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Good afternoon, and thank you for attending today's Yelp Fourth Quarter and Full Year 2021 Earnings Call. My name is Austin, and I'll be the moderator for today. [Operator Instructions]
I would now like to pass the conference over to our host, James Miln, Senior Vice President of Finance and Investor Relations. James, go ahead.
Good afternoon, everyone, and thanks for joining us on Yelp's Fourth Quarter and Full Year 2021 Earnings Conference Call. Joining me today are Yelp's Chief Executive Officer, Jeremy Stoppelman; Chief Financial Officer, David Schwarzbach; and Chief Operating Officer, Jed Nachman.
We published the shareholder letter on our Investor Relations website and with the SEC and hope everyone had a chance to read it. We'll provide some brief opening comments and then turn to your questions.
Now 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 opinions only as of the date of this call, and we undertake no obligation to revise or publicly release results of any revision to these forward-looking statements in light of new information or future events.
In addition, we are subject to a number of risks that may significantly impact our business and financial results. Please refer to our SEC filings as well as our shareholder letter for a more detailed description of the risk factors that may affect our results. During our call today, we'll discuss adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with generally accepted accounting principles.
In our shareholder letter released this afternoon and our filings with the SEC, each of which is posted on our website you will find additional disclosures regarding these non-GAAP financial measures as well as historical reconciliations of GAAP net income to both adjusted EBITDA and adjusted EBITDA margin.
And with that, I will turn the call over to Jeremy.
Thanks, James, and welcome, everyone. Yelp had a record year. After entering 2021 as a structurally stronger business, our elevated pace of product innovation, together with the consistent execution of our strategic initiatives led us to deliver record annual net revenue of $1.03 billion, an increase of 18% year-over-year and 2% from 2019. At the same time, we delivered $40 million of positive net income and record adjusted EBITDA of $246 million, representing a 24% adjusted EBITDA margin, up 3 percentage points from 2019. These results demonstrate how our transformed business model is able to drive structural efficiency through product innovation.
Underlying this strong performance, we delivered record advertising revenue of $608 million from Services businesses, which was up 19% from 2019 as our monetization efforts drove record revenue per paying location in these categories. The Home Services category were particularly strong, increasing nearly 40% from 2019. At the same time, advertising revenue from restaurants, retail and other businesses increased over the course of the year to $377 million, an increase of 18% year-over-year despite the spread of new COVID-19 variants as well as ongoing labor and supply chain headwinds.
Advertising revenue in our RR&O categories remained below 2019 levels at the end of the year, which we believe represents a substantial opportunity as local economies further recover. Ad clicks for the year increased by 24% year-over-year, while average CPC decreased by 5% as we continue to deliver more value to advertisers through new ad formats and ongoing optimizations to our ad system. As a result of these efforts, we delivered a record retention rate of non-term advertiser budgets for the year. Both consumers and businesses continue to engage with Yelp as their go-to source of trusted content, and we expanded our rich, local information in 2021.
App Unique Devices rebounded organically to 91% of 2019 levels, growing 6% year-over-year despite the ongoing pandemic. Cumulative reviews increased by 9% year-over-year and 19% from 2019, exceeding $244 million. Active claimed local business locations grew by 8% year-over-year and 18% from 2019, reaching 5.8 million. We see exciting long-term opportunities to drive targeted engagement and grow our valuable audience by making Yelp an even better place to connect with local businesses.
Looking ahead, we have a clear set of strategic initiatives to unlock new ways to further elevate the Yelp experience for consumers, business owners and advertisers. As such, in 2022, we are focusing our product efforts in 4 areas: grow quality leads and monetization in Services; drive sales through the most efficient channels; deliver more value to advertisers; and enhance the consumer experience. Each of these investment priorities represent its own long-term opportunity, and we are confident that the strength and breadth of this portfolio will provide a significant runway for growth.
With that, I'd like to turn it over to David.
