Yelp Inc. · NYSE:YELP
Yelp — Proxy Contest (January 2019)
112 slides from Yelp's proxy contest presentation, Jan 16, 2019
Slide 1: A Fresh Perspective
A Fresh Perspective January 16, 2019
Slide 2: Table of Contents
Table of Contents Executive Summary Yelp’s Potential: A Unique and Valuable Asset Large Total Addressable Market 55 Yelp’s Dramatic Underperformance Page # 90M Unique Monthly Unique Visitors 56 Irreplaceable Asset of Reviews 57 Unfocused Strategy and Dismal Execution Best Option to Find Loca
Slide 3: Executive Summary
Executive Summary Yelp has underperformed the Russell 2000 Technology Index1 by -117% and its own proxy peer group2 Yelp has Dramatically by -74% over the last 5 years. It has missed investor expectations in 12 out of the last 19 quarters Underperformed with No Yelp’s Board is stale, with no new
Slide 4: Yelp is the leading local business review site in North America
Yelp (NASDAQ: YELP) is the leading local business review site in North America with revenue of approximately $1 Billion and an Enterprise Value of $2.4 Billion 90M Desktop and mobile monthly unique visitors1 In $ millions 2018E 2019E Revenues 941 1,044 75M Mobile monthly unique visitors2 Growth3 19%
Slide 5: SQN Investors Overview
SQN Investors Overview: We are concentrated, long-term investors exclusively focused on public technology companies Established: $1.1 Billion in AUM from a broad base of institutional investors; launched in 2014 Focused: invest in public technology companies typically under $10 Billion in market
Slide 6: We are long-term stockholders who are not typically activists
We are long-term stockholders who are not typically activists We seek to back management teams that can create stockholder value and partner with them as needed to help unlock this value We Typically Back Since our launch, we have invested in about 50 unique technology companies and have worked in
Slide 7: Yelp has dramatically underperformed all relevant indexes and its proxy peer group
Yelp has dramatically underperformed all relevant indexes and its proxy peer group over the last 5 years Yelp versus Relevant Benchmarks: 5-Year Indexed Total Stockholder Return 220 Russell 2000 Yelp Nasdaq R2K Tech Yelp Proxy Peers Technology 200 Nasdaq 180 +82% Russell 2000 160 Technology +72% 140
Slide 8: Yelp's 1-Year, 3-Year, and 5-Year TSR shows significant underperformance
Yelp’s 1-Year, 3-Year, and 5-Year TSR shows significant underperformance to all relevant indexes and its proxy peer group Yelp versus Relevant Benchmarks: Indexed Total Stockholder Return 1-Year TSR 3-Year TSR 5-Year TSR Yelp -15% 15% -45% Benchmark Performance S&P 500 2% 35% 62% Nasdaq 3% 42% 82% R
Slide 9: Yelp's dramatic underperformance is self-inflicted
Yelp’s dramatic underperformance is self-inflicted Changing strategic priorities Unfocused Strategy and Entire markets ceded to competition Dismal Execution Repeated operational missteps Inefficient sales model Under-monetized relative to peers Company is Mismanaged Expense structure not
Slide 10: We recommend replacing 3 of the 8 members on Yelp's staggered Board
We recommend replacing 3 of the 8 members on Yelp’s staggered Board and forming a committee to evaluate strategic alternatives Install 3 New Members to Yelp’s Staggered Board that are not Handpicked by the Existing Board: Are objective and independent Refresh the Board Have relevant industry, go
Slide 11: Significant value can be unlocked by a strategic review process
Significant value can be unlocked by a strategic review process Remain Public Sell Yelp Implementation of our recommendations could Large universe of potential buyers: result in the following by 2020: Re-acceleration of revenue growth to 20% Private Equity buyers interested in optimizing the bus
Slide 12: Table of Contents
Table of Contents Executive Summary Yelp’s Potential: A Unique and Valuable Asset Large Total Addressable Market 55 Yelp’s Dramatic Underperformance Page # 90M Unique Monthly Unique Visitors 56 Irreplaceable Asset of Reviews 57 Unfocused Strategy and Dismal Execution Best Option to Find Loca
Slide 13: Unfocused Strategy and Dismal Execution
Yelp’s Dramatic Underperformance 1 Changing Strategic Priorities Unfocused Strategy and 2 Entire Markets Ceded to Competition Dismal Execution 3 Repeated Operational Missteps PAGE 12
Slide 14: Yelp's strategic focus keeps changing year after year
Yelp’s strategic focus keeps changing year after year Management Comments on Yelp’s Strategic Priorities from Earnings Calls “Looking to 2014, we will continue our geographic expansion, add new products and programs 2014 for our community of writers and find even more ways to drive value to business
Slide 15: Shifting and Ineffective Strategy
Shifting and Ineffective Strategy: Yelp has repeatedly given up on, changed, or not substantially delivered on its stated strategic priorities over the last 5 years Year Strategic Priority Outcome Mentioned Expand internationally 2014 Failed: Discontinued international operations in 2016 Lagged the
Slide 16: Shifting and Ineffective Strategy (continued)
Shifting and Ineffective Strategy: Yelp has repeatedly given up on, changed, or not substantially delivered on its stated strategic priorities over the last 5 years (continued) Year Strategic Priority Outcome Mentioned Inconsequential Impact: Transactions account for less than 6%1 of revenue. Yelp u
Slide 17: Competitors have built best-of-breed companies in Yelp's markets
Meanwhile, competitors have built best-of-breed companies in some of Yelp’s markets that now sum up to about 8 times Yelp’s market cap Market Opportunity Best-of-Breed Player Market Capitalization Home & Local Services $8.1B Food Delivery $7.0B Travel $8.5B Restaurants $2.6B1 Total: $26.2B Yelp: $3.
