YELP INC

Our condensed consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA, adjusted EBITDA margin and free cash flow, each of which is a non-GAAP financial measure.

Adjusted EBITDA and free cash flow 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, adjusted EBITDA and free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures 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 adjusted EBITDA does not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

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

•adjusted EBITDA does 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 consider the potentially dilutive impact of equity-based compensation;

•adjusted EBITDA does not take into account certain income and expense items, such as indemnifiable expenses, acquisition and integration costs, or other costs that management determines are not indicative of ongoing operating performance;

•free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and

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

Because of these limitations, you should consider adjusted EBITDA, adjusted EBITDA margin and free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities and our other GAAP results.

Adjusted EBITDA. 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 (expense), net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other operating income and expense items, such as expenses for which we expect to be indemnified, acquisition and integration costs, and other items that we deem not to be indicative of our ongoing operating performance.

Adjusted EBITDA Margin. Adjusted EBITDA margin is a non-GAAP financial measure that we calculate as adjusted EBITDA divided by net revenue.

The following is a reconciliation of net income to adjusted EBITDA, as well as the calculation of net income margin and adjusted EBITDA margin, for the periods presented (in thousands, except percentages):

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

(2)Represents expenses for which we expect to be indemnified in connection with our acquisition of RepairPal. Indemnifiable expenses during the three and nine months ended September 30, 2026 and 2025 consist of expenses recorded in connection with an indemnification obligation assumed in the RepairPal acquisition and, in the current-year periods, tax payments related to pre-acquisition tax periods, in each case net of indemnification payments received through the release of funds from the RepairPal holdbacks. See Note 6, “Acquisitions,” of the Notes to Condensed Consolidated Financial Statements for further detail.

(3)Acquisition and integration costs during the three and nine months ended September 30, 2026 represent costs related to the Hatch acquisition and include accrued acquisition- and integration-related compensation. Acquisition and integration costs during the three and nine months ended September 30, 2025 represent costs related to the RepairPal acquisition. For more information on the acquisition and integration costs, see Note 6, “Acquisitions.”

Free Cash Flow. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.

The following is a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are our cash and cash generated from operations. As of September 30, 2026, we had cash and cash equivalents of $119.8 million, including cash held internationally of $21.2 million.

We also have the ability to access backup liquidity to fund working capital and for other capital requirements, as needed, through the credit facility established pursuant to the Credit Agreement (as defined in Note 11, “Commitments and Contingencies,” of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report). The Credit Agreement provides for a $325.0 million senior secured revolving credit facility, which includes a $35.0 million letter of credit sub-limit, a $25.0 million bilateral letter of credit facility and an accordion option, which, if exercised, would allow us to increase the aggregate commitments by up to $250.0 million, plus additional amounts if we are able to satisfy a leverage test, subject to certain conditions. The commitments under the credit facility expire on April 28, 2028.

As of September 30, 2026, we had $75.0 million of outstanding borrowings and $1.5 million of letters of credit outstanding under the credit facility sub-limit, with $248.5 million remaining available under the credit facility. As of October 30, 2026, we had $50.0 million of outstanding borrowings following payments made subsequent to the quarter end. We were in compliance with all conditions and covenants thereunder as of September 30, 2026.

Material Cash Requirements

Our capital allocation strategy consists of investing in future growth, pursuing strategic acquisitions through a combination of cash and financing, and aiming to return more than 50% of free cash flow to shareholders each year through share repurchases. Our future capital requirements for these and other priorities, as well as the adequacy of available funds, will depend on many factors, including those set forth under “Risk Factors” included under Part I, Item 1A in our Annual Report. We believe that our existing cash, together with any cash generated from operations, will be sufficient to meet our material cash requirements in the next 12 months and beyond, including: 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; payment of lease costs related to our operating leases; income tax payments; and purchases of property, equipment and software and website hosting services. We will also require cash to repay amounts outstanding under our credit facility and interest thereon, which we plan to prioritize as we pause share repurchases through the remainder of 2026. However, this estimate is based on a number of assumptions that may prove to be materially different, and we could fully utilize our available cash earlier than presently anticipated.

