Yelp at Jefferies Conference: Strategic Shift Towards Services and AI

On Thursday, 29 May 2025, Yelp Inc. (NYSE:YELP) presented at the Jefferies Public Technology Conference, highlighting its strategic evolution towards a product-driven growth model and the expanding role of its services business. While the company reported growth in its services segment, it also acknowledged challenges in its restaurant, retail, and other (RRO) categories. Yelp is investing heavily in AI and facing macroeconomic uncertainties.

Key Takeaways

• Yelp’s services segment grew by 11% in 2024 and 14% in Q1 2025, driven by home services and the RepairPal acquisition.
• The RRO category faced challenges due to rising input costs and consumer trade-downs.
• Yelp is investing in AI, particularly Yelp Assistant, to enhance user experience.
• Macroeconomic factors impact Yelp’s different segments variably, with RRO being more cyclical.
• Full-year outlook anticipates an acceleration in the second half of 2025 despite margin pressures.

Financial Results

Yelp’s financial performance revealed notable growth in its services revenue:

• Services revenue increased by 11% in each quarter of 2024.
• In Q1 2025, services revenue grew by 14%, with 3.5% attributed to the RepairPal acquisition.
• RRO revenue decreased by 3% in Q1 2025.
• EBITDA dollars are expected to remain stable for the full year, despite margin pressures from RepairPal’s lower gross margins and increased AI data costs.

Operational Updates

Yelp is making significant strides in its operational strategies:

• The services business is expanding from home services to a broader focus, including multi-location services.
• Investment in APIs and lead management capabilities aims to cater to enterprise customers.
• The RepairPal acquisition is strategically expanding Yelp’s presence in the auto category, the second largest for the company.
• Yelp Assistant and voice AI for reservations are being developed to enhance user interaction.

Future Outlook

Yelp’s guidance and strategic priorities for 2025 include:

• Q2 2025 revenue guidance suggests a slowdown due to ad budget uncertainties.
• Full-year outlook anticipates growth acceleration in the second half.
• Continued investment in AI to improve user experience and matching capabilities.
• Expansion of the multi-location services business and maintaining flat headcount for productivity.

Q&A Highlights

During the Q&A session, key points included:

• The impact of food delivery platforms on Yelp’s restaurant business is marginal.
• Yelp’s core value remains its human-generated, high-quality reviews.
• Macroeconomic shifts affect RRO more than services, with services being less cyclical.
• A shift from a sales headcount-driven growth model to a product-driven approach is underway.
• Over 50% of Yelp visitors come from households with incomes over one hundred thousand dollars.

In conclusion, for a detailed understanding of Yelp’s strategic direction and financial performance, readers are encouraged to refer to the full transcript below.

Full transcript - Jefferies Public Technology Conference:

John Calentoni, Jefferies Internet Analyst, Jefferies: Hi, everyone.

I’m John Calentoni, Jefferies Internet analyst. I’m joined by David Schwarzbach, Gelp’s chief financial officer. David, thanks for joining us today.

David Schwarzbach, Chief Financial Officer, Yelp: John, thanks for having us at the conference. We’ll be making some forward looking statements during the conversation today that are subject to risks and uncertainties. Please refer to our SEC filings for more information on the risk factors that may affect our results.

John Calentoni, Jefferies Internet Analyst, Jefferies: Alright. Great. Well, I think that is this on? Okay. Great.

I think everyone’s familiar with Yelp, but the story has evolved over time. And, you know, I think in the last five plus years, you’ve been making a lot of changes. So maybe just catch people up on how the story’s evolved for those that aren’t as close to it.

David Schwarzbach, Chief Financial Officer, Yelp: So Yelp has changed quite a bit over the years, and maybe one of the most fundamental changes has been this shift from what had been a sales headcount driven growth model to very much being a product driven growth model. And that’s something that we’ve really invested in and are accelerating. Now, at the same time that we’ve invested in accelerating product delivery and really focusing our on the product front. There’s obviously been tremendous changes in the underlying technology or technologies that are available to us, we’ll spend more time on AI. But we are spending a significant amount of effort around capturing this new emerging opportunity that comes with large language models.

