YELP INC

Net Revenue

Net revenue increased slightly in the three months ended March 31, 2026 compared to the prior-year period, primarily driven by growth in other revenue and an increase in advertising revenue from Services businesses, partially offset by a decrease in advertising revenue from RR&O businesses.

Advertising. Advertising revenue for the three months ended March 31, 2026 decreased 3% year over year, as a result of a decrease in revenue from RR&O businesses, partially offset by an increase in revenue from Services businesses. The decrease in RR&O revenue was driven by a decrease in ad clicks, partially offset by an increase in average CPC. Services revenue growth in the three months ended March 31, 2026 was driven by an increase in ad clicks, partially offset by a decrease in average CPC.

Other. We generate other revenue through non-advertising contracts, such as our subscription services, which include our Yelp Guest Manager, Yelp Receptionist, Yelp Host and Hatch offerings, as well as our Yelp Places API, Yelp AI API and Yelp Insights API programs, which provide Yelp content and data for a fee. In addition, other revenue includes revenue from various transactions with consumers. We generate revenue from our partnership integrations for food ordering through a combination of transaction-based, revenue-sharing agreements, under which we act as an agent and recognize fees on a net basis upon completion of each transaction, and fixed annual fee arrangements that may be adjusted based on engagement metrics such as click to order volume.

Other revenue for the three months ended March 31, 2026 increased compared to the prior-year period, driven by the addition of revenue from Hatch, an increase in revenue from our Yelp Places API program, and food ordering partnerships.

Trends and Uncertainties of Net Revenue. We expect our strategic initiatives to drive strong growth in other revenue, resulting in a sequential increase in net revenue for the three months ending June 30, 2026. However, we anticipate net revenue will decrease compared to the prior-year period, reflecting the continued economic challenges facing consumers and local businesses.

Costs and Expenses

Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of website infrastructure expense, which includes website hosting costs and employee-related costs (including stock-based compensation expense) for the infrastructure teams responsible for operating our website and mobile app and the RepairPal and Hatch websites, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs, credit card processing fees and revenue share payments, which primarily consist of payments to RepairPal referral partners.

Cost of revenue for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:

•a $2.3 million increase in website infrastructure expenses, primarily driven by ongoing investments in maintaining and enhancing our infrastructure, including the integration of AI products; and

•an additional $1.7 million of infrastructure expense due to our acquisition of Hatch.

These increases were partially offset by a $1.4 million decrease in advertising fulfillment costs, largely attributable to lower Yelp Audiences spend.

We expect cost of revenue to increase on an absolute dollar basis in 2026 compared to 2025, primarily due to our planned investments in AI capabilities.

Sales and Marketing. Our sales and marketing expenses primarily consist of employee-related costs (including sales commission and stock-based compensation expenses) for our sales and marketing employees. Sales and marketing expenses also include business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.

Sales and marketing expenses for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:

•a $5.3 million increase in marketing and advertising costs, primarily driven by higher consumer and business owner marketing; and

•a $1.5 million increase in sales and marketing employee-related costs, resulting from higher average headcount in these roles, including headcount added from the acquisition of Hatch.

We expect sales and marketing expenses to increase on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025, primarily due to marketing investments and additional headcount from the acquisition of Hatch.

Product Development. Our product development expenses primarily consist of employee-related costs (including bonuses and stock-based compensation expense, net of capitalized employee-related costs associated with capitalized website and internal-use software development) for our engineers, product management and corporate infrastructure employees. In addition, product development expenses include allocated workplace and other supporting overhead costs.

Product development expenses for the three months ended March 31, 2026 decreased compared to the prior-year period primarily due to an $8.9 million decrease in employee-related costs resulting from more employee costs being capitalized, a higher proportion of employee work directed toward infrastructure enhancements (resulting in more costs included in cost of revenue), and lower cost of labor. These decreases were partially offset by an additional $1.5 million in headcount costs related to the acquisition of Hatch.

We expect product development expenses to decrease both on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025, inclusive of additional headcount from the acquisition of Hatch, as we realize cost efficiencies within our organization.

General and Administrative. Our general and administrative expenses primarily consist of employee-related costs (including bonuses and stock-based compensation expense) for our executive, finance, user operations, legal, people operations and other administrative employees. Our general and administrative expenses also include our provision for credit losses, certain consulting and professional services costs, including litigation settlements, as well as allocated workplace and other supporting overhead costs.

General and administrative expenses for the three months ended March 31, 2026 decreased compared to the prior-year period primarily due to:

•a $4.2 million decrease in indemnifiable expenses related to the RepairPal acquisition;

•a $1.1 million decrease in our provision for credit losses, primarily due to lower customer delinquencies; and

•a $1.1 million decrease in general and administrative employee-related costs, primarily driven by lower stock-based compensation expense.

These decreases were partially offset by a $3.9 million increase in acquisition and integration costs related to the acquisition of Hatch.

We expect general and administrative expenses to increase on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025 as we continue to support our business and integrate Hatch.

Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation and amortization on capitalized website and internal-use software development costs, computer equipment, leasehold improvements, and intangible assets.

Depreciation and amortization expense for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:

•a $2.8 million increase resulting from the amortization of intangible assets acquired in the Hatch acquisition; and

•a $1.8 million increase due to higher capitalized website and internal-use software development costs.

Other Income, Net

Other income, net consists primarily of the interest income earned on our cash, cash equivalents and marketable securities, research and development tax credits, the portion of our sublease income in excess of our lease cost, accretion of discounts and amortization of premiums on investments, and credit facility-related interest and fees.

Other income, net for the three months ended March 31, 2026 decreased compared to the prior-year period, primarily due to:

•a $1.8 million decrease in interest income as a result of lower average cash, cash equivalents, and marketable securities balances and lower interest rates in the current quarter; and

•a $1.0 million increase in interest expense related to the credit facility borrowings incurred during the current period.

Provision for Income Taxes

Provision for income taxes consists of: federal and state income taxes in the United States and income taxes in certain foreign jurisdictions; and 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.

Provision for income taxes for the three months ended March 31, 2026 increased from the prior-year period primarily due to an increase in the discrete tax expense primarily related to stock-based compensation.

As of December 31, 2025, we had approximately $115.5 million in net deferred tax assets (“DTAs”). As of March 31, 2026, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs. However, it is possible that some or all of these DTAs will not be realized. Therefore, unless we are able to generate sufficient taxable income from our operations, a substantial valuation allowance may be required to reduce our DTAs, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our condensed consolidated financial statements. The exact timing and amount of the valuation allowance recognition are subject to change on the basis of the net income that we are able to actually achieve. We will continue to evaluate the possible recognition of a valuation allowance on a quarterly basis.

In July 2025, the congressional bill known as the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which, among other things, restored certain favorable corporate tax provisions, including permitting full expensing of domestic research and development expenses. As of March 31, 2026, the impacts of the OBBBA are reflected in the 2026 estimated annual effective tax rate calculated in accordance with accounting principles generally accepted in the United States (“GAAP”).