On February 2, 2026, we completed our acquisition of Hatch for approximately $270.6 million in cash. In connection with the acquisition, we have also agreed to provide certain continuing Hatch employees with acquisition- and integration-related compensation valued in the aggregate of $30.0 million, to be paid over the next two to three years. See Note 6, “Acquisitions,” of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail.

In July 2025, the OBBBA was signed into law, which, among other things, permits full expensing of domestic research and development expenditures beginning in 2025 and allows previously capitalized domestic research and development expenditures to be deducted over one or two years. We elected to deduct our remaining unamortized domestic research and development expenditures over two years in 2025 and 2026. As a result, our income tax payments were lower in 2025 and are expected to be lower in 2026 than they would have been under prior law. These provisions primarily affect the timing of tax payments and are not expected to have a material impact on our effective tax rate. In addition, we are not able to reasonably estimate the timing of future cash flows related to $57.2 million of uncertain tax positions; however, we expect approximately $30.5 million of such uncertain tax positions to be released in the three months ending December 31, 2026. See Note 16,“Subsequent Events,” of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail.

We lease office facilities under operating lease agreements that expire from 2027 to 2031. Our cash requirements related to these lease agreements are $23.1 million, of which $8.3 million is expected to be paid within the next 12 months. The total lease obligations are partially offset by our future minimum rental receipts to be received under non-cancelable subleases of $11.6 million. See Note 8, “Leases,” of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail on our operating lease obligations.

Our cash requirements related to off-balance sheet purchase obligations consisting of non-cancelable agreements to purchase goods and services required in the ordinary course of business — primarily website hosting services — are approximately $107.4 million, of which approximately $58.3 million is expected to be paid within the next 12 months.

We may be required to draw down additional funds from our credit facility or seek additional funds through equity or debt financings to respond to business challenges associated with the uncertain macroeconomic environment or other challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies. The cost of capital associated with any additional funds sought in the future might be adversely impacted by the effects of macroeconomic conditions on our business. Additionally, 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 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 presented (in thousands):

Operating Activities. Net cash provided by operating activities during the nine months ended September 30, 2026 decreased by $54.0 million compared to the prior-year period, primarily due to a $35.9 million increase in employee-related payments for salaries, commissions, bonuses and benefits, including costs related to the Hatch acquisition, a $28.4 million increase in payments to vendors, a net $9.5 million decrease related to lower interest income received and higher interest payments, and other cash payments that were not individually significant. These outflows were partially offset by a $13.8 million increase in cash collected from customers, a $12.8 million decrease in cash paid for leases, and a $12.2 million decrease in income taxes paid.

Investing Activities. Net cash used in investing activities during the nine months ended September 30, 2026 increased compared to the prior-year period, primarily due to the acquisition of Hatch in February 2026 as well as an increase in capitalized website and internal-use software development costs. This increase was partially offset by lower purchases of marketable securities and higher net proceeds from sales and maturities of marketable securities and other investments.

Financing Activities. Net cash used in financing activities during the nine months ended September 30, 2026 decreased compared to the prior-year period, primarily due to proceeds from net borrowings under our credit facility, lower taxes paid related to the net share settlement of equity awards and increased proceeds from the issuance of common stock under employee stock-based plans.

Stock Repurchase Program

Since its initial authorization in July 2017, our board of directors has authorized us to repurchase up to an aggregate of $2.45 billion of our outstanding common stock, including the $500.0 million authorized in February 2026, of which $338.7 million remained available as of October 30, 2026.

We may repurchase shares at our discretion in the open market, in 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.

During the nine months ended September 30, 2026, we repurchased 8,052,511 shares on the open market for an aggregate purchase price of $200.1 million (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022).

We paused our stock repurchase program in July 2026 and expect to resume share repurchases in 2027. We have funded all repurchases to date and currently expect to fund any future repurchases with cash and cash equivalents available on our condensed consolidated balance sheet.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed 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. Due to macroeconomic conditions and other factors, certain estimates and assumptions have required and may continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may materially change in future periods.

We believe that the assumptions and estimates associated with revenue recognition, business combinations and income taxes have the greatest potential impact on our condensed consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report.