So that’s that’s one big change. The other big change for Yelp over the past years has been, certainly we are well known for our restaurant and and retail reviews, But now, about two thirds of our revenue comes from services, and that’s also a huge transition for us over the past five or seven years. And we’ve really doubled down and focused on being able to deliver value to consumers and advertisers alike, but particularly around services. So those are the the the two big ones, and then financially, continue to grow the company while driving margins higher.

John Calentoni, Jefferies Internet Analyst, Jefferies: Let’s start with the services business. It’s been, obviously, it’s had very consistent momentum. Maybe just talk about what has been driving that momentum. What makes you, confident that you can keep driving sort of resilient growth in that business over time?

David Schwarzbach, Chief Financial Officer, Yelp: So services performed quite well for us. And throughout 2024, we grew at about 11% each quarter. And for the year, in the first quarter of this year, we grew 14%. Now about three and a half percent of that came from an acquisition that we did in the fall, a company called Repair Pal, which is focused on the auto segment. What has really driven services over the past several years was home services in particular.

And we think that we’ve been able to really drive performance there because we’ve continued to deliver incremental value to service pros. And by driving value to them, that comes from delivering great leads from consumers. And consumers, we wanna match them with the right businesses. And we did a lot of work around an experience on Yelp that we call Request Quote. It’s where you answer a few questions in order for us to really understand the nature of your project and be able to match you.

So home services really drove that performance, but we realized as we made all these improvements in home services that they were more widely applicable. Request a quote works in more categories than home services. So we continue to build that out, and so this year what we’ve said is that we’re expanding the focus to not just be on home services, in particular as we did last year, but broadly services. And we’re investing now in these other categories like auto. For RepairPal, we really like that acquisition because they have a network of repair shops that have high quality, folks doing work, and they have a great quoting engine for what it will cost you to actually get a repair done.

And I think we’ve all had that experience. My car needs a repair. I don’t know what it’s gonna cost. And if you have a way to estimate it, it gives a little confident a lot of confidence in what to expect and who’s gonna do that work. So we thought that was something valuable that we could bring in a request to quote on Yelp, and conversely, we thought we could really support their business, on things that we think that we do well, whether it’s SEM or SEO.

So we see a lot of strategic value in doing that and and and value across both the Yelp, experience as well as the RepairPal experience. So when you combine all those things in this product led experience, and again, we’ll talk more about it, but Yelp Assistant, which is our chatbot, we just see a large opportunity to fundamentally, at the end of the day, you have to do is deliver value to advertisers and consumers alike.

John Calentoni, Jefferies Internet Analyst, Jefferies: You’re focusing more on multi location in the services business. Maybe talk a little bit about the motivation behind doing that, and maybe just describe what a multi location service is, and why you are excited about that opportunity.

David Schwarzbach, Chief Financial Officer, Yelp: So, on the restaurant, retail, and other side, enterprise customers have have been a large proportion of that. On the services side, it’s actually been far fewer. And we use this term multi location. What we really mean is mid market and enterprise, and also, channel partners. So we’re going after this opportunity to increase the amount of advertising dollars that we can, support from services enterprise customers.

And what’s been hard about that, the reason why it’s been a smaller proportion, is that there is a lot of capability that you need to provide to those enterprise customers for them to be able to realize, to first work a lead and also realize, the most value from that lead. And so we had to build out a variety of APIs to integrate with our CRMs. Everybody, I think, is broadly moving to conversion API, so that was an important component. There also has to be lead management for them, and you have to be able to do that across multiple locations at scale. And so we’ve done a lot of product work over the past year, and now we see the opportunity to really engage with those folks to grow enterprise services revenue, which we have not been as realized as we had been in the past.

But broadly, there’s just a lot of spend, obviously, by mid market enterprise customers, and we want to participate in that.