Thanks for the full year recap, Jeremy. I will now turn to our fourth quarter results. Fourth quarter net revenue grew by 17% year-over-year and by 2% from 2019 to a record $273 million. With a structurally improved business model, much of this strong revenue performance flowed through to the bottom line, even as we increased our strategic investments in the fourth quarter. We delivered net income of $23 million and $68 million of adjusted EBITDA, representing a 25% adjusted EBITDA margin.
Advertising revenue from Services businesses increased by 13% year-over-year to $157 million and our efforts to increase monetization as well as deliver more value to advertisers contributed to another quarter of record revenue per location in these categories.
At the same time, ad revenue from restaurants, retail and other categories increased by $5 million from the third quarter and by 24% year-over-year to $104 million despite new COVID-19 variants along with ongoing labor and supply chain issues. Paying advertising locations grew by 2% year-over-year to 528,000. Though decreased slightly from the third quarter amid ongoing volatility in the macro environment. However, we were pleased to see that paying advertising locations increased over the course of the quarter to reach a pandemic high in the month of December, largely driven by our multi-location restaurants, retail and other customers.
In addition to maintaining a healthy cash balance to fund our operations we're leaving a buffer for potential tuck-in acquisitions, returning excess capital to shareholders through share repurchases is an important element of our overall capital allocation strategy.
As of December 31, we have repurchased nearly $1 billion worth of shares since our initial repurchase authorization in 2017. This includes $263 million worth of shares repurchased in 2021 and $85 million repurchased in the fourth quarter. As of December 31, we had $232 million remaining under our existing repurchase authorization. We plan to continue repurchasing shares subject to market and economic conditions.
Turning to our outlook. Yelp's record 2021 performance is a testament to the strength of ours and consistent execution against our strategic initiatives. As we enter 2022 following the strong performance, we believe we continue to have a large opportunity in local advertising with Yelp well positioned to drive long-term profitable growth.
As such, we expect 2022 net revenue to fall in the range of $1.16 billion to $1.18 billion. We also expect adjusted EBITDA for 2022 to fall between $260 million and $280 million. For the first quarter of 2022, we expect net revenue of $260 million to $270 million and adjusted EBITDA of $35 million to $45 million, reflecting seasonal trends and increased strategic investments to fuel our initiatives.
On an absolute basis, we expect net revenue will grow consistently from quarter-to-quarter for the balance of the year as the benefits of our initiatives build. We also expect expenses will remain relatively flat throughout the year after increasing in the first quarter from the fourth quarter of 2021.
In addition, we expect our GAAP tax rate for 2022 to increase to approximately 38%. A significant driver of this increase comes as a result of the new requirement to amortize certain research and development expenses under the 2017 U.S. Tax Cuts and Jobs Act. Although there is pending legislation in Congress to repeal this requirement or defer it to 2026, the outcome of that legislation is uncertain.
In summary, Yelp's 2021 results demonstrate that we have transformed Yelp into a more efficient business. Our teams have consistently executed amid a difficult operating environment, providing us with continued confidence in our ability to drive long-term sustainable and profitable growth. We are excited for the opportunities ahead to connect more people with great local businesses in 2022, and we remain focused on generating long-term shareholder value.
With that, operator, please open up the line for questions.
[Operator Instructions] Our first question is with Justin Patterson of KeyBanc.
Great. Two, if I can. First, on multi-location and Self-serve, congratulations on the record performance in those channels in a very difficult operating year. How should we think about just further progress in 2022 across those channels and how large they could get? That's question number one.
And then number two, I noticed you called out iOS users as having more ad engagement than Android users. What do you think is driving that? And what can be done with the user experience to achieve parity?
Justin, I can take the first. This is Jed. Yes, we were really pleased with the strong performance in the fourth quarter with both the multi-location channel as well as the self-serve channel. We've been talking about it for a couple of years now. It's really kind of a pillar of our long-term strategy to invest in those channels. We made the shift from largely being driven by local sales to both self-serve and multilocation. That was obviously accelerated by COVID. Right now, those 2 channels represent approximately 45% of our ad revenue in 2021, and we believe there is considerable room for growth. Self-service specifically was up 65% from 2019 and multilocation up 15% from 2019.