Slide 18: Yelp has lacked consistency in operations
Yelp has lacked consistency in operations. The Company has disappointed investors in 12 out of the last 19 quarters Yelp versus Relevant Benchmarks: 5-Year Indexed TSR and Stock Reaction Day After Quarterly Earnings 220 Russell 2000 Yelp Nasdaq R2K Tech Yelp Proxy Peers Technology 200 Nasdaq 180 +82
Slide 19: Evaluation of Yelp's last 19 quarters
Evaluation of Yelp’s last 19 quarters reveals a dismal track record of meeting operational targets and stockholder expectations Stock Reaction Day Quarter Key Development After Earnings Q1 2014 +9.8% Beat expectations driven by Brand Advertising Q2 2014 -11.2% PAA adds missed consensus estimates Q3
Slide 20: Evaluation of Yelp's last 19 quarters (continued)
Evaluation of Yelp’s last 19 quarters reveals a dismal track record of meeting operational targets and stockholder expectations (continued) Stock Reaction Day Quarter Key Development After Earnings Q3 2016 +9.9% Beat estimates with another quarter of accelerating Local Ad Revenues Q4 2016 -13.6% Mis
Slide 21: Yelp resets expectations in a major way
Yelp resets expectations in a major way, months or even weeks after setting them Event Expectation Set Revised View “We implemented a territory change within our sales Q1 2015: “So broad strokes for the sales force … in a lot 3 organization … the change had a negative impact on Untested sales of way
Slide 22: Company is Mismanaged and Under-optimized
Yelp’s Dramatic Underperformance 1 Inefficient Sales Model 2 Under-monetized Relative to Peers Company is Mismanaged 3 Expense Structure Not Aligned with Growth and Under- optimized 4 Lack of Basic Product Features 5 Poor Capital Allocation PAGE 21
Slide 23: Yelp has one of the least productive sales forces
Yelp has one of the least productive sales forces compared to its Internet peers and has one of the highest sales and marketing spends relative to its growth rate Sales & Marketing as % of Revenues1 versus Revenue Growth 80% Less Efficient YEXT CARG 70% ANGI SNAP 60% TRUE TRIP YELP 2018E EXPE Growth
Slide 24: Repeated operational missteps have compounded sales efficiency issues
Repeated operational missteps have compounded Yelp’s sales efficiency issues Net Paid Advertising Account (PAA) Adds per Ramped Sales Person1 Management’s Reasons for Sales Efficiency Issues as Stated on Earnings Calls: 9.4 “Implemented a “Approximately two “If I were to point to a “Recognized churn
Slide 25: Company is Mismanaged and Under-optimized
Yelp’s Dramatic Underperformance 1 Inefficient Sales Model 2 Under-monetized Relative to Peers Company is Mismanaged 3 Expense Structure Not Aligned with Growth and Under- optimized 4 Lack of Basic Product Features 5 Poor Capital Allocation PAGE 24
Slide 26: Yelp's call center sales force appears about 4 times less efficient than ANGI
Yelp’s call center sales force appears about 4 times less efficient than ANGI Homeservices, a business calling on similar customers 4.4x Yelp Closed Deals / Rep / Month 2.7 12 Yelp ANGI Current Current1 Evaluating Yelp as a Cold-Call Sales Center Yelp Sales Assumptions Notes Annual Recurring Revenue
Slide 27: If viewed as a SaaS operation, Yelp's sales team is about one-third as efficient
If viewed as a SaaS operation, Yelp’s sales team appears about one-third as efficient 2.7x Yelp SaaS Industry Benchmark of Annual Recurring Revenue / 1.9x 5.2x Sales Rep Compensation Yelp SaaS Industry Current Benchmark Evaluating Yelp as a SaaS Business Yelp Sales Performance Assumptions Notes Annu
Slide 28: Comments from Yelp sales force employees
Comments from Yelp sales force employees further highlight the inefficiency of the sales process “You’re literally cold calling places in the middle “This is more of a call center job than a sales of nowhere that mostly hate Yelp because they job. You make a lot of calls a day without ever have been
Slide 29: Yelp is one of the worst monetizers of unique visitors
Yelp is one of the worst monetizers of unique visitors compared to other large internet platforms Top Visited Websites in the US ComScore Top Adjusted for Unique Visitors 2018E Revenue2 Revenue per Unique Visitor 50 Ranking Internet Peers1 Property2 ('000s) ($M) $ As a Multiple of Yelp's 1 1 Google
Slide 30: Company is Mismanaged and Under-optimized
Yelp’s Dramatic Underperformance 1 Inefficient Sales Model 2 Under-monetized Relative to Peers Company is Mismanaged 3 Expense Structure Not Aligned with Growth and Under- optimized 4 Lack of Basic Product Features 5 Poor Capital Allocation PAGE 29
