, ~~which currently do not provide businesses with the option to add videos to their accounts.~~

when we discontinued video production services for our customers.

These decreases were partially offset by an increase of $2.7 million in website infrastructure expense due to increases in the use of our website and in employees supporting the website infrastructure.

~~The increase in 2017 was primarily attributable to:~~

an increase of $5.4 million in website infrastructure expense, primarily due to increases in the number of visitors to, and transactions completed on, our website compared to the prior year, as well as increased headcount for personnel supporting the website infrastructure;

an increase of $3.1 million in confirmation services and third-party food delivery costs due to an increase in the number of Yelp Eat24 transactions, and increased confirmation services expenses associated with Yelp Reservations as well as Yelp Waitlist and Yelp WiFi Marketing following our acquisitions of Nowait and Turnstyle; and

an increase of $2.4 million in merchant fees related to credit card transactions due to growth in advertising and transactions revenue. The rate of increase in these costs in 2017 was lower than the increase in 2016 as a result of the sale of Yelp Eat24 in 2017 as well as the slower growth rate in advertising revenue that year.

~~We expect cost of revenue to remain a consistent percentage of net revenue in 2019 compared to 2018.~~

Sales and Marketing

Our sales and marketing expenses primarily consist of employee costs (including sales commission ~~expense, amortized commission expense~~ and stock-based compensation ~~expense)~~expenses) for our sales and marketing employees. ~~In addition, sales~~Sales and marketing expenses also include business and consumer acquisition marketing, community management, ~~branding and advertising costs,~~ as well as allocated facilities and other supporting overhead costs.

~~Sales~~The increase in sales and marketing expenses ~~increased $45.9 million, or 10%,~~ in ~~2018 compared to 2017, and $57.5 million, or 15%, in 2017 compared 2016. The increases in 2018 and 2017 were~~2019 was primarily attributable ~~to:~~

~~increases~~to an increase of ~~$44.0~~$31.8 million ~~and $43.0 million, respectively,~~ in ~~additional~~ employee costs resulting from ~~increases~~an increase in sales commission expenses due to improved sales team productivity and, to a lesser extent, from increased salary costs driven by higher multi-location sales teams headcount ~~including increases in stock-based compensation expense~~and a larger share of ~~$2.7 million and $1.0 million, respectively, as we expanded~~tenured sales representatives throughout our sales ~~organization;~~organization. The increase in 2019 was partially offset by a decrease of $15.8 million in marketing and advertising costs primarily due to our continued efforts to optimize our marketing spend, particularly as our Yelp Reservations and Yelp Waitlist products drove consumer usage, which allowed us to reduce our reliance on consumer marketing.

~~increases~~The increase in sales and marketing expenses in 2018 was primarily attributable to an increase of $48.7 million in employee costs resulting from higher sales headcount and an increase of $10.6 million ~~and $6.1 million, respectively,~~ in facilities and other overhead allocations as we leased additional office space and incurred additional overhead costs for our expanding ~~headcount; and~~

~~increases of $4.7 million and $6.1 million, respectively, in commission expenses (including amortized commission expense) as a result of increases in advertising revenue driven by increased sales team~~ headcount.

The increase in 2018 was partially offset by a decrease of $13.4 million in marketing and advertising costs ~~primarily~~ due to the cessation of Yelp Eat24 marketing activities following our sale of Eat24 in October 2017 and, to a lesser extent, decreases in Yelp-related marketing and advertising costs. ~~In 2017,~~

Sales and marketing ~~and advertising costs increased by $2.3 million compared to 2016~~ as a ~~result~~percentage of ~~ongoing business~~net revenue was 49% in 2019 and ~~consumer marketing campaigns.~~

~~While the sale of Eat24 resulted~~51% in ~~an initial reduction in our sales and marketing expenses, we~~2018. We expect ~~our~~ sales and marketing expenses to ~~continue to~~ increase again in 2020 as ~~we work to increase~~ the ~~number of advertising~~tenure and subscription accounts and promote the Yelp brand to both consumers and businesses. However, we expect the pace of growth in sales and marketing expenses to be lower in 2019 than in recent years as a result of our planned focus on our most efficient sales channels, relocationchannel mix of our sales force changes and we continue to ~~more cost-effective locations and optimization~~invest in marketing, though we expect these expenses to decrease as a percentage of net revenue. We expect overall sales headcount to be flat in 2020 compared to 2019, with growth in our ~~consumer marketing spend.~~multi-location sales team offsetting lower local sales headcount as we emphasize the higher-margin sales channel.

Product Development

Our product development expenses primarily consist of employee costs (including stock-based compensation ~~expense)~~expense, net of capitalized employee costs associated with capitalized website and internal-use software development) for our engineers, product management and ~~information technology personnel.~~corporate infrastructure employees. In addition, product development expenses include ~~consulting costs, as well as~~ allocated facilities and other supporting overhead costs.

~~Product development expenses increased $36.5 million, or 21%, in 2018 compared to 2017, and $37.2 million, or 27%, in 2017 compared to 2016.~~

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The increases in ~~2018~~product development expenses in 2019 and ~~2017~~2018 were primarily attributable to:

~~$32.1~~•increases of $15.6 million and ~~$30.4~~$32.1 million, respectively, in ~~additional salaries and benefits~~employee costs associated with increased headcount to support more research and development activities, primarily for new and enhanced business-owner products as well as, to a lesser extent, enhancements to the consumer experience; and

•increases ~~in headcount, including increases in stock-based compensation expense (net~~ of ~~capitalized stock-based compensation expense) of $9.6~~$2.6 million and ~~$11.0 million, respectively; and~~

~~increases of~~ $3.8 ~~million and $6.0~~ million, respectively, in facilities and other overhead allocations as we leased additional office space and incurred additional overhead costs for our expanding headcount.

We believe that continued investment in research and development of new features in order to advance the Yelp consumer experience and to support an increased focus on business-owner products and marketplace transaction features is important to attaining our strategic objectives, particularly as we look to decrease our reliance on sales headcount growth to drive revenue growth in the medium term. We expect product development expenses to remain a relatively consistent percentage of net revenue in 2019 compared to 2018.

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, ~~human resources~~people operations and other administrative employees. Our general and administrative expenses also include provision for doubtful accounts, ~~outside~~ consulting ~~primarily related to legal and accounting services,~~costs, as well as facilities and other supporting overhead costs.

~~General~~The increase in general and administrative expenses ~~increased $10.9 million, or 10%,~~ in ~~2018 compared to 2017, and $9.2 million, or 9%, in 2017 compared to 2016. The increases in 2018 and 2017 were~~2019 was primarily attributable ~~to:~~

~~$4.8~~to $10.3 million ~~and $5.7 million, respectively,~~ in additional employee costs, ~~associated with increases~~consulting costs, and facilities and other overhead costs required to support the growth of the business, as well as $7.1 million in ~~headcount, including increases~~fees related to shareholder activism. This increase was partially offset by a decrease in ~~stock-based compensation expense~~the provision for doubtful accounts of ~~$1.1~~$2.0 million due to an improvement in collection rates from advertising customers.

The increase in general and ~~$0.6~~administrative expenses in 2018 was primarily attributable to $7.3 million ~~respectively;~~

~~increases~~in additional employee costs and an increase in provision for doubtful accounts of $3.6 ~~million and $2.0 million, respectively,~~million. The increase in provision for doubtful accounts was due to continued growth in advertising revenue and ~~in 2018,~~ the shift in our advertiser base toward newer advertisers, who are typically associated with higher provision for doubtful ~~accounts;~~accounts.

Adjusting for the fees related to shareholder activism, we expect general and

an increase in the use of outside consultants of $1.4 million in each period as we invested in our financial and human resources systems to support our expanding headcount, as well as additional consulting costs administrative expenses as a ~~result of the continued growth of the business.~~

~~We expect provision for doubtful accounts to increase as advertising revenue generated from newer customers continues to become a larger~~ percentage of ~~our overall advertising revenue. We expect overall~~net revenue in 2020 to remain consistent with general and administrative expenses as a percentage of net revenue in 2019, ~~to remain consistent with, or slightly lower than, general and administrative expenses as a percentage of net revenue in 2018.~~which was 13%.

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 ~~acquired~~purchased intangible assets.

~~Depreciation~~The increases in depreciation and amortization ~~expenses increased $1.6 million, or 4%,~~expense in ~~2018 compared to 2017,~~2019 and ~~$5.9 million, or 17%, in 2017 compared to 2016. These increases~~2018 were primarily ~~the result of our investments~~attributable to increases in ~~expanding our technology infrastructure and capital assets to support our increase in headcount across the organization. Depreciation and amortization expenses related to our property, equipment and~~depreciation associated with capitalized website and internal use software development costs, ~~increased $4.7 million~~as we invested in new products for business owners and ~~$6.1 million~~consumers as well as leasehold improvements related to additional leased facilities. The increase in 2018 ~~and 2017, respectively. These increases were~~was partially offset by ~~decreases~~a decrease in amortization expense related to our intangible assets of $3.1 million ~~and $0.2 million in 2018 and 2017, respectively,~~ in connection with the ~~sale of Eat24.~~

We expect depreciation expense to increase for the foreseeable future as we continue to expand our technology infrastructure and lease additional office space. Amortization expense is likely to be lower for the foreseeable future as a result of the disposal of intangible assets in our sale of Eat24.

Restructuring and Integration

On November 2, 2016, we announced plans to significantly reduce sales and marketing activities in markets outside of the United States and Canada. The restructuring plan was completed by December 31, 2017.

We did not incur any costs related to this plan in the ~~year~~years ended December 31, 2019 and 2018. We incurred $0.3 ~~million and $3.5~~ million in restructuring and integration costs associated with this plan in the years ended December 31, 2017 ~~and 2016, respectively,~~ related to severance costs for affected employees. We do not expect to incur any additional expenses related to this plan in the future. No goodwill, intangibles or other long lived assets were impaired as a result of the restructuring plan.

Gain on Disposal of a Business Unit

Our sale of Eat24 to Grubhub on October 10, 2017 resulted in a $163.7 million pre-tax gain. The gain recorded was calculated as proceeds from the disposal, offset by the net assets of Eat24 as of the disposal date, and costs specifically incurred as a result of the sale.

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Other Income, Net

Other income, net consists primarily of the interest income earned on our cash, cash equivalents and marketable securities, and foreign exchange gains and losses.

Other income, net ~~increased~~remained relatively consistent in 2019 compared to 2018, primarily due to higher rates of interest earned on marketable investments offset by ~~$9.2 million, or 190%,~~a decrease in cash held in interest bearing accounts as a result of the stock repurchase program.

The increase in 2018 compared to 2017 ~~and $3.2 million, or 187%, in 2017 compared to 2016. The increases in both periods were~~was primarily driven by increases in interest income earned on marketable investments and cash held in interest-bearing accounts, particularly due to proceeds received on the sale of Eat24 in October 2017. The increase in 2018 was also due to investing a greater portion of our excess cash in marketable securities.

~~(Benefit from)~~ Provision for (Benefit from) Income Taxes

Provision for (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.

InThe increase in the provision for income taxes in 2019 (from a recorded benefit in 2018 ~~we recognized income tax benefit of $15.3 million~~to a recorded provision in 2019) was primarily due to the release of our valuation allowance in 2018,which was previously recorded against certain deferred tax ~~assets, offset by foreign~~assets. The decrease in the provision for income ~~tax expense. Income tax expense decreased $46.8 million~~taxes in 2018 ~~compared~~(from a recorded provision in 2017 to ~~2017~~a recorded benefit in 2018) was primarily due to the gain on the disposal of Eat24 in 2017, partially offset by the release of our valuation allowance in 2018. ~~Income tax expense increased $30.1 million in 2017 compared to 2016 primarily due to the gain on disposal of Eat24 recorded in 2017.~~

~~Quarterly Results of Operations and Other Data~~

The following tables set forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the two-year period ended December 31, 2018 (in thousands, except per share data). We also present other financial and operational data and a reconciliation of net income (loss) to EBITDA and adjusted EBITDA. We have prepared this quarterly data on a consistent basis with the audited consolidated financial statements included in this Annual Report. In the opinion of management, the quarterly financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information should be read in conjunction with the audited financial statements and related notes included elsewhere in this Annual Report. The results of historical periods are not necessarily indicative of the results of operations for any future period.