John Calentoni, Jefferies Internet Analyst, Jefferies: Great. And Request a Quote. It’s an initiative that you’ve had now for a few years. You’ve still you’ve had good momentum. You know, some periods not as well not as good a momentum as others, but, you know, I think recently the momentum has been strong.

So maybe just talk a little bit about what you’re doing there, how important that is to the services business, and how big of

David Schwarzbach, Chief Financial Officer, Yelp: an opportunity you see that over time. So request a quote is important for a variety of reasons. The first is, if you come to Yelp, the way that we think about services is really much more as a workflow than an ad unit. And what do we mean by workflow? I’ve got a project or I have a problem with, say, my home.

I need a plumber to come out. Plumbers do different work. The nature of my problem can vary a lot. And so you first have to discern what is it exactly what is exactly required in the job. Then you have to take that information, and you have to match with a service pro who can do that work well, who’s available in your, area, and then we have to enable a conversation between them because most people wanna have a sense that the person that they’re inviting into their home is someone who’s trustworthy and will do good work.

It also is time consuming, and then they need to give a quote, they need to do the job, they need to get paid, and so that whole workflow we’ve been focused on enabling better experience. Request a quote is foundational to that because we ask some more questions, we learn something more, that informs our matching model, and then we also support the conversation. One of the reasons that we’re so excited about large language models is that they enable us to do that much more conversationally, as opposed to having what is really a fixed question tree and trying to ascertain what the exact job is. Because the flexibility of these models, you can ask a better question, elicit more information in fewer questions that is useful for the matching model. So we’ve invested heavily in Yelp Assistant.

It’s something that we’ve rolled out across services, and it’s something that we intend to roll out across the entire Yelp experience over the course of this year. So we’re gonna continue to invest there in the message center. And then two new things that we did announce were, enabling some, call, enabling people to make reservations using voice AI for both restaurants and services business on Yelp. So you can see we’re doing a lot around AI, but it’s all in service to delivering value to those advertisers.

John Calentoni, Jefferies Internet Analyst, Jefferies: Sticking with services, let’s go

David Schwarzbach, Chief Financial Officer, Yelp: to the RepairPal acquisition. Talk about the strategic rationale for the acquisition, how you plan to integrate it into the business over time to drive synergies. So auto, third largest category for us before the acquisition, now the second largest category. Auto is clearly something that is very important to folks. There’s a lot of different types of things that can happen in auto categories.

You could have detailing, you could have repairs, you could have maintenance and so on, collision. And so we just see this broad opportunity to bring value to folks when they have an issue with their car. The other thing, of course, is you have a car, it needs to be repaired, you have to do it. And so it’s much less discretionary than, say, some of the other categories might be or, say, a large home remodeling. This was also an opportunity for us to, as I mentioned, expand out beyond home services and drive growth in services more broadly.

So that was the strategic rationale. And then in terms of integration, it will remain a standalone asset for us. They have a separate tech stack, so we’re not gonna, I think, integrate the tech stacks. But again, there’s a lot of expertise that we can bring to bear. It’s been very much over the past six months landing the team, getting them integrated, and working together.

That’s the first step in any acquisition, and then we’re going to really look to deliver value on both sides as we continue to work with them.

John Calentoni, Jefferies Internet Analyst, Jefferies: Okay, great. So very strong performance in services. Let’s go to the other side of the business, restaurant, retail, and other, which has started to slow recently. Talk about what some of the drivers of that moderation has been, and the playbook that you’re implementing to get momentum back on track?

David Schwarzbach, Chief Financial Officer, Yelp: Yeah. Restaurant, retail, and other has definitely been, broadly a category for us that has had its challenges, and it really did start in in ’24, and it certainly played out again in the first quarter of twenty five. For those businesses, and I think you’ve heard this on other earnings calls, input costs have risen. And that input costs cover both, say, ingredients for a restaurant, but also on the labor front. And it became much harder to pass on those cost increases to consumers.

