Yelp, Inc. (YELP) Q1 2014 Earnings Call Corrected Transcript: 30-Apr-2014
Wendy Lim - Head of Investor Relations, Yelp Inc.
Jeremy Stoppelman - Chief Executive Officer & Director, Yelp, Inc.
Robert J. Krolik - Chief Financial Officer, Yelp, Inc.
Geoff Donaker - Chief Operating Officer & Director, Yelp!, Inc.
Youssef H. Squali - Analyst, Cantor Fitzgerald Securities
Jed Kelly - Analyst, Oppenheimer & Co., Inc. (Broker)
Tom Cauthorn White - Analyst, Macquarie Capital (USA), Inc.
Kaizad K. Gotla - Analyst, JPMorgan Securities LLC
Lloyd Walmsley - Analyst, Deutsche Bank Securities, Inc.
Stephen Ju - Analyst, Credit Suisse Securities (USA) LLC (Broker)
Justin Post - Analyst, Merrill Lynch, Pierce, Fenner & Smith, Inc.
Mark S. Mahaney - Analyst, RBC Capital Markets LLC
Ron Victor Josey - Analyst, JMP Securities LLC
Michael B. Purcell - Analyst, Stifel, Nicolaus & Co., Inc.
Heath P. Terry - Analyst, Goldman Sachs & Co.
Brian P. Fitzgerald - Analyst, Jefferies LLC
Peter C. Stabler - Analyst, Wells Fargo Securities LLC
Gene E. Munster - Analyst, Piper Jaffray & Co (Broker)
Rob J. Sanderson - Analyst, MKM Partners LLC
MANAGEMENT DISCUSSION SECTION
Operator: Welcome to the Yelp Q1 2014 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded.
I'll now turn the call over to Wendy Lim. You may begin.
Wendy Lim, Head of Investor Relations
Good afternoon, everyone, and thank you for joining us on Yelp's first quarter earnings conference call. Joining me on the call today are CEO, Jeremy Stoppelman; and CFO, Rob Krolik; and COO, Geoff Donaker will join us for Q&A.
Before we begin, I'll read our Safe Harbor statement. We'll make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinion only as of the date of this call and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Please refer to our SEC filings as well as our financial result press release for a more detailed description of the risk factors that may affect our results.
During our call today, we will discuss adjusted EBITDA, a non-GAAP financial measure in our press release issued this afternoon and our filings with the SEC, each of which is posted on our website. You will find additional disclosures regarding this non-GAAP financial measure and a reconciliation of historical net loss to adjusted EBTIDA.
And with that, I will turn the call over to Jeremy.
Jeremy Stoppelman, Chief Executive Officer & Director
Thanks, Wendy, and welcome everyone. 2014 is off to a great start. In the first quarter, revenue grew 66% and again we saw strong growth across our key metrics. Yelp's mission is to connect consumers with great local businesses. Our goal is to be wherever consumers are looking for local business, no matter where they are in the world, or how they access our content, more than ever before, our brand is becoming synonymous with local search as evidenced by the 132 million unique visitors who came to Yelp on a monthly average basis in Q1. Many companies recognize our leadership.
This quarter we announced partnerships with Yahoo! and YP.com. In addition, we're developing local search in Apple Maps and have integrations with several car navigation systems. We would not be where we are today without our community of writers. This high quality rich content makes Yelp relevant for consumers.
In March, we held our Annual Community Manager Week at our headquarters in San Francisco and I was struck by the overwhelming enthusiasm in the room. CMs are Yelp's brand ambassadors and are growing vibrant Yelp communities globally. I'm proud of all of their hard work and excited for what lies ahead for Yelpers around the world. We also continue to rollout new features to enhance the experience for our community of contributors and readers.
We've been working to improve the mobile web experience and in the first quarter we launched the ability to add photos via mobile web. The strong engagement we're seeing across mobile is the result of the investment we've made over the past year. Approximately, 35% of new reviews came from mobile and about 60% of all searches came from mobile in the quarter.