Quarter Ended
Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018
Dec 31,
2017⁽¹⁾

Sep 30,
2017⁽¹⁾

Jun 30,
2017⁽¹⁾

Mar 31,
2017⁽¹⁾
Consolidated Statements of
Operations Data:

Net revenue by product

Advertising $ 234,774
$ 232,502
$ 226,168
$ 214,043
$ 209,593
$ 200,502
$ 187,683
$ 177,900
Transactions 3,293
3,042
3,520
3,839
5,227
18,524
18,435
18,065
Other services 5,673
5,552
5,175
5,192
4,621
4,261
3,827
2,209
Total net revenue $ 243,740
$ 241,096
$ 234,863
$ 223,074
$ 219,441
$ 223,287
$ 209,945
$ 198,174
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)⁽²⁾
$ 14,255
$ 14,177
$ 14,708
$ 14,732
$ 16,236
$ 19,312
$ 18,056
$ 16,914
Sales and marketing⁽²⁾
121,256
121,759
120,653
119,641
111,013
112,958
104,921
108,532
Product development⁽²⁾
54,273
53,764
52,789
51,493
47,994
45,834
42,088
39,871
General and administrative⁽²⁾
29,677
30,302
28,583
32,007
27,898
27,601
27,042
27,166
Depreciation and amortization 11,557
10,713
10,509
10,028
9,729
10,656
10,662
10,151
Restructuring and integration —
—
—
—
1
35
21
231
Gain on disposal of a business unit —
—
—
—
(163,697 ) —
—
—
Total costs and expenses $ 231,018
$ 230,715
$ 227,242
$ 227,901
$ 49,174
$ 216,396
$ 202,790
$ 202,865
Income (loss) from operations $ 12,722
$ 10,381
$ 7,621
$ (4,827 ) $ 170,267
$ 6,891
$ 7,155
$ (4,691 )
Other income, net 4,160
3,921
3,424
2,604
1,897
1,371
864
732
Income (loss) before income taxes $ 16,882
$ 14,302
$ 11,045
$ (2,223 ) $ 172,164
$ 8,262
$ 8,019
$ (3,959 )
Benefit from/(provision for) income taxes 15,064
684
(341 ) (63 ) (31,074 ) (232 ) (118 ) (67 )
Net income (loss) attributable to
common stockholders $ 31,946
$ 14,986
$ 10,704
$ (2,286 ) $ 141,090
$ 8,030
$ 7,901
$ (4,026 )
Net income (loss) per share attributable
to common stockholders:
Basic $ 0.39
$ 0.18
$ 0.13
$ (0.03 ) $ 1.69
$ 0.10
$ 0.10
$ (0.05 )
Diluted $ 0.37
$ 0.17
$ 0.12
$ (0.03 ) $ 1.58
$ 0.09
$ 0.09
$ (0.05 )
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic 82,706
84,008
83,769
83,785
83,264
82,259
80,996
79,843
Diluted 86,287
88,724
88,651
83,785
89,064
87,433
84,860
79,843


~~(1)~~	~~Amounts for 2017 have been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~


~~(2)~~	~~Includes non-cash stock-based compensation expense as follows (in thousands):~~

Quarter Ended
Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017
Stock-based compensation
Cost of revenue $ 1,227
$ 1,162
$ 1,153
$ 1,030
$ 1,079
$ 993
$ 957
$ 981
Sales and marketing 7,265
7,941
8,055
7,518
6,666
7,305
7,261
6,868
Product development 15,004
14,536
13,907
13,435
12,851
11,976
11,245
11,208
General and administrative 5,157
5,555
5,690
5,751
4,811
5,035
5,902
5,277
Total stock-based compensation $ 28,653
$ 29,194
$ 28,805
$ 27,734
$ 25,407
$ 25,309
$ 25,365
$ 24,334

~~The following table presents other financial and operational data (dollars in thousands):~~

Quarter Ended
Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017
Other Financial and Operational Data⁽¹⁾:

Reviews 177,385
170,865
162,969
155,328
148,298
142,036
134,591
127,478
Desktop Unique Visitors 62,140
68,807
73,939
73,668
76,748
83,592
82,998
78,167
Mobile Web Unique Visitors 69,148
74,789
72,328
69,901
64,221
73,508
74,101
73,192
App Unique Devices 32,891
34,025
32,062
30,115
28,845
30,162
27,987
25,827
Claimed Local Business Locations 4,979
4,790
4,593
4,378
4,156
3,963
3,753
3,559
Paying Advertising Accounts 191
194
194
177
163
155
148
139
Adjusted EBITDA $ 52,932
$ 50,288
$ 46,935
$ 32,935
$ 41,707
$ 42,891
$ 43,203
$ 30,025


~~(1)~~	~~For information on how we define these operational and other metrics, see “—Key Metrics~~.”

~~The following table presents a reconciliation of net income (loss) to EBITDA and adjusted EBITDA (in thousands):~~

Quarter Ended
Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018
Dec 31,
2017⁽¹⁾

Sep 30,
2017⁽¹⁾

Jun 30,
2017⁽¹⁾

Mar 31,
2017⁽¹⁾
Reconciliation of GAAP net income (loss) to EBITDA and adjusted EBITDA:
Net income (loss) $ 31,946
$ 14,986
$ 10,704
$ (2,286 ) $ 141,090
$ 8,030
$ 7,901
$ (4,026 )
Provision for (benefit from) income taxes (15,064 ) (684 ) 341
63
31,074
232
118
67
Other income, net (4,160 ) (3,921 ) (3,424 ) (2,604 ) (1,897 ) (1,371 ) (864 ) (732 )
Depreciation and amortization 11,557
10,713
10,509
10,028
9,729
10,656
10,662
10,151
EBITDA 24,279
21,094
18,130
5,201
179,996
17,547
17,817
5,460
Stock-based compensation 28,653
29,194
28,805
27,734
25,407
25,309
25,365
24,334
Restructuring and integration costs —
—
—
—
1
35
21
231
Gain on disposal of a business unit —
—
—
—
(163,697 ) —
—
—
Adjusted EBITDA $ 52,932
$ 50,288
$ 46,935
$ 32,935
$ 41,707
$ 42,891
$ 43,203
$ 30,025


~~(1)~~	~~Amounts for 2017 have been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~

~~Liquidity and Capital Resources~~

As of December 31, 2018, we had cash and cash equivalents of $332.8 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of less than three months. Our cash held internationally as of December 31, 2018 was $8.9 million. We did not have any outstanding bank loans or credit facilities in place as of December 31, 2018. Our investment portfolio comprises highly rated marketable securities, and our investment policy limits the amount of credit exposure to any one issuer. The policy generally requires securities to be investment grade (i.e. rated ‘A+’ or higher by bond rating firms) with the objective of minimizing the potential risk of principal loss. 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, 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 2012 Employee Stock Purchase Plan, as amended, or ESPP. In addition, in the fourth quarter of 2017, we completed our sale of Eat24 to Grubhub and received $252.7 million in cash, with an additional $28.8 million currently being held in escrow for a minimum 18-month period after closing to secure our indemnification obligations in connection with the sale. Specifically, we agreed to indemnify Grubhub and certain related parties against certain losses arising out of Grubhub's purchase of Eat24, including, but not limited to, any breach or inaccuracy of any representation or warranty made by us or Eat24 in the purchase agreement. While Grubhub's right to recover for many claims is limited to the funds being held in escrow, certain claims are capped only at the total purchase price. The date and amount of final release of escrow funds are subject to the resolution of any such claims. The escrow balance is presented on our consolidated balance sheets as an other non-current asset (see ~~Note 9~~ ~~of the Notes to Consolidated Financial Statements).~~

~~Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under the heading “Risk Factors~~” in this Annual Report. We believe that our existing cash and cash equivalents, together with any cash generated from operations, will be sufficient to meet our 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 as well as purchases of property, equipment and software for at least the next 12 months. However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated. We may require or otherwise seek additional funds in the next 12 months to respond to business challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies, and, accordingly, we may need to engage in equity or debt financings to secure additional funds.

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):~~

Year Ended December 31,
2018 2017 2016
Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities 160,187
167,647
126,900
Net cash (used in) provided by investing activities (164,369 ) 81,136
(54,741 )
Net cash (used in) provided by financing activities (207,747 ) 27,162
29,522

~~Operating Activities.~~ We generated $160.2 million of cash from operating activities during the year ended December 31, 2018, primarily resulting from our net income of $55.4 million, which included non-cash depreciation and amortization expense of $42.8 million, non-cash stock-based compensation expense of $114.4 million and non-cash provision for doubtful accounts of $24.5 million offset by deferred income taxes of $15.5 million. In addition, significant changes in our operating assets and liabilities resulted from the following:

an increase in accounts receivable of $35.7 million due to an increase in billings for advertising plans, particularly for customers paying in arrears, as well as the timing of payments from these customers;

an increase in prepaid expenses and other assets of $5.2 million, primarily driven by increases in deferred contract costs and tax-related receivables, partially offset by a decrease in non-trade receivables; and

a decrease in accounts payable, accrued expenses and other liabilities of $20.2 million, primarily driven by a decrease in accrued income taxes as a result of income tax payments made in 2018 on taxable income from 2017, which was primarily a result of the gain on disposal of Eat24. This decrease was partially offset by higher accrued compensation costs as a result of increased headcount.

We generated $167.6 million of cash in operating activities in the year ended December 31, 2017, primarily resulting from our net income of $153.0 million, which included the pre-tax gain on disposal of Eat24 of $163.7 million, non-cash depreciation and amortization expenses of $41.2 million, non-cash stock-based compensation expense of $100.4 million, and non-cash provision for doubtful accounts and sales returns of $20.9 million. In addition, significant changes in our operating assets and liabilities resulted from the following:

increase in accounts receivable of $36.1 million due to an increase in billings for advertising plans, particularly those customers billed in-arrears, as well as the timing of payments from these customers;

increase in accounts payable, accrued expenses and other liabilities of $52.9 million, primarily driven by an increase in income taxes payable associated with the gain on disposal of Eat24, accrued bonus and commissions, and various other accrued operating costs and expenses as a result of the growth in our business, offset by a decrease in restaurant revenue share liability as a result of the disposal of Eat24; and

~~increase in prepaids and other assets of $2.6 million, primarily due to an increase in tenant improvement allowance receivable and prepaid licenses.~~

We generated $126.9 million of cash in operating activities in the year ended December 31, 2016, primarily resulting from our net loss of $1.7 million, which included non-cash depreciation and amortization expenses of $35.3 million, non-cash stock-based compensation expense of $86.3 million and non-cash provision for doubtful accounts and sales returns of $18.9 million. In addition, significant changes in our operating assets and liabilities resulted from the following:

~~increase in accounts receivable of $34.6 million due to an increase in billings for advertising plans, as well as the timing of payments from these customers;~~

increase in accounts payable, accrued expenses and other liabilities of $15.3 million, primarily driven by an increase in restaurant revenue share liability, accrued vacation and employee-related expenses, and the timing of invoices and payments to the vendors, particularly marketing-related vendors; and

~~decrease in prepaids and other assets of $2.7 million, primarily due to the collection of non-trade receivables, partially offset by an increase in deferred contract costs.~~

~~Investing Activities.~~ Our primary investing activities in the year ended December 31, 2018 consisted of purchases of marketable securities, purchases of property and equipment to support the ongoing build out of leasehold improvements for our new facilities in San Francisco and New York, the purchase of technology hardware to support our growth in headcount and internally developed software to support website and mobile app development, website operations and our corporate infrastructure. Purchases of property, equipment and software may vary from period to period due to the timing of the expansion of our offices, operations and website and internal-use software and development. We expect our investments in property and equipment, leasehold assets and the development of software in 2019 to remain relatively consistent with the amount of our investments in 2018.