That was possible in ’22 and ’23, say also in ’21 with inflation, but, consumers had really seen a lot of of, price increases, and so it wasn’t possible to pass those on. The result of that is if you have input costs rising and you’re not able to pass those along, margins are squeezed, and that certainly has resulted in some pullback in advertising across those businesses. Also, know that consumers have traded down in a variety of categories, due to inflation. So that that had that did remain challenged, and and it did, come in at minus 3% in the first quarter. Now, what are we doing?

We wanna be well positioned to participate as that recovers. So we’ve continued to invest in the consumer experience. Our home feed is completely revamped. It’s much more visual. It’s still very much about high engagement with particularly food, people like food.

And we’re also continuing to look at ways to improve the underlying ad matching technology, not just for services, broadly including restaurants, that we could deliver incremental value to those advertisers. So we continue to believe that we’re well positioned when the recovery occurs. And we have mentioned that there’s also another dynamic at play, particularly in restaurants, which is the food delivery players now do advertising, and that’s certainly true at the margin, but the much bigger driver in restaurant retail and other has been this rise in input cost and margin compression. You mentioned the delivery platforms. Often receive questions about how those delivery platforms could be impacting your

John Calentoni, Jefferies Internet Analyst, Jefferies: restaurant business specifically. What’s your perspective on how the delivery platforms have impacted your momentum? And do you have any initiatives to help offset competitive competition in general?

David Schwarzbach, Chief Financial Officer, Yelp: So restaurants today for us is a relatively small category, and marginal advertising dollars that the delivery players are absorbing is something that we see, but it really is at the margin on the margin. So if restaurants are on the margin, the competition for ad dollars in restaurants is also on the margin. So it’s not a huge driver, but it’s certainly out there. I’d say broadly you have to recognize that retail ad networks have grown up. Everybody saw the Amazon model.

They’ve replicated that. And so there is more competition for ad dollars in restaurant retail and other. How are we tackling that? It really does all fundamentally come back to, we have a terrific audience. Our audience is highly engaged, it’s affluent, More than 50% of visitors to Yelp come from households with income over a hundred thousand dollars, highly educated, often homeowners.

And so advertisers wanna reach that audience. It’s still true on maybe a lower ASP like a restaurant, but nevertheless, and then also true on the services side. So at the end of the day, what we are focused on is our core value proposition, which is human generated, high quality ratings and reviews that people can depend on to make decisions. And that audience, we believe, is attractive to advertisers, both on the services front and the restaurant retail and other side. So we continue to be heavily invested in in improving that consumer experience, generating those reviews, continuing to be maniacally focused on, content moderation to ensure that those reviews are reliable, and then showing advertisers value by matching the right visitor with their business, so that when they pay for a click, they’re getting a good lead.

John Calentoni, Jefferies Internet Analyst, Jefferies: Let’s go to traffic and engagement. Last year, you experimented with paid traffic acquisition, ultimately decided to pull back on that. Maybe you could give some perspective. Why did you decide to experiment there? Why did you decide to pull back ultimately?

And how important is traffic and engagement growth to your ability to execute on your goals and strategies over time?

David Schwarzbach, Chief Financial Officer, Yelp: So last year, we we did start out the year, we did spend heavily on paid project acquisition through SEM, paid paid search ads, and we successfully drove up projects. We generated a lot of projects, and those did have a positive impact on CPCs. And and just for reference, the way that we approach things is we have an auction for a visitor in a category at that time of day in that area of the country, and we are really finding the market clearing price for that visitor. So we’re not trying to set CPCs per se or the number of clicks. We’re optimizing, and we do optimize budget on behalf of advertisers.

So, as we went through that, we added more projects, CPCs came down, but we did not see broadly ad budgets go up, and we were puzzled by that, and we learned that for a lot of advertisers, the incremental visitor wasn’t enough to prompt them to increase budget. What that meant was we really had to direct those visitors, those projects, to the right advertisers, the ones who were most sensitive to seeing increased projects. And operationally, that’s not simple to do when you’re running an at scale auction system. So we did pull back, but we had this very important learning, and that has been an attribute of how we’ve thought about going after this mid market and national services opportunity, because we know that those folks will pay for incremental leads. And so the way that we’ve thought about it is, how can we engineer a system in which we clearly know that when we buy a project, that there is someone who will pay for it.