Slide 31: Yelp should be much more profitable given its growth rate
A comparison to best-of-breed peers shows that Yelp should be much more profitable given its sub-20% revenue growth rate Revenue Growth versus EBITDA Margin for Yelp and Its Peers 50% 45% Peers that are growing Z faster and are more 40% profitable than Yelp Mean ‘19 EBITDA Multiple1: 22x Yelp ’19 EB
Slide 32: Yelp's offices are in some of the most expensive cities
Yelp’s low profitability can be partially attributed to its offices being located in some of the most expensive cities in North America Yelp’s Office Locations Median Household Income ($K) Yelp Office Yelp Office Key US Offices: Yelp Office Yelp Office Yelp Office Chicago Scottsdale Washington DC Ne
Slide 33: Majority of headcount is in high-cost office locations
The majority of Yelp’s headcount across all functional areas is in its high-cost office locations Yelp’s Estimated Headcount Distribution by Office Location1: High-Cost Low-Cost Headcount San Washington High-Cost Low-Cost (% Total) New York Scottsdale Chicago Other Francisco DC Total Total S&M 20% 2
Slide 34: Company is Mismanaged and Under-optimized
Yelp’s Dramatic Underperformance 1 Inefficient Sales Model 2 Under-monetized Relative to Peers Company is Mismanaged 3 Expense Structure Not Aligned with Growth and Under- optimized 4 Lack of Basic Product Features 5 Poor Capital Allocation PAGE 33
Slide 35: Advertisers and consumers are going elsewhere as competitors catch up
Advertisers and consumers are going elsewhere as competitors catch up to Yelp Our surveys1 reveal that advertisers are consistently disappointed with Yelp’s Business Dashboard Impact on Our surveys1 also reveal that Yelp advertisers still find it difficult to measure attribution and Advertisers
Slide 36: SQN's survey of advertisers on Yelp
SQN’s survey of advertisers on Yelp suggests that Yelp’s inferior business dashboard is the primary reason they stopped spending We asked advertisers why they churned off Yelp 42% said it is because Yelp’s business dashboard / advertising platform lagged alternatives SQN’s Survey of ~500 Small Bus
Slide 37: Yelp must provide advertisers more capabilities to measure effectiveness
It is critical that Yelp provide advertisers with more capabilities to measure the effectiveness of advertising on Yelp Read reviews, Book service Order food Book property browse photos, look appointment up directions... Primarily transactional Yelp is not primarily a transactional platform. Unlike
Slide 38: Competitors are growing their local reviews faster than Yelp
Competitors are growing their local reviews faster than Yelp Relative Growth of Reviews 1,500 1,300 1,100 900 Cumulative Growth Indexed to 100 700 500 300 100 2012 2013 2014 2015 2016 2017 Source: BrightLocal. Based on review data of 50,000 US-based businesses PAGE 37
Slide 39: Google is adding powerful local discovery features
Google is adding powerful local discovery features, some that Yelp does not have Google “Explore” Message Businesses “Popular Times” The “Explore” tab provides Enables direct chat Discover when the most popular personalized local recommendations with local businesses times are to visit a location PA
Slide 40: Google is rapidly growing its location-based searches
Google is rapidly growing its location-based searches Google Mobile Query Growth (2015–2017) " NEAR ME ..." 900% " SHOULD I ..." 65% " …. FOR ME" 60% Source: “Internet Trends 2018” – Mary Meeker, Kleiner Perkins. PAGE 39
Slide 41: Facebook is leveraging machine learning to recommend local businesses
Facebook is leveraging machine learning to recommend local businesses and provide contextual data from a user’s social network Messenger Discover Tab Facebook Local Allows users to discover nearby restaurants and businesses. Explore and share events, places, and Transactions facilitated by chat bots
Slide 42: Facebook has significantly improved its local searches
Facebook has significantly improved the relevance and quality of its local searches November 2015 Search for “Italian Restaurants” Same Search 2 Years Later Results did not correlate to location; Results from within 2 miles, integrated little contextual data with maps, with rich review data PAGE 41
Slide 43: Amazon and Snapchat are developing overlapping features
Amazon and Snapchat are also developing features that overlap with components of Yelp’s value proposition Amazon – Home Services App Snapchat – Geofilter Integration Connects home and business repair services merchants and Integrates “Geofilter” location tags that populate digital cards customers on