We used $164.4 million of cash in investing activities in during the year ended December 31, 2018. Cash used in investing activities during this period primarily related to purchases of $751 million of marketable securities, expenditures of $20.1 million related to website and internally developed software and purchases of $24.8 million of property, equipment and software. Cash used in investing activities was partially offset by the maturity of $613.7 million of investment securities held-to-maturity and the sale of $17.9 million of investment securities prior to maturity (refer to ~~Note 4~~ ~~of the Notes to Consolidated Financial Statements for details regarding of sale of held-to-maturity investment).~~

We generated $81.1 million of cash in investing activities during the year ended December 31, 2017. Cash provided by investing activities primarily related to $252.7 million net cash received for the sale of Eat24 to Grubhub on October 10, 2017 and $264.0 million of maturities of investment securities held-to-maturity. Cash provided by investing was offset by purchases of marketable securities of $354.9 million, purchases of property, equipment and software of $15.6 million to support the growth in our business, expenditures related to website and internally developed software of $14.6 million, as well as our acquisition of Nowait for net cash consideration of $30.8 million, which included intangible assets of $12.7 million, and our acquisition of Turnstyle for net cash consideration of $19.7 million, which included intangible assets of $4.3 million.

We used $54.7 million of cash in investing activities during the year ended December 31, 2016. Cash used in investing activities primarily related to purchases of marketable securities of $275.0 million, expenditures related to website and internally developed software of $14.2 million, purchases of property, equipment and software of $23.0 million to support the growth in our business, our investment of $8.0 million in the preferred stock of Nowait. Cash used in investing was offset by $265.5 million of maturities of investment securities held to maturity.

~~Financing Activities.~~ During the year ended December 31, 2018, we used $207.7 million of cash for financing activities, consisting of $187.4 million to repurchase shares of common stock pursuant to our stock repurchase program and $50.1 million to pay taxes related to the net share settlement of equity awards for our employees, partially offset by $29.8 million in cash generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP.

During the year ended December 31, 2017, we generated $27.2 million in financing activities, primarily due to net proceeds of $40.9 million in cash generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP. Cash provided by financing activities was partially offset by $12.6 million in repurchases of common stock and $1.2 million of taxes paid related to the net share settlement of equity awards for our international employees.

During the year ended December 31, 2016, we generated $29.5 million in financing activities, primarily due to cash generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP.

~~Stock Repurchase Program~~

In July 2017, our board of directors authorized the repurchase of up to $200 million of our outstanding common stock. During the years ended December 31, 2018 and 2017, we repurchased on the open market and subsequently retired 4,896,003 shares and 302,206 shares, respectively, for aggregate purchase prices of $187.4 million and $12.6 million, respectively. We completed the repurchase of the full $200 million authorization in November 2018.

On November 27, 2018, our board of directors authorized a new stock repurchase program providing for the repurchase up to $250 million of our outstanding common stock, of which no shares had been repurchased as of December 31, 2018. On February 11, 2019, our board of directors authorized us to repurchase an additional $250 million of our outstanding common stock, bringing the total amount of repurchases authorized under our stock repurchase program to $500 million. We may purchase 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. As a result, we expect that cash used in financing activities will continue to increase as we make repurchases pursuant to this program. As of February 20, 2019, we had not made any repurchases under the current authorizations of $500 million.

~~Net Share Settlement of Equity Awards~~

In 2017, we began settling the employee tax liabilities associated with the vesting of RSUs through net share withholding for our internationally based employees, rather than selling a portion of the vested shares to cover taxes, as we had previously. In 2018, we expanded this practice of net share settlement for vestings of RSUs for all for all employees. As a result, we paid $50.1 million, and $1.2 million of employee taxes in the year ended December 31, 2018 and 2017, respectively, out of cash held on our consolidated balance sheet. We do not expect this practice to result in material increases to cash used in financing activities in 2019 compared to 2018.

Non-GAAP Financial Measures

Our consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below EBITDA and adjusted EBITDA, which are non-GAAP financial measures. We have included EBITDA and adjusted EBITDA because they are key measures used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Accordingly, we believe that EBITDA and adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, EBITDA and adjusted EBITDA should not be viewed as substitutes 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 EBITDA and adjusted EBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;

•EBITDA and adjusted EBITDA do 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 take into account any income or costs that management determines are not indicative of ongoing operating performance, such as restructuring and integration ~~costs;~~costs in 2016 and 2017, gain on disposal of a business unit in 2017, and fees related to shareholder activism in 2019; and

•other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA differently, which reduces their usefulness as comparative measures.

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Because of these limitations, you should consider EBITDA and adjusted EBITDA alongside other financial performance measures, including net income (loss), and our other GAAP results. The tables below present reconciliations of net income (loss) to EBITDA and adjusted EBITDA, the most directly comparable GAAP financial measure in each case, for each of the periods indicated.

EBITDA. EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: (benefit from) provision for income taxes; other income (expense), net; and depreciation and amortization.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: provision for (benefit from) ~~provision for~~ income taxes; other income, ~~(expense),~~ net; depreciation and amortization; stock-based compensation expense; ~~gain (loss) on disposal of a business unit; restructuring and integration costs;~~ and, in certain periods, certain other income and expense items. For 2019, 2017 and 2016, these other income and expense items consisted of (i) certain fees related to shareholder activism, (ii) gain on disposal of a business unit and restructuring and integration costs, and (iii) restructuring and integration costs, respectively.

The following is a reconciliation of net income (loss) to EBITDA and adjusted EBITDA (in thousands):


	Year Ended December 31,
	2019		2018			2017		2016		2015⁽¹⁾
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:
Net income (loss)	$	40,881	$	55,350		$	152,995	$	(1,711)	$	(32,900)
Provision for (benefit from) income taxes	8,886		(15,344)			31,491		1,385		11,962
Other income, net	(14,256)		(14,109)			(4,864)		(1,694)		(386)
Depreciation and amortization	49,356		42,807			41,198		35,346		29,604
EBITDA	84,867		68,704			220,820		33,326		8,280
Stock-based compensation	121,512		114,386			100,415		86,261		60,842
Gain on disposal of a business unit	—		—		��	(163,697)		—		—
Restructuring and integration costs	—		—			288		3,455		—
Fees related to shareholder activism⁽²⁾	7,116		—			—		—		—
Adjusted EBITDA	$	213,495	$	183,090		$	157,826	$	123,042	$	69,122

⁽¹⁾Amounts for 2015 have not been recast to reflect the adoption of ASC 606.

⁽²⁾Recorded within general and administrative expenses on our consolidated statements of operations.

Liquidity and Capital Resources

As of December 31, 2019, we had cash and cash equivalents of $170.3 million. Cash and cash equivalents consist of cash, money market funds and investments with original maturities of less than three months. Our cash held internationally as of December 31, 2019 was $11.2 million. We did not have any outstanding bank loans or credit facilities in place as of December 31, 2019.

Our investment portfolio comprises highly rated marketable securities, and our investment policy limits the amount of credit exposure to any one issuer. The policy generally requires securities to be investment grade (i.e. rated ‘A+’ or higher by bond rating firms) with the objective of minimizing the potential risk of principal loss. 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, 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 2012 Employee Stock Purchase Plan, as amended, or ESPP. In addition, in the fourth quarter of 2017, we completed our sale of Eat24 to Grubhub and received $252.7 million in cash, with an additional $28.8 million that was held in escrow for an initial 18-month period after closing to secure our indemnification obligations in connection with the sale. The full escrow amount was released to us in April 2019.

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under the heading “Risk Factors” in this Annual Report. We believe that our existing cash and cash equivalents, together with any cash generated from operations, will be sufficient to meet our 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 as well as purchases of property, equipment and software for at least the next 12 months. However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated. We may require or otherwise seek additional funds in the next 12 months to respond to business

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Year Ended December 31,
2018
2017⁽¹⁾

2016⁽¹⁾

2015⁽²⁾

2014⁽²⁾
Reconciliation of GAAP Net Income/(Loss) to EBITDA and adjusted EBITDA:
GAAP net income (loss) $ 55,350
$ 152,995
$ (1,711 ) $ (32,900 ) $ 36,473
(Benefit from) provision for income taxes (15,344 ) 31,491
1,385
11,962
(25,193 )
Other income, net (14,109 ) (4,864 ) (1,694 ) (386 ) (221 )
Depreciation and amortization 42,807
41,198
35,346
29,604
17,590
EBITDA 68,704
220,820
33,326
8,280
28,649
Stock-based compensation 114,386
100,415
86,261
60,842
42,273
Gain on disposal of a business unit —
(163,697 ) —
—
—
Restructuring and integration costs —
288
3,455
—
—
Adjusted EBITDA $ 183,090
$ 157,826
$ 123,042
$ 69,122
$ 70,922


~~(1)~~	~~Amounts for 2017 and 2016 have been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~


~~(2)~~	~~Amounts for 2015 and 2014 have not been recast to reflect the adoption of ASC 606. Additional information regarding our adoption of ASC 606 is set forth in~~ ~~Note 2~~ ~~of the Notes to Consolidated Financial Statements.~~

challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies, and, accordingly, we may need to engage in equity or debt financings to secure additional funds.

~~Off Balance~~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):


	Year Ended December 31,
	2019		2018		2017
Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities	$	204,782	$	160,187	$	167,647
Net cash provided by (used in) investing activities	$	124,335	$	(164,369)	$	81,136
Net cash (used in) provided by financing activities	$	(491,519)	$	(207,747)	$	27,162

Operating Activities. Cash provided by operating activities during 2019 was primarily attributable to net income of $40.9 million and noncash adjustments to net income of $229.0 million, partially offset by a decrease in the net change in operating assets and liabilities of $65.1 million, which included the following:

•an increase in accounts receivable of $42.1 million due to an increase in billings for advertising plans, particularly for customers paying in arrears, as well as the timing of payments from these customers;

•an increase in prepaid expenses and other assets of $1.3 million;

•a decrease in operating lease liabilities of $41.8 million due to operating lease payments made during the year; and

•an increase in accounts payable, accrued expenses and other liabilities of $20.1 million, primarily driven by an increase in accrued employee compensation and related costs due to a change in the frequency of pay cycles. This increase was partially offset by a decrease in accrued expenses related to various operating expenses.

Cash provided by operating activities during 2018 was primarily attributable to net income of $55.4 million and noncash adjustments to net income of $165.5 million, partially offset by a decrease in the net change in operating assets and liabilities of $60.7 million, which included the following:

•an increase in accounts receivable of $35.7 million due to an increase in billings for advertising plans, particularly for customers billed in-arrears, as well as the timing of payments from these customers;

•an increase in prepaid expenses and other assets of $5.2 million, primarily driven by increases in deferred contract costs and tax-related receivables, partially offset by a decrease in non-trade receivables; and

•a decrease in accounts payable, accrued expenses and other liabilities of $19.8 million, primarily driven by a decrease in accrued income taxes as a result of income tax payments made in 2018 on taxable income from 2017, which was primarily a result of the gain on disposal of Eat24. This decrease was partially offset by higher accrued compensation costs as a result of increased headcount.