And so that, we’ve built a lot of capabilities on the back end in order to do that, and that’s supporting the current initiative to increase the amount of advertising budget that we get from these mid market and national or enterprise services businesses. And I’d just add, we’re just very, very ROI driven, and when we saw that the ROI wasn’t there, we pulled the spend back and we flowed it back through EBITDA. So we have no issue doing that. We’re going to continue to take swings, we’re going to invest, we’re going to be experimentation driven, we’re going to AB test things, and if it doesn’t work, hey, no problem, we’ll either redirect the investment or return it through margin.

John Calentoni, Jefferies Internet Analyst, Jefferies: Great. Let’s let’s turn to AI. How are you thinking about the future of the Yelp platform and its use of AI? How do you view the and also, how do you view the competitive landscape in search advertising evolving? And how do you expect or plan to remain competitive as that evolution occurs?

David Schwarzbach, Chief Financial Officer, Yelp: So for us, we absolutely see AI as a huge opportunity. And it starts with the fact that we have these human generated, high quality reviews. So for AI to be effective, successful, and to deliver results that are accurate and relevant, you really do need to have the right data set, and we think that we’re in a very, very good position from that perspective. So that’s the first piece. The second piece, of course, is that you have to have the infrastructure, technology, engineering know how in order to leverage these technologies.

That’s really shown up in Yelp Assistant. We think that it is industry leading. I personally think that it’s a terrific experience. We get more relevant information and fewer questions from consumers that enables us to better match them with the right service pros. So we’ve been excited about that.

Another thing that large language models are terrific at is extracting sentiment and information that really reflects the gist of what folks have written on Yelp. So we use review snippets. We’ve made those more contextual and more dynamic so that we’re reviewing snippets that are more responsive to the query that the person has written, so that’s an exciting area for us. We announced that we’re gonna be building these Yelp answering service for both restaurant and service pros. Both restaurants and service pros miss a lot of calls, so there’s real value if you can pick up every call and do it in a way that’s engaging and results in a booking or an appointment.

We’re very excited about our capabilities there. Again, they’re informed by this depth of understanding that we have in the categories, plus our first party data set, plus the back end systems that we’ve built over the years that can support this with low latency and high accuracy. We benefit from the fact that the problems that we’re tackling are very constrained. They’re very specific. I’m calling a plumber.

We know a lot about plumbing and how to answer questions and ask questions about plumbing, And so that makes it possible for us to really target the experience in a way that I think is high quality and differentiated. So we’re most certainly excited about that. Broadly, as an organization or as a company, an enterprise, we’re looking at ways to apply AI across everything we do, whether it’s coding tools like Copilot or ChatGPT. Every single employee at Yelp has access to, large language models to help them in the work that they do, and we continue to look for additional avenues to be more productive with the folks that we have.

John Calentoni, Jefferies Internet Analyst, Jefferies: Let’s turn to macro. Give us your perspective on how sensitive you’d consider the Yelp business to macroeconomic shifts, changes, pullbacks, etcetera. And maybe just give us your perspective on how that might break down or differ between the services business versus the r r and o business,

David Schwarzbach, Chief Financial Officer, Yelp: etcetera? So, we’ve certainly seen that restaurant and Restaurant, retail and other is more cyclical. I think that’s There’s more discretionary spend around that, and as I already talked about, for those, businesses in restaurant, retail and other, if people are trading down or if they have less business or input costs are higher, they are gonna spend less on advertising. It’s pretty different though on the services front. Services, there’s a significant portion of it that is just non discretionary.

If I’m locked out of my home, I need a locksmith. If I have a leak in my home, I’ve gotta have that repaired. So there’s a lot that is non discretionary. There is also discretionary. What we’ve seen historically in services though, is as things have slowed, those service pros have increased their advertising to stay busy.