Slide 44: Company is Mismanaged and Under-optimized
Yelp’s Dramatic Underperformance 1 Inefficient Sales Model 2 Under-monetized Relative to Peers Company is Mismanaged 3 Expense Structure Not Aligned with Growth and Under- optimized 4 Lack of Basic Product Features 5 Poor Capital Allocation PAGE 43
Slide 45: Yelp's poor track record of capital allocation
Based on Yelp’s poor track record of capital allocation, the Board should not allow further speculative uses of cash Date Capital Allocation Decision Outcome 2012–2015 Invested and built Brand Advertising business1 Discontinued Brand Advertising segment in 2016 Acquired Restaurant-Kritik, a restaura
Slide 46: Yelp has too much cash
Yelp has too much cash Yelp’s Net Cash as % of Market Cap versus Internet Peers 29% 22% 19% 19% 19% 16% 14% 13% 13% 10% 9% 9% 8% 7% 5% 4% 0% 0% 0% -6% -8% -11% -14% -15% -16% -41% YELP RDFN TRUE GRPN SNAP SSTK GOOG Z TWTR FB BKNG WIX TRIP YEXT ETSY CARG ANGI GRUB W IAC MTCH EXPE GDDY P EBAY CARS Sou
Slide 47: Yelp will have almost $1 billion in cash in 2020
Even after planned share buybacks, we estimate that Yelp will have almost $1 billion in cash in 2020 Summary of Yelp’s Cash Flow: Q3 2018 to 20201 1,600 1,400 1,200 +408 1,000 -250 995 Cash Flow ($M) 800 837 600 400 200 0 Q3Cash 3Q 2018 2018Balance November November 20182018 Buyback Consensus Q3 201
Slide 48: Management Poorly Aligned with Stockholders
Yelp’s Dramatic Underperformance 1 CEO Not Held Accountable Management Poorly Aligned 2 Compensation Not Aligned with Performance with Stockholders 3 Insiders are Sellers PAGE 47
Slide 49: Yelp's Founder has an abysmal track record as CEO
Yelp’s Founder, after taking the Company public, has an abysmal track record as CEO Yelp Returns Relative to Benchmarks 5-Year TSR: Yelp has underperformed the Russell 2000 Technology Index by -117% and its own proxy peer group by -74% 1-Year 3-Year 5-Year S&P 500 -17% -20% -107% Strategic Failu
Slide 50: Large stock grants to insiders are not tied to performance
Awards of large stock grants to insiders are not tied to achieving performance metrics Yelp’s Incentive Compensation Policy “Historically, we have not offered incentive cash compensation opportunities to our executive officers. Our Compensation Committee revisited this practice in setting 2017 and 2
Slide 51: Insiders have sold almost twice the shares they were granted
Over the last 5 years, insiders have sold almost twice the number of shares they have been granted over this time Each Red Tag Represents a Day of Net Selling by Insiders over the Last 5 Years1 2014-2017 Shares Granted 3,464K Net Shares Sold (6,233K) (2,769K) more shares sold than granted In Thousan
Slide 52: Poor Corporate Governance
Yelp’s Dramatic Underperformance 1 Board is Stale and Needs Fresh Perspectives Poor Corporate Governance 2 Corporate Governance is Stockholder Unfriendly PAGE 51
Slide 53: The Board is stale with average tenure over 9 years
The Board is stale with an average tenure of over 9 years. Only 1 new member has joined since May 2012 Board Tenure Director Date Joined Class Principal Occupation (in Years) Jeremy Levine November 2005 13 Class I Partner, Bessemer Venture Partners Peter Fenton September 2006 12 Class I General Part
Slide 54: Yelp's governance is stockholder unfriendly
Yelp’s governance is stockholder unfriendly, giving stockholders few viable alternatives to seek a remedy for years of underperformance Yelp’s Stockholder Industry Best Practice Unfriendly Terms Declassify the Board to permit directors to be elected annually Classified Board; Directors up for ISS su
Slide 55: Table of Contents
Table of Contents Executive Summary Yelp’s Potential: A Unique and Valuable Asset Large Total Addressable Market 55 Yelp’s Dramatic Underperformance Page # 90M Unique Monthly Unique Visitors 56 Irreplaceable Asset of Reviews 57 Unfocused Strategy and Dismal Execution Best Option to Find Loca
Slide 56: Yelp's market is very large
Yelp’s market is very large, giving it significant room to grow Local Advertising Spend SMBs in the U.S. $149B 20M Online and Mobile Claimed Advertising Spend Businesses $37B 4.8M Revenues PAAs $941M 194K Yelp revenues represent under 1% of total local Only ~25% of SMBs list their businesses on Yelp
Slide 57: Yelp is one of the Top-30 visited websites in the US
Yelp is one of the Top-30 visited websites in the US, and a Top-10 website amongst peer Internet companies Top Visited Websites in the US ComScore Top 50 Ranking Adjusted for Internet Peers1 Property UVs ('000s) 1 1 Google 249,721 2 2 Facebook 211,184 5 3 Amazon 201,899 13 4 Twitter 143,341 19 5 Sna