Cash provided by operating activities during 2017 was primarily attributable to net income of $153.0 million, which included the pre-tax gain on disposal of Eat24 of $163.7 million, and noncash adjustments to net income of $0.3 million, which included the following:

•an increase in accounts receivable of $36.1 million due to an increase in billings for advertising plans, particularly for customers billed in-arrears, as well as the timing of payments from these customers;

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•an increase in prepaid expenses and other assets of $2.6 million, primarily due to an increase in tenant improvement allowance receivable and prepaid licenses; and

•an increase in accounts payable, accrued expenses and other liabilities of $53.0 million, primarily driven by an increase in income taxes payable associated with the gain on disposal of Eat24, accrued bonus and commissions, and various other accrued operating costs and expenses as a result of the growth in our business, offset by a decrease in restaurant revenue share liability as a result of the disposal of Eat24.

Investing Activities. Our primary investing activities during the year ended December 31, 2019 consisted of maturities of marketable securities, purchases of property and equipment to support the ongoing build out of leasehold improvements for our new facility in Washington, D.C., the upgrading of technology hardware for our employees and internally developed software to support website and mobile app development, and our corporate infrastructure. Purchases of property, equipment and software may vary from period to period due to the timing of the expansion of our offices, and website and internal-use software and development.

Cash provided by investing activities during 2019 primarily related to the maturity of $674.1 million of investment securities held-to-maturity and the release of an escrow deposit of $28.8 million in connection with our sale of Eat24. Cash provided by investing activities was partially offset by purchases of $541.5 million of marketable securities and expenditures of $37.5 million of property, equipment and software, primarily related to investments in website and mobile app development, as well as internal-use software.

Cash used in investing activities during 2018 was primarily attributable to purchases of $751.2 million of marketable securities and expenditures of $45.0 million of property, equipment and software, primarily related to investments in website and mobile app development, as well as internal-use software. Cash used in investing activities was partially offset by the maturity of $613.7 million of investment securities held-to-maturity and the sale of $17.9 million of investment securities prior to maturity (refer to Note 4 ,"Fair Value of Financial I nstruments," of the Notes to Consolidated Financial Statements for details regarding the sale of held-to-maturity investment).

Cash provided by investing activities during 2017 primarily related to $252.7 million net cash received for the sale of Eat24 to Grubhub on October 10, 2017 and $264.0 million of maturities of investment securities held-to-maturity. Cash provided by investing was offset by purchases of marketable securities of $354.9 million, expenditures of $30.2 million of property, equipment and software, primarily related to investments in website and mobile app development, as well as internal-use software, our acquisition of Nowait for net cash consideration of $30.8 million, which included intangible assets of $12.7 million, and our acquisition of Turnstyle for net cash consideration of $19.7 million, which included intangible assets of $4.3 million.

Financing Activities. Cash used for financing activities during 2019 comprised $481.0 million to repurchase shares of common stock pursuant to our stock repurchase program and $42.8 million to pay taxes related to the net share settlement of equity awards for our employees. These were partially offset by $32.3 million in cash generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP.

Cash used in financing activities during 2018 comprised $187.4 million to repurchase shares of common stock pursuant to our stock repurchase program and $50.1 million to pay taxes related to the net share settlement of equity awards for our employees, partially offset by $29.8 million in cash generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP.

Cash provided by financing activities during 2017 was primarily due to net proceeds of $40.9 million generated from the issuance of common stock upon exercise of stock options and the sale of common stock under the ESPP. Cash provided by financing activities was partially offset by $12.6 million in repurchases of common stock and $1.2 million of taxes paid related to the net share settlement of equity awards for our international employees.

Stock Repurchase Program

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On each of November 27, 2018 and February 11. 2019, our board of directors authorized us to repurchase up to an additional $250 million of our outstanding common stock, bringing the amount of repurchases authorized under our stock repurchase program to $700 million. During the year ended December 31, 2019, we repurchased on the open market and subsequently retired 14,190,409 shares for an aggregate purchase price of $481.0 million. On January 15, 2020, our board of directors authorized us to repurchase up to an additional $250 million of our outstanding common stock, bringing the total amount of repurchases authorized under our stock repurchase program to $950 million, of which approximately $269.0 million remains available.

We may purchase 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 future repurchases with cash available on our balance sheet. As a result, we expect that cash used in financing activities will continue to increase as we make repurchases pursuant to this program.

Net Share Settlement of Equity Awards

In 2017, we began settling the employee tax liabilities associated with the vesting of RSUs through net share withholding for our internationally based employees, rather than selling a portion of the vested shares to cover taxes, as we had previously. In 2018, we expanded this practice of net share settlement for the vesting of RSUs to all employees. As a result, we paid $42.8 million, $50.1 million and $1.2 million of employee taxes in the years ended December 31, 2019, 2018, and 2017, respectively, out of cash held on our consolidated balance sheet.

Off-Balance Sheet Arrangements

We did not have any ~~off balance~~off-balance sheet arrangements, as defined in Regulation S-K, Item 303(a)(4)(ii) promulgated by the SEC under the Securities Act, in 2019, 2018 ~~2017~~ or ~~2016.~~2017.

Contractual Obligations

We lease various office facilities, including our corporate headquarters in San Francisco, California, under operating lease agreements that expire from 2019 to 2029. The terms of the lease agreements provide for rental payments on a graduated basis. We recognize rent expense on a straight-line basis over the lease periods. We do not have any debt or material capital lease obligations, and all of our property, equipment and software have been purchased with cash. As of December 31, ~~2018,~~2019, we had no material long-term purchase obligations outstanding with vendors or third parties other than ~~obligations related to the fit out of certain leasehold properties and~~ purchases of website hosting services. The following table summarizes our future minimum payments under non-cancelable operating leases and purchase obligations for equipment and office facilities as of December 31, ~~2018~~2019 (in thousands):


	Payments Due by Period
	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Operating lease obligations⁽¹⁾	$	274,478	$	59,522	$	96,772	$	81,072	$	37,112
Purchase obligations	$	104,538	$	40,572	$	61,466	$	2,500	$	—

Payments Due by Period
Total Less Than 1 Year 1 – 3 Years 3 – 5 Years More Than 5 Years
Operating lease obligations $ 321,241
$ 56,703
$ 110,438
$ 84,120
$ 69,980
Purchase obligations $ 128,970
$ 35,213
$ 61,257
$ 32,500
$ —
⁽¹⁾In October 2019, the Company entered into a lease agreement for an office facility in London, U.K. for which the lease term has not yet commenced, with lease obligations of approximately $15.0 million. The lease is expected to commence in 2020 and will expire 2030. The Company expects to classify it as an operating lease. Because the lease had not yet commenced as of December 31, 2019, payments related to this lease are not included in the above table.

The contractual commitment amounts in the table above are associated with binding agreements and do not include obligations under contracts that we can cancel without a significant penalty. In addition, as of December 31, ~~2018,~~2019, our total liability for uncertain tax positions was ~~$3.8 million, which is included within current liabilities and other long-term liabilities.~~$5.6 million. We are not reasonably able to estimate the timing of future cash flow related to this liability. As a result, this amount is not included in the contractual obligations table above.

We have subleased certain office facilities under operating lease agreements that expire in ~~2021.~~2025. The terms of these lease agreements provide for rental receipts on a graduated basis. We recognize sublease rentals on a straight-line basis over the lease

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periods reflected as a reduction in rental expense. As of December 31, ~~2018,~~2019, our future minimum rental receipts to be received under non-cancelable subleases were ~~$4.3~~$37.5 million.

Item 7A. 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 include primarily 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, ~~2017.~~2018.

Interest Rate Fluctuation

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk.

Our cash and cash equivalents consist of cash, money market funds and commercial paper. We do not have any long-term borrowings. Because our cash and cash equivalents have a relatively short maturity, their fair value is relatively insensitive to interest rate changes. We believe a hypothetical 10% increase in the interest rates as of December 31, ~~2018~~2019 would not have a material impact on our cash and cash equivalents portfolio.

Our marketable securities ~~are comprised of~~comprise fixed-rate debt securities issued by U.S. corporations, U.S. government agencies and the U.S. Treasury; as such, their fair value may be affected by fluctuations in interest rates in the broader economy. As we have both the ability and intent to hold these securities to maturity, such fluctuations would have no impact on our results of operations.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, principally in the British pound sterling, Canadian dollar and the Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Although we have experienced and will continue to experience fluctuations in net income (loss) as a result of transaction gains (losses), net, related to revaluing certain cash balances, trade accounts receivable balances and intercompany balances that are denominated in currencies other than the U.S. dollar, we believe a hypothetical 10% strengthening (weakening) of the U.S. dollar against the British pound sterling, Canadian dollar or Euro, either alone or in combination with each other, would not have a material impact on our results of operations. In the event our foreign sales and expenses increase as a proportion of our overall sales and expenses, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. At this time, we do not enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk, though we may in the future. It is difficult to predict the impact hedging activities would have on our results of operations.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.

Item 8. Financial Statements and Supplementary Data.

Our financial statements and the report of our independent registered public accounting firm are included in this Annual Report beginning on page F-1. The index to our financial statements is included in Part IV, Item 15 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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Item 9A. 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 provide reasonable assurance 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 and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. 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 December 31, ~~2018.~~2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, ~~2018,~~2019, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of our internal control over financial reporting based on the framework set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2018.~~2019. Our management reviewed the results of this evaluation with the audit committee of our board of directors.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report and, as part of the audit, has issued a report on the effectiveness of our internal control over financial reporting as of December 31, ~~2018,~~2019, which is included below.

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 December 31, ~~2018~~2019 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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors ~~and~~

~~Stockholders~~ of Yelp Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Yelp Inc. and subsidiaries (the “Company”) as of December 31, ~~2018,~~2019, based on criteria established in Internal ~~Control -~~Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2018,~~2019, based on criteria established in Internal ~~Control -~~Control- Integrated Framework (2013)issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, ~~2018~~2019 of the Company and our report dated February 28, ~~2019,~~2020, expressed an unqualified opinion on those financial ~~statements.~~statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; ~~(2)~~ provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and ~~(3)~~ provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

February 28, ~~2019~~2020

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Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information required by this item regarding directors and director nominees, executive officers, the board of directors and its committees, and certain corporate governance matters is incorporated by reference to the information set forth under the captions “Proposal No. 1—Election of Directors,” “Information Regarding the Board of Directors and Corporate Governance” and “Executive Officers” in the definitive proxy statement for our ~~2019~~2020 Annual Meeting of Stockholders, or the ~~2019~~2020 Proxy Statement. Information required by this item regarding compliance with Section 16(a) of the Exchange Act is incorporated by reference to the information set forth under the caption ~~“Section~~“Delinquent Section 16(a) ~~Beneficial Ownership Reporting Compliance”~~Reports” in our ~~2019~~2020 Proxy Statement.

We have adopted a written code of business conduct and ethics that applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. The code of business conduct and ethics is available on our corporate website at www.yelp-ir.com under the section entitled “Corporate Governance.” If we make any substantive amendments to our code of business conduct and ethics or grant any of our directors or executive officers any waiver, including any implicit waiver, from a provision of our code of business conduct and ethics, we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K.

Item 11. Executive Compensation.

Information required by this item regarding executive compensation is incorporated by reference to the information set forth under the captions “Executive Compensation,” “Director Compensation” and “Information Regarding the Board of Directors and Corporate Governance” in our ~~2019~~2020 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our ~~2019~~2020 Proxy Statement. Information required by this item regarding securities authorized for issuance under our equity compensation plans is incorporated by reference to the information set forth under the caption “Equity Compensation Plan Information” in our ~~2019~~2020 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by this item regarding certain relationships and related transactions is incorporated by reference to the information set forth under the caption “Transactions with Related Persons” in our ~~2019~~2020 Proxy Statement. Information required by this item regarding director independence is incorporated by reference to the information set forth under the caption “Information Regarding the Board of Directors and Corporate Governance” in our ~~2019~~2020 Proxy Statement.

Item 14. Principal Accounting Fees and Services.

