YelpYELP

Key highlights

• Licensing revenue nearly doubles: Other revenue, which includes money earned from licensing Yelp data to AI partners like ChatGPT, grew 98% to $33 million. This rapid growth suggests the company is successfully finding new ways to make money from its data as businesses use it to train and power AI models.
• Cash flow increases: Free cash flow, the cash left over after paying for operations and equipment, rose 36% to $61 million compared to the same period last year. This extra cash gave the company more room to spend $174 million on buying back its own shares during the first half of the year.
• Shrinking profit margins: Net income margin, the percentage of revenue kept as profit, fell to 8% from 12% a year ago. Profits were squeezed by higher costs, including $3.5 million spent on integrating the recently acquired company Hatch and $18 million for depreciation on equipment and software.
• Steady share count reduction: The number of outstanding shares used to calculate basic earnings per share fell to 55.3 million, a 13.8% decrease from the 64.1 million shares a year ago. Reducing the share count makes each remaining share more valuable by giving it a larger claim on the company's total profits.
• Narrowed annual outlook: Management narrowed its full year revenue forecast to a range between $1.460 billion and $1.470 billion, while profit guidance before interest and taxes is now set at $315 million to $325 million. This tighter range shows the company has a clearer view of its performance for the rest of the year despite a difficult environment for local businesses.

Our take: Better than the headline suggests. While total revenue grew just 1%, the 98% surge in licensing and data revenue shows Yelp is successfully turning its human reviews into a valuable asset for AI developers. This new high margin income stream helps offset the sluggishness in its traditional local advertising business.