Slide 58: Yelp has one of the largest databases of reviews
Yelp has one of the largest database of reviews, growing over 20% annually Yelp Cumulative Reviews (M) 171M 163 155 148 5-Year CAGR: 142 29% 135 127 121 115 108 102 95 90 83 77 71 67 61 57 53 47 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2013 2014 2014 2014 2014 2015 2015 20
Slide 59: Reviews are critical to how consumers discover local businesses
Reviews are becoming a critical part of how consumers discover and engage with local businesses 86% of consumers read reviews for local businesses 57% of consumers will only patron a business if it has 4 or more stars 91% of 18 to 34-year-olds trust online reviews as much as personal recommendations
Slide 60: Yelp is still the best option to find local businesses
Yelp is still the best option to find local businesses. Leading tech platforms that don’t have home-grown solutions consistently choose to partner with Yelp Next best alternative to Yelp, and catching up Facebook has a growing offering, but quality and length Homegrown of reviews lag significantly.
Slide 61: Case Study: Dim Sum Club
Case Study: Dim Sum Club, a dumpling restaurant in San Francisco Yelp’s review profiles: Have the Highest Number of Reviews Are the Most Descriptive Have the Most Photos Number of Reviews Average Word Count of First 10 Reviews Number of Photos 179 780 342 152 59 41 178 61 25 6 20 25 Yelp Google Face
Slide 62: Case Study: Dim Sum Club
Case Study: Dim Sum Club, a dumpling restaurant in San Francisco “If I could give 4.5 stars, I would - it's that close to greatness. I've willfully “Soup dumplings were so delicious it made me Detailed Review ignored Dim Sum Club after driving by it 1000x and assuming it could not want to cry. If yo
Slide 63: Yelp is trading at a discount to publicly traded peers
Yelp is trading at a discount to publicly traded peers with similar growth Revenue Growth versus Valuation for Yelp and its Peers 35x ETSY 30x Relatively ANGI Z 25x Expensive WIX GRUB Valuation: 20x 2019E TRUE EV/EBITDA GDDY TWTR TRIP (other than where indicated) MTCH 15x IAC BKNG EXPE 10x CARS Rela
Slide 64: Table of Contents
Table of Contents Executive Summary Yelp’s Potential: A Unique and Valuable Asset Large Total Addressable Market 55 Yelp’s Dramatic Underperformance Page # 90M Unique Monthly Unique Visitors 56 Irreplaceable Asset of Reviews 57 Unfocused Strategy and Dismal Execution Best Option to Find Loca
Slide 65: We recommend replacing the 3 members up for election in 2019
We recommend replacing the 3 members on Yelp’s 8-person staggered Board that are up for election at Yelp’s 2019 Annual Meeting with candidates that are not handpicked by the existing Board The Current Board is Severely Lacking Key Requirements for Effective Governance Requirement Current State SQN’s
Slide 66: Recommendations balance operational fixes, growth and financial impact
In making recommendations, we have carefully balanced addressing current operational deficiencies, achieving long-term growth, and realizing quantifiable financial improvements by 2020 SQN Optimize Current Achieve Potential to Participate Quantifiable Financial Recommendation Business Model in Trans
Slide 67: Yelp can increase monetization of its traffic through partners
Yelp can significantly increase the monetization of its traffic by partnering with Monetize Through 1 vertically-focused internet platforms Partners Estimated Revenue Category Per Unique Visitor Home & Local $40 Healthcare $40 Travel $50 $10 Revenue per Unique Visitor1 Real Estate $15 Child Care $20
Slide 68: Many partners and structures Yelp can pursue
There are many partners and structures that Yelp can pursue to increase Monetize Through 1 monetization Partners Verticals Partner Potential Structure Yelp sends Request-A-Quote messages directly to HomeAdvisor in return for share Home & Local of lead revenues Yelp includes a "Book on Expedia" link
Slide 69: Partnership Case Study: ANGI Homeservices
Partnership Case Study: ANGI Homeservices Monetize Through Partners 1 Yelp Today: Revenue Yelp receives Yelp monetizes 8 million Request-A-Quote x at $5.63 = $45M per request projects annually1 Partnership: versus Yelp receives Yelp sends requests to ANGI 50% Yelp receives 8 million Request-A-Quote
Slide 70: Dozens of potential partnerships across multiple categories