Information required by this item regarding principal accounting fees and services is incorporated by reference to the information set forth under the caption “Proposal No. 2—Ratification of Selection of Independent Registered Public Accounting Firm” in our ~~2019~~2020 Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

The following documents are filed as part of this Annual Report:

Financial Statements. Our consolidated financial statements and the Report of Independent Registered Public

Accounting Firm are included herein on the pages indicated:

Report of Independent Registered Public Accounting Firm

~~F-1~~1

Consolidated Balance Sheets

~~F-2~~4

Consolidated Statements of Operations

~~F-3~~5

Consolidated Statements of Comprehensive Income ~~(Loss)~~

~~F-4~~6

Consolidated Statements of Stockholders’ Equity

~~F-5~~7

Consolidated Statements of Cash Flows

~~F-6~~8

Notes to Consolidated Financial Statements

~~F-7~~9

Financial Statement Schedules. None. All financial statement schedules are omitted because they are not applicable, not required under the instructions, or the requested information is included in the consolidated financial statements or notes thereto.

Exhibits. The following is a list of exhibits filed with this report or incorporated herein by reference:

Incorporated by Reference

Exhibit

Filing

Filed

Number

Exhibit Description

Form

File No.

Exhibit

Date

Herewith

2.1

Agreement and Plan of Merger, dated February 9, 2015, by and among Yelp Inc., Eat24Hours.com, Inc., Kale Acquisition Corp., Quinoa Acquisition LLC, the Stockholders of Eat24Hours.com, Inc. and Nadav Sharon, as Stockholders’ Agent.

8-K

001-35444

99.1

2/10/2015

2.2

Agreement and Plan of Merger, dated February 28, 2017, by and among Yelp Inc., Nowait, Inc., Beagle Acquisition Corp. and Shareholder Representative Services LLC, as Stockholders’ Agent.

8-K

001-35444

2.1

3/6/2017

2.3

Share Purchase Agreement, dated April 3, 2017, by and among Yelp Inc., 10036773 Canada Inc., Turnstyle Analytics Inc., the shareholders of Turnstyle Analytics Inc., the vested option holders of Turnstyle Analytics Inc., 500 Startups IV, L.P. and Fortis Advisors LLC, as Securityholders’ Agent.

8-K

001-35444

2.1

4/7/2017

2.4

Unit Purchase Agreement, dated as of August 3, 2017, by and among Yelp Inc., Eat24, LLC, Grubhub Inc. and Grubhub Holdings Inc.

10-Q

001-35444

2.3

8/9/2017

3.1

Amended and Restated Certificate of Incorporation of Yelp Inc.

8-A/A

001-35444

3.2

9/23/2016

3.2

Amended and Restated Bylaws of Yelp Inc., as amended.

8-K

001-35444

3.1

2/13/2019

4.1

Reference is made to Exhibits 3.1 and 3.2.

4.2

Form of Common Stock Certificate.

8-A/A

001-35444

4.1

9/23/2016

10.1*

Amended and Restated 2005 Equity Incentive Plan.

S-1

333-178030

10.2

11/17/2011

10.2*

Forms of Option Agreement and Option Grant Notice under Amended and Restated 2005 Equity Incentive Plan.

S-1

333-178030

10.3

11/17/2011

10.3*

2011 Equity Incentive Plan.

S-1

333-178030

10.4

2/3/2012

10.4*

Forms of Option Agreement and Option Grant Notice under 2011 Equity Incentive Plan.

S-1

333-178030

10.5

2/3/2012

Filed
Incorporated by Reference Herewith
Exhibit
Number Exhibit Description Form File No. Exhibit Filing Date
2.1
Agreement and Plan of Merger, dated February 9, 2015, by and among Yelp Inc., Eat24Hours.com, Inc., Kale Acquisition Corp., Quinoa Acquisition LLC, the Stockholders of Eat24Hours.com, Inc. and Nadav Sharon, as Stockholders’ Agent. 8-K 001-35444 99.1 2/10/2015
2.2
Agreement and Plan of Merger, dated February 28, 2017, by and among Yelp Inc., Nowait, Inc., Beagle Acquisition Corp. and Shareholder Representative Services LLC, as Stockholders’ Agent. 8-K 001-35444 2.1 3/6/2017
2.3
Share Purchase Agreement, dated April 3, 2017, by and among Yelp Inc., 10036773 Canada Inc., Turnstyle Analytics Inc., the shareholders of Turnstyle Analytics Inc., the vested option holders of Turnstyle Analytics Inc., 500 Startups IV, L.P. and Fortis Advisors LLC, as Securityholders’ Agent. 8-K 001-35444 2.1 4/7/2017
2.4
Unit Purchase Agreement, dated as of August 3, 2017, by and among Yelp Inc., Eat24, LLC, Grubhub Inc. and Grubhub Holdings Inc. 10-Q 001-35444 2.3 8/9/2017
3.1
Amended and Restated Certificate of Incorporation of Yelp Inc. 8-A/A 001-35444 3.2 9/23/2016
3.2
Amended and Restated Bylaws of Yelp Inc., as amended 8-K 001-35444 3.1 2/13/2019
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2
Form of Common Stock Certificate. 8-A/A 001-35444 4.1 9/23/2016
10.1*
Amended and Restated 2005 Equity Incentive Plan. S-1 333-178030 10.2 11/17/2011
10.2*
Forms of Option Agreement and Option Grant Notice under Amended and Restated 2005 Equity Incentive Plan. S-1 333-178030 10.3 11/17/2011
10.3*
2011 Equity Incentive Plan. S-1 333-178030 10.4 2/3/2012
10.4*
Forms of Option Agreement and Option Grant Notice under 2011 Equity Incentive Plan. S-1 333-178030 10.5 2/3/2012
10.5*
2012 Equity Incentive Plan, as amended. 8-K 001-35444 10.2 2/13/2019

Incorporated by Reference

Exhibit

Filing

Filed

Number

Exhibit Description

Form

File No.

Exhibit

Date

Herewith

10.5*

2012 Equity Incentive Plan, as amended.

8-K

001-35444

10.2

2/13/2019

10.6*

Forms of Option Agreement and Grant Notice and RSU Agreement and Grant Notice under 2012 Equity Incentive Plan.

S-1/A

333-178030

10.17

2/3/2012

10.7 *

Forms of Performance Restricted Stock Unit Award Grant Notice and Agreement under 2012 Equity Incentive Plan.

10-Q

001-35444

10.1

5/10/2019

10.8 *

2012 Employee Stock Purchase Plan, as amended.

8-K

001-35444

10.2

9/23/2016

10.9 *

Executive Severance Benefit Plan, as amended.

10.10 *

Form of Indemnification Agreement made by and between Yelp Inc. and each of its directors and executive officers.

S-1

333-178030

10.6

2/3/2012

10.11*

Offer Letter, by and between Yelp Inc. and Jeremy Stoppelman, dated February 3, 2012.

S-1/A

333-178030

10.15

2/3/2012

10.12*

Offer Letter, dated December 27, 2019, by and between Yelp Inc. and David Schwarzbach.

10.1 3 *

Amended and Restated Offer Letter, by and between Yelp Inc. and Joseph Nachman, dated February 3, 2012.

S-1/A

333-178030

10.9

2/3/2012

10.1 4 *

Letter Agreement, dated May 22, 2014, by and between Joseph Nachman and Yelp Inc.

8-K

001-35444

99.1

5/28/2014

10.15*

Offer Letter, dated April 1, 2009, by and between Yelp Inc. and Vivek Patel.

10-Q

001-35444

10.2

5/10/2019

10.1 6 *

Amended and Restated Offer Letter, by and between Yelp Inc. and Laurence Wilson, dated February 3, 2012.

S-1/A

333-178030

10.10

2/3/2012

10.17*

Offer Letter, dated January 17, 2019, by and between Yelp Inc. and James Miln.

10.1 8 *

Compensation Information for Registrant’s Executive Officers.

8-K

001-35444

2/24/2020

10.19 *

Compensation Information for Registrant's Non-Employee Directors.

8-K

001-35444

2/13/2020

10.20

Amended and Restated Lease, dated April 1, 2015, by and between Stockdale Galleria Project Owner, LLC and Yelp Inc.; First Amendment to Lease, dated July 30, 2015; Second Amendment to Lease, dated April 22, 2016; Third Amendment to Lease, dated July 22, 2016.

10-K

001-35444

10.23

3/1/2017

10.21

License Agreement between Harrison 160, LLC, as Licensor, and MRL Ventures Inc., as Licensee, dated as of April 6, 2004; Addendums through November 10, 2011.

S-1/A

333-178030

10.14

2/3/2012

10.22

Office Lease, dated May 9, 2012, by and between Yelp Inc. and Stockbridge 138 New Montgomery LLC, as amended.

10-K

001-35444

10.25

3/1/2017

10.23

Lease, dated July 31, 2014, by and between Yelp Inc. and 11 Madison Avenue LLC.

8-K

001-35444

10.1

8/6/2014

21.1

Subsidiaries of Yelp Inc.

23.1

Consent of Independent Registered Public Accounting Firm.

24.1

Power of Attorney (included on signature page).

31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a).

Filed
Incorporated by Reference Herewith
Exhibit
Number Exhibit Description Form File No. Exhibit Filing Date
10.6*
Forms of Option Agreement and Grant Notice and RSU Agreement and Grant Notice under 2012 Equity Incentive Plan. S-1/A 333-178030 10.17 2/3/2012
10.7*
2012 Employee Stock Purchase Plan, as amended. 8-K 001-35444 10.2 9/23/2016
10.8*
Executive Severance Benefit Plan. S-1/A 333-178030 10.19 2/3/2012
10.9*
Form of Indemnification Agreement made by and between Yelp Inc. and each of its directors and executive officers. S-1 333-178030 10.6 2/3/2012
10.10*
Offer Letter, by and between Yelp Inc. and Jeremy Stoppelman, dated February 3, 2012. S-1/A 333-178030 10.15 2/3/2012
10.11*
Employment Offer Letter, dated April 15, 2016, between Yelp Inc. and Charles Baker. 8-K 001-35444 10.1 4/18/2016
10.12*
Amended and Restated Offer Letter, by and between Yelp Inc. and Jed Nachman, dated February 3, 2012. S-1/A 333-178030 10.9 2/3/2012
10.13*
Letter Agreement, dated May 22, 2014, by and between Joseph Nachman and Yelp Inc. 8-K 001-35444 99.1 5/28/2014
10.14*
Amended and Restated Offer Letter, by and between Yelp Inc. and Laurence Wilson, dated February 3, 2012. S-1/A 333-178030 10.10 2/3/2012
10.15*
Offer Letter, dated July 13, 2012, by and between Yelp Inc. and Alan Ramsay. 10-Q 001-35444 10.1 5/10/2017
10.16*
Form of Restricted Stock Unit Agreement and Notice. 8-K 001-35444 10.2 2/8/2016
10.17*
Compensation Information for Registrant’s Executive Officers. 8-K 001-35444 1/23/2019
10.18
Amended and Restated Lease, dated April 1, 2015, by and between Stockdale Galleria Project Owner, LLC and Yelp Inc.; First Amendment to Lease, dated July 30, 2015; Second Amendment to Lease, dated April 22, 2016; Third Amendment to Lease, dated July 22, 2016. 10-K 001-35444 10.23 3/1/2017
10.19
License Agreement between Harrison 160, LLC, as Licensor, and MRL Ventures Inc., as Licensee, dated as of April 6, 2004; Addendums through November 10, 2011. S-1/A 333-178030 10.14 2/3/2012
10.20
Office Lease, dated May 9, 2012, by and between Yelp Inc. and Stockbridge 138 New Montgomery LLC, as amended. 10-K 001-35444 10.25 3/1/2017
10.21
Lease, dated July 31, 2014, by and between Yelp Inc. and 11 Madison Avenue LLC. 8-K 001-35444 10.1 8/6/2014
21.1
Subsidiaries of Yelp Inc. X
23.1
Consent of Independent Registered Public Accounting Firm. X
24.1
Power of Attorney (included on signature page). X
31.1
Certification pursuant to Rule 13a-14(a)/15d-14(a). X
31.2
Certification pursuant to Rule 13a-14(a)/15d-14(a). X
32.1†

Certifications of Chief Executive Officer and Chief Financial Officer.