And we believe that from a product perspective, there is a deep vein of projects that we can do to continue to drive those 2 components of our business. So we're really pleased with it and feel we're in a good position heading into 2022.
And I'll take the second question there, Justin. When you were pointing to how on iOS, there's more ad clicks engagement than Android. And why were we pointing to that? Well, it's really about one of our priorities this year, which is enhancing the consumer experience. We see a lot of opportunity to grow our audience and increase engagement, streamline contributions. We know we have really trusted content. We know that the more people that see that will find value. And we just wanted to pick a very clear example of the low-hanging fruit that is out there for us. And so when we look between those 2 platforms, we see that iOS is more profound than Android. And when we look at the actual applications, our Yelp app on Android devices, it's just lagged behind iOS, like the features aren't all there. It hasn't gotten as much love and attention from our product and engineering team.
And the good news there is, that's pretty straightforward. How close can we get it to iOS. I think it's an open question. But We definitely see a ton of opportunity to improve the experience there and close the gap.
Our next question is with Mike Ng of Goldman Sachs.
I was just wondering if you could talk a little bit more about the Home Services revenue in the quarter. Just good to hear about the strength relative to 2019. I was just wondering if there are any headwinds there from supply chain challenges and just the tight labor market and whether you expect that to improve as we go into 2022.
And then as a separate housekeeping item, I was just wondering if you could talk a little bit about your expected trajectory of paying advertising locations as we move through 2022.
Sure. I can take that, Mike. In terms of services revenue, it did slow down slightly during Q4. A lot of that was due to seasonality and some of the continued macro impacts that associated with COVID that you had mentioned. Despite that, we still hit a record revenue per paying advertising location and services as our products really continue to resonate well with our advertisers. While consumer spend may shift somewhat to other categories as things normalize, there remains plenty of runway to drive growth from a revenue perspective.
And we believe kind of driving revenue, both from existing advertisers as well as folks who are not yet on the platform. Feel really good about where we sit on the Services side. And we have a product pipeline that we believe supports driving long-term growth and profitable growth.
In terms of PALs, overall PALs for the quarter, we did see an acceleration of PALs throughout the quarter and ended up at kind of a record for at least a pandemic era in December. Again, there were some kind of seasonal -- I'm sorry, seasonal and pandemic-related headwinds early in the quarter, but we feel really comfortable with where that's going.
Long term, again, we want to drive both revenue per PAL as well as those users, and we believe that we're set up well to do that in 2022.
Our next question is from Shweta Khajuria of Evercore.
Okay. Let me try. Two, please. Your first quarter guidance came in slightly lighter than we were expecting or the Street was expecting. But the full year 2022 guidance is largely in line to better. So perhaps, if you could help us think through the cadence of the year, what gives you the confidence in back half acceleration in, let's say, topline growth. That would be very helpful.
And then the second is, I guess, one way to look at it is, it is a low-hanging fruit is being ad locations down 8% versus 2019 in the RR&O category versus revenue, I think you mentioned 19% versus '19. So help us think about -- how to think about that as an opportunity for you? And when do you think you would be at 2019 levels for that category.
Shweta, this is David. Thanks for your question. In terms of the performance on revenue through the course of the year, we really see it stacking evenly quarter-to-quarter-to-quarter relatively so. And our confidence comes from the execution that we've delivered over the past several years.
As Jed and Jeremy have both talked about, we have a robust pipeline of initiatives to drive performance. And I think one thing that's really important to underscore is that consistency of delivery. That's what we're focused on providing. There is some seasonal effect as well as we go through the year. So that's also a factor. But fundamentally, what we want to do is with our portfolio of initiatives, deliver consistently across our strategic initiatives.
And Shweta, I can take the second on RR&O. Obviously, a difficult period broadly for restaurants and retail over the past couple of years, but we're really pleased with kind of the recovery we've seen thus far, even though we're kind of not back to full 2019 levels. We've maintained many of our customer relationships throughout the pandemic.