There are dozens of potential partnerships across multiple categories that Yelp Monetize Through 1 can pursue to get the highest value for its traffic Partners Partnership Benefits Annual Annual Verticals Potential Partnerships Incremental Revenue Incremental EBITDA2 Incremental Costs Home and $88M
Slide 71: Improve sales efficiency by 30% by 2020
Yelp’s sales cold-calling results are far below benchmarks. We only assume a 30% Improve Sales 2 efficiency improvement by 2020 and believe there is significant additional upside Efficiency Relevant Benchmarks for Yelp +30% 4.4x Closed ANGI Deals Closed / Rep Deals / Month / Rep / Month 2.7 3 3.5 12
Slide 72: National Accounts and Home & Local are growing faster
National Accounts and Home & Local are growing significantly faster than Align Spend with 3 the rest of the business Growth Potential 2018 Estimated 30% Segment 28% Growth1 19% ``` 11% National Accounts Home & Local All Other Total Segment Revenue2,3 $227M $223M $492M $941M Source: Company Filings;
Slide 73: Aligning S&M spend to growth for each segment
By aligning S&M spend to growth for each segment, we believe Yelp can expand Align Spend with 3 EBITDA margins by 8%, or $97M1 annually exiting 2020 Growth Potential Aligning Sales and Marketing Spend to Growth Prospects by Segment2 2018E SQN Target S&M Segment Spend as % of Segment (2018E Growth) R
Slide 74: Aligning R&D spend to growth for each segment
By aligning R&D spend to growth for each segment, we believe Yelp can expand Align Spend with 3 EBITDA margins by 3%, or $36M1 annually exiting 2020 Growth Potential Aligning Research and Development Spend to Growth Prospects by Segment2,3 2018E SQN Target R&D Segment Spend as % of Segment (2018E Gr
Slide 75: Shifting headcount to lower cost cities
Shifting headcount to lower cost cities could result in a 4.71% expansion in Move to Lower 4 EBITDA margins, or $58M1 annually exiting 2020 Cost Cities % Headcount in High Cost Cities SQN Resulting EBITDA Area Current Target Margin Expansion2 Rationale Skills readily available in low cost cities
Slide 76: Yelp can return to 20% growth and $1.3B revenues by 2020
We think Yelp can return to 20% growth and achieve $1.3B in revenues by 2020 through monetization partnerships and improvements in sales efficiency Revenue Upside from SQN Recommendations1 35% 1,500 Growth SQN Discount +155 for Execution Risk 1,450 1,471 1,400 1,350 20% +150 Growth 1,300 2020 Revenu
Slide 77: Yelp can expand to 30% EBITDA margins by 2020
We think Yelp can conservatively expand to 30% EBITDA margins by 2020 if these recommendations are implemented. This is still well below Yelp’s own long-term target of 35 to 40%1 EBITDA Upside from SQN Recommendations2 700 36% Margin SQN Discount 600 +28 for Execution Risk +91 500 540 30% 2020 +35 M
Slide 78: Accelerate to 20% growth with 30% EBITDA margins
By successfully implementing our recommendations, Yelp can realistically accelerate to 20% growth while generating 30% EBITDA margins Revenue Growth versus EBITDA Margin for Yelp and Its Peers 50% 45% Peers that are growing Z faster and are more 40% profitable than Yelp Mean ‘19 EBITDA Multiple1: 22
Slide 79: Yelp can easily buy back $500M of stock
Yelp can easily buy back $500M of stock and still have significant excess cash Buyback $500M 5 remaining of Stock Yelp’s Cash Flow Waterfall from Q3 2018 to 20201 1,800 1,600 1,400 +78 -250 +408 Cash 1,200 1,323 -500 Flow ($M) 1,000 800 837 -257 600 400 200 316 0 Q3 '18 3Q 2018Cash Q3 2018 Street to
Slide 80: A $55 to $65 stock price can be achieved
A $55 to $65 stock price can be achieved by the successful implementation of our recommendations Calculation of SQN Target Share Price for Yelp Notes Consensus EBITDA for 2020 $266M Bloomberg Incremental EBITDA from SQN Recommendations +$117M See page 76 SQN Target EBITDA for 2020 $383M Net Cash in
Slide 81: Yelp lacks Google's advertiser reach preview feature
Yelp lacks Google’s feature that allows advertisers to preview the reach of their ad Eliminate Key 6 campaign, enticing advertisers to spend Product Gaps Competitors Forecast Advertiser Reach PAGE 80
Slide 82: Yelp lacks benchmarking of competitor spend
Yelp lacks benchmarking like Google’s feature that lets advertisers preview what Eliminate Key 6 competitors spend, allowing new advertisers to compare themselves to peers Product Gaps Competitor Platforms Show Advertisers Benchmark Spend Budgets PAGE 81
Slide 83: No easy way to download and analyze Yelp's traffic data
Unlike on Google, there is no easy way to download and analyze Yelp’s traffic Eliminate Key 6 and advertising data. Yelp’s dashboard is too crude to run effective ad analyses Product Gaps Competitors Give Advertisers the Ability to Easily Download and Analyze Traffic Data PAGE 82