X

101.INS# XBRL Instance Document. X
101.SCH# XBRL Taxonomy Extension Schema Document. X

~~Indicates management contract or compensatory plan or arrangement.~~

Incorporated by Reference

Exhibit

Filing

Filed

Number

Exhibit Description

Form

File No.

Exhibit

Date

Herewith

†

32.1†

~~The certifications attached~~

Certifications of Chief Executive Officer and Chief Financial Officer.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as ~~Exhibit 32.1 accompany this Annual Report on Form 10-K are not deemed filed with the Securities~~inline XBRL and Exchange Commission and are not to be incorporated by reference into any filing of Yelp Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in ~~such filing.~~Exhibit 101).

* Indicates management contract or compensatory plan or arrangement.

† The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Yelp Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.

Item 16. Form 10-K Summary.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: February 28, ~~2019~~

2020


			Yelp Inc.
			~~Yelp Inc.~~
			/s/ David Schwarzbach
			~~/s/ Charles Baker~~David Schwarzbach
			~~Charles Baker~~
	Chief Financial Officer
			(Principal Financial and Accounting Officer)

POWEROFATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints ~~Charles Baker~~David Schwarzbach and Laurence Wilson, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and either of them, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

~~Signature~~

~~Title~~

~~Date~~

/s/ Jeremy Stoppelman

Chief Executive Officer and Director

February 28, ~~2019~~2020

Jeremy Stoppelman

(Principal Executive Officer)

/s/ ~~Charles Baker~~David Schwarzbach

Chief Financial Officer

February 28, ~~2019~~2020

~~Charles Baker~~David Schwarzbach

(Principal Financial and Accounting Officer)

/s/ Diane Irvine

Chairperson

February 28, ~~2019~~2020

Diane Irvine

/s/ Fred Anderson

Director

February 28, ~~2019~~2020

Fred Anderson

~~/s/ Geoff Donaker~~

~~Director~~

~~February 28, 2019~~

~~Geoff Donaker~~

~~/s/ Peter Fenton~~

~~Director~~

~~February 28, 2019~~

~~Peter Fenton~~

/s/ Robert Gibbs

Director

February 28, ~~2019~~2020

Robert Gibbs

/s/ ~~Jeremy Levine~~George Hu

Director

February 28, ~~2019~~2020

~~Jeremy Levine~~George Hu

/s/ ~~Mariam Naficy~~Sharon Rothstein

Director

February 28, ~~2019~~2020

~~Mariam Naficy~~Sharon Rothstein

/s/ Brian Sharples

Director

February 28, 2020

Brian Sharples

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors ~~and~~

~~Stockholders~~ of Yelp Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Yelp Inc. and subsidiaries (the "Company") as of December 31, ~~2018~~2019 and ~~2017,~~2018, the related consolidated statements of operations, comprehensive income, ~~(loss), stockholders’~~stockholders' equity, and cash flows, for each of the three years in the period ended December 31, ~~2018,~~2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of ~~Yelp Inc. and subsidiaries~~the Company as of December 31, ~~2018~~2019 and ~~2017,~~2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2018,~~2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2018,~~2019, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, ~~2019~~2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, effective January 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, Leases (ASC 842) using the modified retrospective approach. The incremental borrowing rate (IBR) used upon adoption of ASC 842 to calculate the present value of future lease payments is also communicated as a critical audit matter below.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Advertising Revenue — Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company’s revenue consists of advertising placements, primarily performance-based cost-per-click advertising (CPC), which is comprised of a significant volume of low-dollar transactions, initiated and maintained within internally developed systems. The processing and recording of those transactions is highly automated and is based on contractual terms with customers. The Company relies on information from these internally developed systems and automations to record its CPC revenue.

F-1

Table of Contents

We identified CPC revenue as a critical audit matter because the Company’s processes to record CPC revenue are highly dependent on internally developed systems and automations. This required an increased extent of effort, including the need for us to involve professionals with expertise in information technology (IT), to identify, test, and evaluate the Company’s systems, databases, tools, software applications, and automated controls.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s processes and systems used to record CPC revenue included the following, among others:

•We tested internal controls within the relevant CPC revenue business processes, including those in place to reconcile the various systems to the Company’s general ledger and address the accuracy and completeness of contract data.

•With the assistance of our IT specialists, we:

•Identified the significant systems, automated controls, and tools used to maintain databases and process CPC revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

•Performed testing of system interface controls and automated controls within CPC revenue transactions, as well as the controls designed to address the accuracy and completeness of CPC revenue.

•With the assistance of our data specialists, we created data visualizations to evaluate recorded CPC revenue and evaluate trends in the transactional CPC revenue data.

•We generated synthetic click transactions on the Company’s website and traced the recording of these transactions into the Company’s systems to understand how CPC revenue transactions are initiated, processed, and aggregated.

•For a sample of CPC revenue transactions, we performed detail transaction testing by agreeing the amounts recognized to source documentation and system reports.

Leases — Refer to Notes 2 and 10 to the financial statements

Critical Audit Matter Description

The Company adopted and began applying ASC 842 on January 1, 2019, which generally requires lessees to recognize a right-of-use asset and lease liability for all leases. The adoption of this new accounting standard resulted in the recognition of operating lease right-of-use assets of $233.0 million, current operating lease liabilities of $55.2 million, and long-term operating lease liabilities of $212.5 million on the consolidated balance sheet upon adoption on January 1, 2019.

As part of measuring the lease liability upon adoption, the Company calculated its incremental borrowing rate (IBR), based on hypothetical borrowings to fund each respective lease over the lease terms. The Company’s IBR calculation is derived based on the Company’s implied credit rating and other market rate information of similar companies. The determination of its IBR requires management to use significant estimates and assumptions, including credit ratings, lease tenures, and adjustments for the effects of collateral.

We identified the IBR as a critical audit matter given the significant judgments management is required to make to determine the IBR to apply to the calculation of the lease liability for each lease. This required an increased extent of effort and auditor judgment, including the need to involve a valuation specialist.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination of the IBR included the following, among others:

•We tested the effectiveness of management’s controls over the determination and appropriateness of the IBR.

•With the assistance of our fair value specialists, we:

•Assessed the reasonableness of the methodology used to estimate the IBR based on the definition and related guidance in ASC 842.

F-2

Table of Contents

•Assessed the reasonableness of the implied credit rating, collateral, base rate, and spreads applied in determining the IBR by comparing to Company specific benchmarks, comparable companies, and other market information.

•Evaluated the reasonableness of the models and the mathematical accuracy of the calculations used to estimate the IBR, including validating the inputs used for each lease tenure.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

February 28, ~~2019~~2020

We have served as the Company's auditor since 2008.

F-3

Table of Contents

~~Yelp Inc.~~YELP INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	December 31, 2018			December 31, 2017				December 31, 2019		December 31, 2018
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	332,764		$	547,850		Cash and cash equivalents	$	170,281	$	332,764
Short-term marketable securities	423,096			273,366			Short-term marketable securities	242,000		423,096
Accounts receivable (net of allowance for doubtful accounts of $8,685 and $8,602 at December 31, 2018 and December 31, 2017, respectively)	87,305			76,173
Accounts receivable (net of allowance for doubtful accounts of $7,686 and $8,685 at December 31, 2019 and December 31, 2018, respectively)							Accounts receivable (net of allowance for doubtful accounts of $7,686 and $8,685 at December 31, 2019 and December 31, 2018, respectively)	106,832		87,305
Prepaid expenses and other current assets	17,104			15,700			Prepaid expenses and other current assets	14,196		17,104
Total current assets	860,269			913,089			Total current assets	533,309		860,269
Long-term marketable securities	—			25,032			Long-term marketable securities	53,499		—
Property, equipment and software, net	114,800			103,651			Property, equipment and software, net	110,949		114,800
Operating lease right-of-use assets							Operating lease right-of-use assets	197,866		—
Goodwill	105,620			107,954			Goodwill	104,589		105,620
Intangibles, net	13,359			16,893			Intangibles, net	10,082		13,359
Restricted cash	22,071			18,554			Restricted cash	22,037		22,071
Other non-current assets	59,444			40,428			Other non-current assets	38,369		59,444
Total assets	$	1,175,563		$	1,225,601		Total assets	$	1,070,700	$	1,175,563
Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable	$	6,540		$	9,033
Accrued liabilities	54,522			73,665
Accounts payable and accrued liabilities							Accounts payable and accrued liabilities	$	72,333	$	61,062
Operating lease liabilities — current							Operating lease liabilities — current	57,507		—
Deferred revenue	3,843			3,469			Deferred revenue	4,315		3,843
Total current liabilities	64,905			86,167			Total current liabilities	134,155		64,905
Long-term liabilities	35,140			30,737
Operating lease liabilities — long-term							Operating lease liabilities — long-term	174,756		—
Other long-term liabilities							Other long-term liabilities	6,798		35,140
Total liabilities	100,045			116,904			Total liabilities	315,709		100,045
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 15)							Commitments and contingencies (Note 15)
Stockholders’ equity:							Stockholders’ equity:
Common stock, $0.000001 par value — 200,000,000 shares authorized, 81,996,839 and 83,724,916 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively	—			—
Common stock, $0.000001 par value — 200,000,000 shares authorized, 71,185,468 and 81,996,839 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively							Common stock, $0.000001 par value — 200,000,000 shares authorized, 71,185,468 and 81,996,839 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	—		—
Additional paid-in capital	1,139,462			1,038,017			Additional paid-in capital	1,259,803		1,139,462
Treasury stock	—			(46		)

Accumulated other comprehensive loss	(11,021		)	(8,444		)	Accumulated other comprehensive loss	(11,759)		(11,021)
(Accumulated deficit) retained earnings	(52,923		)	79,170
Accumulated deficit							Accumulated deficit	(493,053)		(52,923)
Total stockholders’ equity	1,075,518			1,108,697			Total stockholders’ equity	754,991		1,075,518
Total liabilities and stockholders’ equity	$	1,175,563		$	1,225,601		Total liabilities and stockholders’ equity	$	1,070,700	$	1,175,563



Delaware			20-1854266
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)



Large accelerated filerx	☑	Accelerated filer¨	☐
Non-accelerated filer¨	☐	Smaller reporting company¨	☐
		Emerging growth company¨	☐



Free Online Business Account						We enable businesses to create a free online business account and claim the listing page for each of their business locations. With their free business accounts, businesses can view trends (e.g. statistics and charts of the performance of their pages on our platform), use the Revenue Estimator tool to quantify the revenue opportunity Yelp provides, message customers (e.g. by replying to messages or reviews either publicly or directly), update listing information (e.g. address, hours of operation) and offer Yelp Deals and Gift ~~Certificates, as described below.~~Certificates.

Branded Profile						Our Branded Profile product provides businesses with access to premium features in connection with their business listing pages, such as the ability to update listing information and select photos or videos to highlight on the page through a slideshow feature. Businesses can also promote a desired transaction of their choosing — such as scheduling an appointment or printing a coupon — directly on their business listing pages with our Call to Action feature. This feature transfers consumers from a business’s listing page to the business’s own website to complete the action. Account support is available via phone and email for businesses that purchase a Branded Profile program.

Enhanced Profile						In addition to providing businesses with the same premium features and support options as our Branded Profile product, our Enhanced Profile product restricts how ads from other businesses appear on the business listing pages of our Enhanced Profile customers.