So that was a little bit counterintuitive for me when I first saw this a few years ago. It certainly could play out differently in the future, but that makes it a little less cyclical, maybe a little more acyclical than the restaurant, retail, and other side of the business. But at the end of the day, it really still comes back to this fundamental premise, is we have to be able to deliver value to consumers who, especially in an economic downturn, are gonna be more careful with how they spend their money, so we think we deliver value in helping them make better decisions, and then we’re delivering those high intent customers who have money to spend to advertisers, and therefore, we can generate a return on that advertising spend for those folks. So maniacally focused on delivering value to consumers and advertisers alike.

John Calentoni, Jefferies Internet Analyst, Jefferies: Let’s talk about guidance. So we’ll start with revenue. The revenue guidance for the second quarter implies a bit of a slowdown, then the full year outlook implies a bit of an acceleration in the second half. Talk about the drivers of that and what you’re seeing that’s helping inform your outlook for the second quarter and for the full year.

David Schwarzbach, Chief Financial Officer, Yelp: Absolutely. And my comments are absolutely restricted to our date of earnings earlier in in May. So what we said, what we saw about April was that given the uncertainty, we did not see the typical seasonal rise in ad budgets. And why does it rise seasonally? Well, on the restaurant, retail, and other side, people are traveling, summer’s coming, spring’s there, and then people do do more projects once spring comes.

There’s also an element of that which has to do with tax refunds. So, in general, advertisers know that consumers are spending more as you move into the summer months through the spring, and so they they increase their ad spend. We did not see that. People held their budgets flat because they were more cautious. So that certainly impacts our expected performance for the second quarter and is reflected in the guidance.

Now what we also said was that at the May, again, I’m keeping my comments to that period, we did see some early positive signals that as some of the uncertainty declined, there was increased confidence. But we’re really gonna have to see how this plays out over the course of the year. I would say there’s still uncertainty on policy and how everything’s gonna play out on the tariff front. And so we certainly always need to reflect in our guidance the risks and uncertainties that we see.

John Calentoni, Jefferies Internet Analyst, Jefferies: Alright. We’re running out of time, but let’s do one quick one on margins. So the and and profitability. So you the outlook for the full year implies EBITDA dollars are roughly stable despite mid single digit growth in revenue and the upside that you delivered in the first quarter. So what are the sources of margin pressure that’s contemplated in your outlook?

And talk about the impact of repair pal, and how that’s factored into your outlook for margins.

David Schwarzbach, Chief Financial Officer, Yelp: So there’s a few dynamics at play. One, there are particular expenses that are harder to estimate. So how much vacation time are people taking? How much health care expenses they’re gonna be? That was lower than we expected in the first quarter, and it tends to even out.

So you’ve got to expect that expense to show up as you move through the rest of the year. That’s one of the things that drove what was clearly outperformance on adjusted EBITDA in the first quarter, both expectations from a margin perspective, but that is, we expect, going going to smooth out. A second component on the gross margin front is RepairPal’s a lower gross margin business than us, and therefore we see some impact there. Third, we are spending a lot more on data in order to power these AI products, and so that is also a contributor from a margin perspective. And the fourth thing is we’ve made a concerted effort to move away from stock based comp to to lower stock based comp expense and move that towards cash comp.

And so that’s still playing out here in 2025, and that’s a headwind on on EBITDA. So when you combine all of those things, that’s what informs our guidance expectations for 2025. I just point out for the third year in a row, we’re going with, we’ve guided to flat headcount, and yet we think that we’re continuing to drive great performance, or or we’re driving continued improvement in the experience on Yelp. And so we’re just maniacally focused on being more productive in with the folks that we have.

John Calentoni, Jefferies Internet Analyst, Jefferies: Alright. We’re gonna have to stop there. But, David, thank you so much for joining us today. Appreciate it.

David Schwarzbach, Chief Financial Officer, Yelp: Thanks so much.

John Calentoni, Jefferies Internet Analyst, Jefferies: This presentation has now finished. Please check back shortly for the archive.

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