And I think we're about 14% below 2019 in the fourth quarter of this year. And that really, for us, remains an opportunity. And while we can't tell you the exact timing of full recovery, obviously, there have been some uncertainties. We do feel like that is sitting in front of us and an opportunity to continue to deliver value for those customers. And as the economy continues to kind of get in the full recovery mode, we believe will be a beneficiary there.
Our next question is from John Colantuoni from Jefferies.
This is David on for John. You've talked about how Yelp only monetizes about 25% of leads through the platform in the Services category, which I believe has more than doubled in just a few years.
While it seems like you still have a long runway to continue improving lead monetization, can you give us a directional sense for how high that 25% could eventually get? I assume it's partially a function of what percentages of services professional help has advertising with on the platform relative to the number of leads in the category that you generate.
David, this is Jeremy. So I can hop on for this question. We have made a lot of progress, striking progress in driving a higher percentage of monetized leads flowing through the system, which is really great. But I guess I'd point out, while there is still plenty of headroom in that number, there's also quality improvements that we can make -- that can drive even more value. And so when you think about just driving more leads, well, the quality of those leads actually matters quite a bit. To that end customer the advertiser that's paying for it. So I think there's actually 2 components that are driving the percentage up. But then also working on delivering the value that, that advertiser really expects. And the more efficient we get at that, the better. And so there's 2 angles that we'll continue to be working on there in '22.
Our next question is with Dan Salmon of BMO.
I have a specific question and then I guess more of a broad one. Specifically, Jeremy, can you expand on the comments you made about increasing targeted communications with business owners. I think the letter mentions building more engagement with that group with some of your free offerings through market insights, but I'm curious is there also some paid media spending to support that also baked into that comment? Anything else you can share on that strategy would be interesting.
And then the broader question, I guess, a bit of a follow-up on the last one is, just when I think about the Services category performance is obviously very important. I guess my question is whether you think there are lessons you can take from that category and apply to restaurant, retail, the other categories that have been more impacted by COVID as they hopefully begin to stabilize?
Sure. Dan, I can try and take these here. So reaching SMBs, I guess I'd start with looking at our performance in Self-serve. We've managed to grow that dramatically. It now comprises 17% of our advertising revenue in 2021, which is incredible growth.
And how are we doing that? Well, it is increasing the ways that we communicate with business owners. So that can be through performance advertising. It could also be through improvements in the claiming flow as businesses get to Yelp, it can be improvements in the experience that they get once they sign up as well as the communications they receive from us via e-mail marketing campaigns, et cetera, et cetera. So there is a lot of different touch point for us in reaching SMBs. And not to mention sort of our legacy infrastructure, which is, of course, our great sales team. So we have a number of different ways to reach out to local businesses. And then on top of that, the performance of the ad system keeps getting better and better. So you may have noticed that our ad clicks were up 24% year-over-year, and our CPCs were actually down 5% year-over-year.
And what that says is, in my view, is that there's more value flowing to advertisers and they're actually getting more value in terms of pricing. And so that's really good, I think, for the long term as well as for the growth opportunity ahead of us.
And then you mentioned Services. Obviously, there's been some nice performance there. Is there anything we can take away and apply to restaurant retail and other? I think we're seeing a nice healthy recovery in restaurant, retail and other. So I'm not sure that there's really takeaways there. I think there's obviously -- that space is being held back by the macro factors. So the pandemic supply chain, labor issues, all sorts of things going on. So I think there is upside in there. And so that's a great opportunity for us.
But I don't know that what's happening with a plumber. Are we doing anything that's really special that we haven't done in the restaurant category. I think it's more about the external forces. But that said, as Jed mentioned, we are maintaining relationships there. We're trying to be a constructive partner, and we have been seen recovered.
There are currently no further questions. [Operator Instructions] There are no further questions registered. So that concludes this call. Thank you for joining the Yelp Fourth Quarter and Full Year 2021 Earnings Call. Thank you for your participation. You may now disconnect your lines.