We also revamped our business listing page by increasing the number and size of photos and improving review highlights to emphasize the information that consumers find most useful. Our international communities are also experiencing increased traction and brand awareness. In January, I spoke at the DLD conference in Munich, Germany and visited our Hamburg office. I was excited to see first-hand the communities that have taken root there. In Germany alone the number of contributors has increased over 350% since we completed the Qype integration in October 2013.
In Q1, our total international traffic grew 95% year-over-year to 23% of total traffic and reviews grew 210% compared to last year to comprise 11% of total reviews. We also recently launched in Mexico and Japan, our 25th and 26th countries. I visited Japan for our launch this month and was thrilled with the warm reception Yelp has received from both consumers and media in our first few weeks. We continue to provide new ways to close the loop with local businesses. Earlier this month, we integrated our latest Yelp Platform partner, Booker. So now consumers can book spa and saloon appointments directly on Yelp. We look forward to integrating additional platform partners throughout 2014.
We're also seeing good traction with the products we've rolled out last year. Call to Action is a popular feature with both advertisers and consumers, although we only launched CTA last summer, it's already generating approximately 100,000 leads for advertisers every week. Also the Customer Activity Feed, which we launched in Q4 of last year, provides business owners with details of each lead.
For example, yesterday at 5:30 P.M. a man in his 30s from New York called your business from the Yelp mobile app. We think consumer desire to find great local businesses is universal and this creates a large global opportunity for us. I'm excited about what's in store for the rest of the year. We'll continue to focus on what has made us successful, supporting and engaging our community of contributors, developing innovative products that enhance the consumer experience, and helping local business owners see the value that Yelp delivers to them.
And now, I'll turn the call over to Rob for the financial details.
Robert J. Krolik, Chief Financial Officer
Thanks, Jeremy. As Jeremy mentioned, we had a strong start to the year. Please note that we have posted a few slides on our Investor Relations webpage that accompany the financial portion of the webcast. Let me start with the financial results.
We were very pleased with our performance. In the first quarter, revenue grew 66% year-over-year to $76.4 million. Adjusted EBITDA was $8.5 million in the first quarter compared to $3.2 million in the first quarter of 2013.
Moving on to key operating metrics for the first quarter. Cumulative reviews grew 46% year-over-year to approximately 57 million reviews as we added about 4 million reviews in the quarter. Active local business accounts, which now include SeatMe customers grew 65% year-over-year to approximately 74,000. Our average monthly unique visitors grew 30% year-over-year to roughly 132 million. Average monthly mobile unique visitors grew 52% year-over-year to approximately 61 million. Claimed local businesses were 1.6 million, up 47% year-over-year.
Let me run down the P&L starting with the revenue mix to provide some additional color. We are seeing great growth across all revenue sources. For the first quarter, local revenue was $65.2 million, up 67% year-over-year. Brand revenue was $7.5 million, up 57% year-over-year and other revenue increased 56% year-over-year to $3.8 million. International revenue contributed about 3% of total revenue in the first quarter.
Our customer repeat rate, defined as the percentage of existing customers from which we recognize revenue in the immediately preceding 12-month period was 75%. Gross margin was 93%. Total sales and marketing was approximately 59% of revenue compared to approximately 61% last year, demonstrating leverage in the model, while we continue to invest in hiring as well as launching new country sites in Japan and Mexico. Sales head count grew 55% year-over-year. We intend to continue to invest in sales and marketing, given the large market opportunity we see in front of us.
Product development was approximately 18% of revenue compared to 16% in the first quarter of last year. Again, this reflects our strategy to invest in product innovation, such as improving business profile pages, integrating additional platform partners and supporting new languages and community.
G&A was 17% of revenue compared to 19% in the first quarter of last year. Separately we recorded a tax benefit in the quarter related to the release of a valuation allowance against our foreign net operating losses.
Turning to the balance sheet, our cash and cash equivalents position at the end of the quarter was approximately $400 million. We generated approximately $9 million in cash from operations in the quarter.