Yelp Verified License						Yelp Verified License is a badge that appears on business listing pages as a paid upgrade for certain licensed advertisers, primarily in our home & local services category. The badge indicates that we have verified the business's trade license and confirmed it was in good standing as of a certain date, allowing businesses to distinguish themselves as licensed and helping consumers make safe and confident decisions when selecting businesses for their projects.

Business Highlights						Businesses in eligible categories can pay to highlight up to six attributes that make their business unique — e.g. "Family Owned" or "Pet Friendly." These highlights appear on business listing pages in a section called "Highlights from the Business," and the top two highlights also appear in organic and sponsored search results for that business.

Yelp Portfolio						Our Yelp Portfolio product allows businesses to showcase their specialties to prospective customers through a photo collection of projects. A business's Portfolio is displayed on its business listing page and can include additional details such as costs, timelines and services provided, allowing potential customers to learn more about the business and helping them decide if the business is the best fit for their upcoming project. Yelp Portfolio is currently available for businesses in certain home & local services categories.

Yelp Connect						Yelp Connect gives businesses an opportunity to tell users more about what makes their business special through posts appearing on their business listing pages by highlighting the unique features of the business, upcoming events, limited time offers and other timely content. Yelp automatically promotes Yelp Connect posts to a business's followers.

Search and Other Ads						We allow businesses to promote themselves as a sponsored search result on our platform, on the listing pages of related businesses and as suggested “additional businesses” for consumers using our Request-A-Quote feature. We ~~now~~ sell ads primarily on a CPC basis, though we also offer impression-based ads.

Ad Resales						We also generate revenue through the resale of our advertising products by certain agencies and partners, such as ~~DexYP,~~Thryv (formerly DexYP), as well as monetization of remnant advertising inventory through third-party ad networks. In 2018, we launched the Yelp Ads Certified Partners Program, which allows partner agencies to independently sell and manage ad campaigns on behalf of their small and medium-sized business clients, providing increased centralization and flexibility.



~~Yelp Platform~~		The Yelp Platform allows consumers to transact with businesses directly on our website or mobile app through partner integrations. Consumers can order flowers, purchase event tickets, and book spa and salon appointments, among many other transaction opportunities, all without leaving Yelp.

Eat24 and the Grubhub Partnership		Prior to our sale of Eat24 to Grubhub on October 10, 2017, we generated revenue from our Yelp Eat24 business through arrangements with restaurants in which restaurants paid a commission percentage fee on orders placed through Yelp Eat24. Following the sale, Eat24’s restaurant network remains integrated on our platform and, pursuant to our strategic partnership, Grubhub’s restaurant network was integrated onto our platform mid-2018. ~~We expect this~~This partnership ~~to provide~~has provided consumers with a wider selection of restaurants and better delivery options, while improving our per-order profitability.

Yelp Platform			The Yelp Platform allows consumers to transact with businesses directly on our website or mobile app through partner integrations. Consumers can order flowers, purchase event tickets, and book spa and salon appointments, among many other transaction opportunities, all without leaving Yelp.

Yelp Deals			Our Yelp Deals product allows local business owners to create promotional discounted deals for their products and services, which are marketed to consumers through our platform. We typically earn a fee based on the discounted price of each deal sold. We process all customer payments and remit to the business the revenue share of any Yelp Deal purchased.

~~Gift Certificates~~	Our Gift Certificates product allows local business owners to sell full-price gift certificates directly to consumers through their business listing pages. The business chooses the price point to offer (from $10 to $500), and consumers may purchase Gift Certificates denominated in such amounts. We earn a fee based on the amount of the Gift Certificate sold. We process all consumer payments and remit to the business the revenue share of any Gift Certificate purchased.



Yelp Reservations		We provide restaurants, nightlife and certain other venues with the ability to offer online reservations directly from their Yelp business listing pages through our Yelp Reservations product, which also includes front-of-house management tools. We offer this product as a monthly subscription service.

Yelp Waitlist		Yelp Waitlist is a subscription-based waitlist management solution that allows consumers to check wait times and join waitlists remotely and businesses to efficiently manage seating and server rotation. Yelp Waitlist is available directly on business listing pages as well as in-store kiosks.

~~Yelp WiFi Marketing~~	Our Yelp WiFi Marketing product provides businesses with the ability to create easy on-premises wifi access for customers, advertise products on the wifi log-in page, and collect contact and social media information from customers who access wifi for use in marketing campaigns. We offer this product as a monthly subscription service.

Yelp Knowledge	Through partnerships with companies such as Sprinklr, InMoment and Chatmeter, our Yelp Knowledge program offers business owners local analytics and insights through access to our historical data and other proprietary content. Our Yelp Knowledge partners pay us program fees for access to Yelp Knowledge content.

Other Partnerships		Other non-advertising partner arrangements include content licensing and allowing third-party data providers to update and manage business listing information on behalf of businesses.


x	~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


~~(2)~~	The above chart provides a breakdown of our cumulative reviews as of December 31, 2018, including reviews that had been removed from our platform. The categories of the businesses associated with these reviews reflect Yelp's category definitions as of December 31, 2018.



Period	Total Number of Shares Purchased⁽¹⁾	Weighted-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⁽¹⁾
October 1 - October 31, 2018	1,312	$	42.25	1,312	$	59,958
November 1 - November 30, 2018	1,832	$	32.75	1,832	$	250,000
December 1 - December 31, 2018	—	$	—	—	$	250,000



			Year Ended December 31,
	2018				2017⁽¹⁾					2016⁽¹⁾
	Amount		% of revenue		Amount			% of revenue		Amount			% of revenue
Consolidated Statements of Operations Data:
Net revenue by product:
Advertising	$	907,487	97	%	$	775,678		91	%	$	648,235		90	%
Transactions	13,694		1		60,251			7		62,495			9
Other services	21,592		2		14,918			2		5,333			1
Total net revenue	$	942,773	100	%	$	850,847		100	%	$	716,063		100	%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	57,872		6	%	70,518			8	%	60,363			9	%
Sales and marketing	483,309		51		437,424			51		379,895			53
Product development	212,319		23		175,787			21		138,549			19
General and administrative	120,569		13		109,707			13		100,475			14
Depreciation and amortization	42,807		5		41,198			5		35,346			5
Restructuring and integration cost	—		—		288			—		3,455			—
Gain on disposal of a business unit	—		—		(163,697		)	(19	)	—			—
Total costs and expenses	916,876		98		671,225			79		718,083			100
Income (loss) from operations	25,897		2		179,622			21		(2,020		)	—
Other income, net	14,109		2		4,864			1		1,694			—
Income (loss) before income taxes	40,006		4		184,486			22		(326		)	—
Provision for income taxes	15,344		2		(31,491		)	(4	)	(1,385		)	—
Net income (loss)	55,350		6	%	152,995			18	%	(1,711		)	—	%



	Quarter Ended
	Dec 31, 2018		Sep 30, 2018		Jun 30, 2018			Mar 31, 2018			Dec 31, 2017⁽¹⁾			Sep 30, 2017⁽¹⁾			Jun 30, 2017⁽¹⁾			Mar 31, 2017⁽¹⁾
Consolidated Statements of Operations Data:
Net revenue by product
Advertising	$	234,774	$	232,502	$	226,168		$	214,043		$	209,593		$	200,502		$	187,683		$	177,900
Transactions	3,293		3,042		3,520			3,839			5,227			18,524			18,435			18,065
Other services	5,673		5,552		5,175			5,192			4,621			4,261			3,827			2,209
Total net revenue	$	243,740	$	241,096	$	234,863		$	223,074		$	219,441		$	223,287		$	209,945		$	198,174
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)⁽²⁾	$	14,255	$	14,177	$	14,708		$	14,732		$	16,236		$	19,312		$	18,056		$	16,914
Sales and marketing⁽²⁾	121,256		121,759		120,653			119,641			111,013			112,958			104,921			108,532
Product development⁽²⁾	54,273		53,764		52,789			51,493			47,994			45,834			42,088			39,871
General and administrative⁽²⁾	29,677		30,302		28,583			32,007			27,898			27,601			27,042			27,166
Depreciation and amortization	11,557		10,713		10,509			10,028			9,729			10,656			10,662			10,151
Restructuring and integration	—		—		—			—			1			35			21			231
Gain on disposal of a business unit	—		—		—			—			(163,697		)	—			—			—
Total costs and expenses	$	231,018	$	230,715	$	227,242		$	227,901		$	49,174		$	216,396		$	202,790		$	202,865
Income (loss) from operations	$	12,722	$	10,381	$	7,621		$	(4,827	)	$	170,267		$	6,891		$	7,155		$	(4,691	)
Other income, net	4,160		3,921		3,424			2,604			1,897			1,371			864			732
Income (loss) before income taxes	$	16,882	$	14,302	$	11,045		$	(2,223	)	$	172,164		$	8,262		$	8,019		$	(3,959	)
Benefit from/(provision for) income taxes	15,064		684		(341		)	(63		)	(31,074		)	(232		)	(118		)	(67		)
Net income (loss) attributable to common stockholders	$	31,946	$	14,986	$	10,704		$	(2,286	)	$	141,090		$	8,030		$	7,901		$	(4,026	)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.39	$	0.18	$	0.13		$	(0.03	)	$	1.69		$	0.10		$	0.10		$	(0.05	)
Diluted	$	0.37	$	0.17	$	0.12		$	(0.03	)	$	1.58		$	0.09		$	0.09		$	(0.05	)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic	82,706		84,008		83,769			83,785			83,264			82,259			80,996			79,843
Diluted	86,287		88,724		88,651			83,785			89,064			87,433			84,860			79,843


				Additional				Accumulated Other		Retained Earnings		Total
	Common Stock					Paid-In		Treasury		Comprehensive		(Accumulated		Stockholders'
	Shares	Amount		Capital		Stock		Loss		Deficit)		Equity
Balance as of December 31, 2016	79,429,833	$	—	$	892,983	$	—	$	(15,576)	$	(61,269)	$	816,138
Issuance of common stock upon exercises of employee stock options	1,519,771	—		29,997		—		—		—		29,997
Issuance of common stock upon vesting of restricted stock units ("RSUs")	2,702,838	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	373,580	—		10,920		—		—		—		10,920
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		106,639		—		—		—		106,639
Shares withheld related to net share settlement of equity awards	—	—		(2,522)		—		—		—		(2,522)
Repurchases of common stock	—	—		—		(12,602)		—		—		(12,602)
Retirement of common stock	(301,106)	—		—		12,556		—		(12,556)		—
Foreign currency adjustment	—	—		—		—		7,132		—		7,132
Net income	—	—		—		—		—		152,995		152,995
Balance as of December 31, 2017	83,724,916	—		1,038,017		(46)		(8,444)		79,170		1,108,697
Issuance of common stock upon exercises of employee stock options	779,871	—		15,581		—		—		—		15,581
Issuance of common stock upon vesting of RSUs	1,946,476	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	442,679	—		14,198		—		—		—		14,198
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		121,878		—		—		—		121,878
Shares withheld related to net share settlement of equity awards	—	—		(50,212)		—		—		—		(50,212)
Repurchases of common stock	—	—		—		(187,397)		—		—		(187,397)
Retirement of common stock	(4,897,103)	—		—		187,443		—		(187,443)		—
Foreign currency adjustments	—	—		—		—		(2,577)		—		(2,577)
Net income	—	—		—		—		—		55,350		55,350
Balance as of December 31, 2018	81,996,839	—		1,139,462		—		(11,021)		(52,923)		1,075,518
Issuance of common stock upon exercises of employee stock options	826,124	—		17,488		—		—		—		17,488
Issuance of common stock upon vesting of RSUs	2,018,794	—		—		—		—		—		—
Issuance of common stock for employee stock purchase plan	534,120	—		14,775		—		—		—		14,775
Stock-based compensation (inclusive of capitalized stock-based compensation)	—	—		131,223		—		—		—		131,223
Shares withheld related to net share settlement of equity awards	—	—		(43,145)		—		—		—		(43,145)
Repurchases of common stock	—	—		—		(481,011)		—		—		(481,011)
Retirement of common stock	(14,190,409)	—		—		481,011		—		(481,011)		—
Foreign currency adjustments	—	—		—		—		(738)		—		(738)
Net income	—	—		—		—		—		40,881		40,881
Balance as of December 31, 2019	71,185,468	$	—	$	1,259,803	$	—	$	(11,759)	$	(493,053)	$	754,991


~~(1)~~	1,100 shares were excluded from the share total as of December 31, 2017 that had been repurchased but not yet retired, and were held as treasury stock as of that date. Those shares were retired during the year ended December 31, 2018.