Slide 84: Yelp does not have A/B Testing
Yelp does not have A/B Testing, while Google allows advertisers to easily run Eliminate Key 6 multiple ads at the same time to optimize their ad campaigns Product Gaps Competitors Have Real-time A/B Tests PAGE 83
Slide 85: Google allows analysis of search phrases
Google allows advertisers to analyze which search phrases customers use to find Eliminate Key 6 them. This allows them to better refine their campaigns and improve conversion Product Gaps Competitors Provide Ability to Analyze Attribution of Search Terms Yelp appears significantly behind Google and
Slide 86: Yelp should expand its network of advertising partners
To help SMBs adopt and better manage their ad campaigns, Yelp should Eliminate Key 6 significantly expand its network of advertising partners Product Gaps Competitors have Rich Network of Advertising Partners PAGE 85
Slide 87: Yelp will need to make critical new leadership hires
Given the long track record of underperformance, we anticipate that Yelp will need Evaluate 7 to make some critical new leadership hires Talent Management Group Requirements of Leadership Consistently meet strategic goals and operating targets Executive Leadership Build a strong team in each fun
Slide 88: Tie compensation to specific performance metrics
The Board should put an immediate stop to the handouts of Yelp’s valuable Align Compensation 8 stock and instead tie compensation to specific performance metrics to Performance Management Group Representative Performance Metrics for Compensation Delivering on revenue growth and cash generation as
Slide 89: Evaluate Sale of Company
SQN’s Recommendations 1 Strategic Acquirers Evaluate Sale of Company 2 Financial Acquirers PAGE 88
Slide 90: Yelp is an attractive asset for strategic and financial buyers
Yelp is an attractive asset for both strategic and financial buyers 90M monthly unique visitors High Organic Traffic 171M cumulative reviews, growing 20%+ annually Large, Irreplaceable Network of Peer Reviews Few at-scale assets in local search Scarcity Value Recurring revenues growing doubl
Slide 91: Strategic acquirers that care most about lead generation
Strategic acquirers that care most about Yelp’s lead generation capabilities Acquisition Rationale Potential Acquirers Monetize Yelp’s traffic at a higher rate by using their own technology and product platforms (e.g., GrubHub, ANGI Homeservices) Diversify away from Google or other paid channels
Slide 92: M&A profiles: lead generation (1 of 4)
M&A profiles: Companies that care most about Yelp’s lead generation capabilities (1 of 4) Company1 Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Peer-to-peer lodging rental platform Revenues: +$1,000 (Q3 ‘
Slide 93: M&A profiles: lead generation (2 of 4)
M&A profiles: Companies that care most about Yelp’s lead generation capabilities (2 of 4) Company1 Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Leisure & corporate travel service provider Revenues: $11,20
Slide 94: M&A profiles: lead generation (3 of 4)
M&A profiles: Companies that care most about Yelp’s lead generation capabilities (3 of 4) Company1 Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Consumer Media and Internet company composed of Revenues: $4
Slide 95: M&A profiles: lead generation (4 of 4)
M&A profiles: Companies that care most about Yelp’s lead generation capabilities (4 of 4) Company1 Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Global travel and review platform that includes user- Revenu
Slide 96: Strategic acquirers that care most about Yelp's reviews
Strategic acquirers that care most about Yelp’s asset of reviews and focus on local businesses Acquisition Rationale Potential Acquirers 171M high-quality consumer reviews Provide highly relevant local search results can leverage Yelp’s broad and deep database of local reviews (e.g., Apple / Ama
Slide 97: M&A profiles: reviews and local businesses (1 of 2)
M&A profiles: Companies that care most about Yelp’s asset of reviews and focus on local businesses (1 of 2) Company Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Consumer hardware, software, and associated
Slide 98: M&A profiles: reviews and local businesses (2 of 2)
M&A profiles: Companies that care most about Yelp’s asset of reviews and focus on local businesses (2 of 2) Company Financial Profile ($M) Business Overview Acquisition Rationale Value of Traffic Value of Reviews Synergies Ability to Pay 2018E Financials Search engine and collection of various Rev
Slide 99: Private equity firms could execute a successful LBO of Yelp
Many private equity firms have the capital base, sector knowledge and operating skills required for a successful LBO of Yelp Buyout Considerations Key Assumptions Unique asset at scale Equity Check Size: $2.1 billion Significant upside from optimizing business Debt-to-Enterprise Value: 50%
Slide 100: A $47 to $50 buyout price can generate an attractive PE return
A $47 to $50 per share buyout price can generate an attractive private equity return Key Assumptions IRR Sensitivity to Take-Out Price and Exit Multiple Price (12/07/18) $34.59 % Premium / Take-Out Price Acquisition Price $48.50 Premium/Discount 40% 36% 39% 42% 45% Leverage (Debt-to-Value) 50% Equit
Slide 101: Time is of the Essence
Time is of the Essence Yelp has underperformed the Russell 2000 Technology Index by -117% and its own proxy peer group by -74% over the last 5 years For years, the Board has not been able to correct shifting strategies, missed opportunities, and dismal execution. The company continues to make st
Slide 102: Contact Information
Contact Information Investor Contact: John Ferguson Saratoga Proxy Consulting LLC 212-257-1311 jferguson@saratogaproxy.com Media Contact: Dan Zacchei / Joe Germani Sloane & Company 212-486-9500 dzacchei@sloanepr.com jgermani@sloanepr.com PAGE 101
Slide 103: Appendix
Appendix PAGE 102
Slide 104: Yelp's Public Proxy Peers from 04/20/18 Proxy Filing
Yelp’s Public Proxy Peers from 04/20/18 Proxy Filing Box Inc Cornerstone OnDemand CoStar Group Etsy FireEye Groupon GrubHub New Relic Pandora Proofpoint RealPage Shutterstock Splunk Synchronoss Technologies Tableau Software Ultimate Software Group Zendesk Zillow Group PAGE 103
Slide 105: ComScore Top 50 rankings
ComScore Top 50 rankings Ranking Property Unique Visitors (M) Ranking Property Unique Visitors (M) 1 Google Sites 250 26 Penske Media Corp (PMC) 96 2 Facebook 211 27 Vox Media 94 3 Oath 207 28 Netflix Inc. 92 4 Microsoft Sites 206 29 Fox News Digital Network 91 5 Amazon Sites 202 30 WASHINGTONPOST.C
Slide 106: Shift to Low Cost Geographies: Assumptions and Calculations
Shift to Low Cost Geographies: Assumptions and Calculations % Headcount by Yelp’s Office Location San Francisco New York Scottsdale Chicago Washington DC Other Total Sales Current 20% 29% 24% 21% 5% 1% 100% Target 15% 20% 35% 30% 0% 0% 100% R&D Current 82% 2% 1% 2% 0% 13% 100% Target 70% 0% 0% 0% 0%
Slide 107: Improve Sales Efficiency: Assumptions and Calculations
Improve Sales Efficiency: Assumptions and Calculations 2018 2019 2020 Comments Sales Reps 3,850 4,200 4,475 Assume sales headcount grows by 9% in 2019, and 7% in 2020 Net Adds/Sales Rep 8.7 9.5 11.3 Assume 30% increase in efficiency exiting 2020 PAAs 194K 232K 281K Net Adds/Sales Rep x Average Sales
Slide 108: Revenue and EBITDA Upside: Assumptions and Calculations (1 of 2)
Revenue and EBITDA Upside: Assumptions and Calculations (1 of 2) 2020 Exit Run- 2018 2019 2020 Comments Rate1 Monetize Through Partners % Target Realized (by end of period) 0% 0% 100% Assume $0 benefit in 2019, and full $150M in 2020 SQN estimate of value of ANGI Homeservices and other potential Inc
Slide 109: Revenue and EBITDA Upside: Assumptions and Calculations (2 of 2)
Revenue and EBITDA Upside: Assumptions and Calculations (2 of 2) 2020 Exit Run- 2018 2019 2020 Comments Rate1 Move to Lower Cost Cities % Target Realized (by end of period) 0% 10% 100% Assume full benefit can be realized by Q4 2020 Incremental Revenue ($M) NA NA NA Incremental EBITDA ($M) +0 +2 +24
Slide 110: Yelp's Cash Flow Summary: Assumptions
Yelp’s Cash Flow Summary: Assumptions Cash Flow Build Assumptions Stock-based compensation is assumed to be 11% of Revenue Stock buyback assumes a weighted average cost of $40 per share Consensus FCF estimates are based on consensus EBITDA estimates and historical FCF conversion SQN FCF estimates as
Slide 111: Disclaimer
DISCLAIMER This presentation is neither an offer to sell nor a solicitation of an offer to buy any security. This material is provided for informational purposes only and is not investment advice or a recommendation for the purchase or sale of any security. This presentation contains information abo
Slide 112: Certain Information Concerning the Participants
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS SQN Investors LP, together with the other participants named herein (collectively, “SQN”) intend to file a preliminary proxy statement and accompanying proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit votes for the e