	As Previously Reported		Impact of ASC 606 Adoption		As Currently Reported
Consolidated Statement of Operations—Year Ended December 31, 2016
Net revenue	713,069		2,994		$	716,063
Costs and Expenses:
Sales and marketing	382,854		(2,959	)	379,895
General and administrative	97,481		2,994		100,475
Net income (loss) attributable to common stockholders	(4,670	)	2,959		(1,711		)
Basic net income per share	(0.06	)	0.04		(0.02		)
Diluted net income per share	(0.06	)	0.04		(0.02		)

Consolidated Statement of Operations—Year Ended December 31, 2017
Net revenue	846,813		4,034		$	850,847
Costs and Expenses:
Sales and marketing	438,643		(1,219	)	437,424
General and administrative	105,673		4,034		109,707
Gain on disposal of a business unit	(164,779	)	1,082		(163,697		)



Net income attributable to common stockholders	152,858		137		152,995
Diluted net income per share	1.75		0.01		1.76

Consolidated Balance Sheet—As of December 31, 2017
Allowance for doubtful accounts	7,352		1,250		8,602
Other non-current assets	31,339		9,089		40,428
Retained earnings	70,081		9,089		79,170

Consolidated Statement of Cash Flows—Year Ended December 31, 2016
Provision for doubtful accounts	15,913		2,994		18,907
Change in accounts receivable	(31,624	)	(2,994	)	(34,618	)
Changes in prepaid expenses and other assets	5,687		(2,959	)	2,728

Consolidated Statement of Cash Flows—Year Ended December 31, 2017
Provision for doubtful accounts	16,883		4,034		20,917
Change in accounts receivable	(32,112	)	(4,034	)	(36,146	)
Gain on disposal of a business unit	(164,779	)	1,082		(163,697	)
Changes in prepaid expenses and other assets	(1,362	)	(1,219	)	(2,581	)

Consolidated Statement of Stockholders' Equity—Year Ended December 31, 2015
Accumulated Deficit	(66,883	)	5,993		(60,890	)

Consolidated Statement of Stockholders' Equity—Year Ended December 31, 2016
Accumulated Deficit	(70,221	)	8,952		(61,269	)


	December 31, 2018								December 31, 2017									December 31, 2019														December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash Equivalents:																	Cash Equivalents:
Money market funds	$	221,173	$	—	$	—	$	221,173	$	217,838	$	—	$	—	$	217,838	Money market funds	$	126,700	$	—	$	—	$	126,700	$	221,173	$	—	$	—	$	221,173
Commercial paper	—		30,536		—		30,536		—		46,927		—		46,927		Commercial paper	—		—		—		—		—		30,536		—		30,536
Marketable Securities:																	Marketable Securities:
Commercial paper	—		175,070		—		175,070		—		138,412		—		138,412		Commercial paper	—		130,472		—		130,472		—		175,070		—		175,070
Corporate bonds	—		131,496		—		131,496		—		69,926		—		69,926		Corporate bonds	—		85,611		—		85,611		—		131,496		—		131,496
Agency bonds																	Agency bonds	—		79,750		—		79,750		—		50,846		—		50,846
U.S. government bonds	—		65,502		—		65,502		—		—		—		—		U.S. government bonds	—		—		—		—		—		65,502		—		65,502
Agency bonds	—		50,846		—		50,846		—		78,913		—		78,913
Agency discount notes	—		—		—		—				10,989				10,989

Total cash equivalents and marketable securities	$	221,173	$	453,450	$	—	$	674,623	$	217,838	$	345,167	$	—	$	563,005	Total cash equivalents and marketable securities	$	126,700	$	295,833	$	—	$	422,533	$	221,173	$	453,450	$	—	$	674,623



	As of December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Short-term marketable securities:
Commercial paper	$	175,070	$	—	$	—		$	175,070
Corporate bonds	131,626		8		(138		)	131,496
U.S. government bonds	65,513		—		(11		)	65,502
Agency bonds	50,887		—		(41		)	50,846
Total marketable securities	$	423,096	$	8	$	(190	)	$	422,914

	As of December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Short-term marketable securities:
Commercial paper	$	138,412	$	1	$	(1	)	$	138,412
Agency bonds	78,958		—		(45		)	78,913
Corporate bonds	45,006		—		(41		)	44,965
Agency discount bonds	10,990		—		(1		)	10,989
Total short-term marketable securities	$	273,366	$	1	$	(88	)	$	273,279
Long-term marketable securities:
Corporate bonds	$	25,032	$	—	$	(71	)	$	24,961
Total long-term marketable securities	$	25,032	$	—	$	(71	)	$	24,961
Total marketable securities	$	298,398	$	1	$	(159	)	$	298,240


																December 31, 2019
																		Less Than 12 Months									12 Months or Greater					Total
																		Fair Value			Unrealized Loss			Fair Value				Unrealized Loss		Fair Value		Unrealized Loss
Commercial paper															Commercial paper	$	63,639		$	(9)		$	—		$	—		$	63,639	$	(9)
Corporate bonds															Corporate bonds	20,979			(10)			—			—			20,979		(10)

Total															Total	$	84,618		$	(19)		$	—		$	—		$	84,618	$	(19)

																December 31, 2018
	As of December 31, 2018																	Less Than 12 Months									12 Months or Greater					Total
	Less Than 12 Months					12 Months or Greater				Total								Fair Value			Unrealized Loss			Fair Value				Unrealized Loss		Fair Value		Unrealized Loss
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Corporate bonds	$	121,566	$	(138	)	$	—	$	—	$	121,566	$	(138	)	Corporate bonds	$	121,566		$	(138)		$	—		$	—		$	121,566	$	(138)
U.S. government bonds	65,502		(11		)	—		—		65,502		(11		)	U.S. government bonds	65,502			(11)			—			—			65,502		(11)
Agency bonds	50,846		(41		)	—		—		50,846		(41		)	Agency bonds	50,846			(41)			—			—			50,846		(41)
Total	$	237,914	$	(190	)	$	—	$	—	$	237,914	$	(190	)	Total	$	237,914		$	(190)		$	—		$	—		$	237,914	$	(190)

	As of December 31, 2017
	Less Than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Agency bonds	$	78,913	$	(45	)	$	—	$	—	$	78,913	$	(45	)
Corporate bonds	62,927		(112		)	—		—		62,927		(112		)
Agency discount notes	10,989		(1		)	—		—		10,989		(1		)
Commercial paper	3,975		(1		)	—		—		3,975		(1		)
Total	$	156,804	$	(159	)	$	—	$	—	$	156,804	$	(159	)


	December 31, 2019		December 31, 2018
Prepaid expenses	$	10,188	$	9,436
Other current assets	4,008		7,668
Total prepaid expenses and other current assets	$	14,196	$	17,104


	2019		2018
Balance, beginning of period	$	105,620	$	107,954



Effect of currency translation	(1,031)		(2,334)
Balance, end of period	$	104,589	$	105,620


	As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Life
Business relationships	$	9,918	$	(2,841)	$	7,077	8.6 years
Developed technology	7,832		(4,959)		2,873		2.2 years
Content	3,814		(3,814)		—		0.0 years
Domain and data licenses	2,869		(2,748)		121		1.7 years
Trademarks	877		(872)		5		0.2 years
User relationships	146		(140)		6		0.2 years
Total	$	25,456	$	(15,374)	$	10,082


Year Ending December 31,	Amount
2020	$	2,402
2021	2,262
2022	1,045
2023	714
2024	708
Thereafter	2,951
Total	$	10,082



	February 28, 2017
Fair value of purchase consideration:
Cash:
Distributed to Nowait stockholders	$	31,892
Held in escrow account	7,945
Total purchase consideration	39,837
Fair value of net assets acquired:
Cash and cash equivalents	$	1,004
Intangible assets	12,670
Goodwill	25,959
Other assets	1,065
Total assets acquired	40,698
Liabilities assumed	(861		)
Total liabilities assumed	(861		)
Net assets acquired	$	39,837



Intangible Asset Type	Amount Assigned		Useful Life
Enterprise restaurant relationships	$	8,500	12.0 years
Acquired technology	2,900		5.0 years
Trademarks	610		3.0 years
Local restaurant relationships	600		5.0 years
User relationships	60		3.0 years
Weighted average			9.6 years


Intangible Asset Type:	Amount Assigned		Useful Life
Enterprise restaurant relationships	$	8,500	12.0 years
Acquired technology	$	2,900	5.0 years
Trademarks	$	610	3.0 years
Local restaurant relationships	$	600	5.0 years
User relationships	$	60	3.0 years
Weighted average			9.6 years



	April 3, 2017
Fair value of purchase consideration
Cash:
Distributed to Turnstyle stockholders	$	16,648
Held in escrow account	3,093
Total purchase consideration	$	19,741
Fair value of net assets acquired:
Cash and cash equivalents	$	30
Intangible assets	4,252
Goodwill	16,048
Other assets	250
Total assets acquired	20,580
Deferred tax liability	(450		)
Liabilities assumed	(389		)
Total liabilities assumed	(839		)
Net assets acquired	$	19,741



	Year Ended December 31,
	2017			2016
Loss before income taxes	$	(11,941	)	$	(4,873	)


9.	~~OTHER NON-CURRENT ASSETS~~Year Ended December 31, 2019
Operating lease cost	$	54,451
Short-term lease cost (12 months or less)	1,287
Sublease income	(4,759)
Total lease cost, net	$	50,979


	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	56,672


Year Ending December 31,	Operating Leases
2020	$	59,522
2021	52,060
2022	44,712
2023	41,652
2024	39,420
Thereafter	37,112
Total minimum lease payments	274,478
Less imputed interest	(42,215)
Present value of lease liabilities	$	232,263


	December 31, 2019
Weighted-average remaining lease term (years) — operating leases	5.5
Weighted-average discount rate — operating leases	6.1	%


	2019		2018
Deferred tax assets	$	20,054	$	17,240
Deferred contract costs	15,138		12,345
Escrow deposit	—		28,750
Other non-current assets	3,177		1,109
Total other non-current assets	$	38,369	$	59,444



	December 31, 2018		December 31, 2017
Accrued employee compensation and related	$	21,580	$	17,725
Accrued sales and marketing expenses	4,536		3,458
Accrued tax liabilities	5,491		32,617
Accrued cost of revenue	5,463		3,022
Other accrued expenses	17,452		16,843
Total accrued liabilities	$	54,522	$	73,665


	December 31, 2019		December 31, 2018
Deferred rent	$	—	$	31,253
Other long-term liabilities	6,798		3,887
Total long-term liabilities	$	6,798	$	35,140



			Number of Shares
Stock options outstanding			~~6,818,682~~6,210,685
RSUs outstanding			~~6,563,863~~7,625,584
Available for future ~~stock option and restricted stock units and awards~~equity award grants			~~6,046,518~~7,233,289
Available for future ESPP offerings			~~2,076,250~~1,542,130
Total reserved for future issuance			~~21,505,313~~22,611,688