Yelp - Q2 2023

Transcript

Operator (participant)

Hello, welcome to the Yelp second quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. I will now turn the conference over to Mr. James Milne, Senior Vice President, Finance and Investor Relations. Please go ahead.

James Milne (SVP of Finance and Investor Relations)

Good afternoon, everyone, thanks for joining us on Yelp's second quarter 2023 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 a shareholder letter on our investor relations website and with the SEC. I 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 the 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. With that, I will turn the call over to Jeremy.

Jeremy Stoppelman (CEO)

Thanks, James. Welcome everyone. Yelp delivered a number of record results in the second quarter, a testament to our increased product velocity and consistent execution across the company. We grew net revenue by 13% year-over-year to a record $337 million, representing the ninth consecutive quarter of double-digit growth. We delivered this performance while also expanding net income margin and adjusted EBITDA margin by 2 percentage points each from the prior year period. Yelp's elevated pace of product innovation continues to strengthen the company for the long term. In the second quarter, we leaned into our roadmap to deliver value to advertisers. As a result, businesses spent more on Yelp than ever before across categories. Advertising revenue from services businesses increased 15% year-over-year, with approximately 25% year-over-year growth in the home services category.

Advertising revenue from restaurants, retail, and other businesses increased by 11% year-over-year. Our portfolio of down-funnel ad products continued to resonate with SMB and Multi-location advertisers, and we made progress against our initiative to drive sales through our most efficient channels. Self-serve and Multi-location maintained their strong year-over-year growth rates of approximately 25% and 15%, respectively. As a result, these channels together accounted for the majority of our advertising revenue at 51% for the first time. Turning to product, AI continues to present new opportunities to enhance the product experience for consumers and advertisers alike. After upgrading our infrastructure over the past year, we've been able to leverage neural networks to determine the most useful content to display to consumers on the Home feed, as well as to provide them with better targeted ads, which improve the overall performance of our ad system.

With a robust pipeline of projects for the remainder of 2023 and beyond, I continue to be excited about the opportunities ahead. In summary, Yelp delivered another standout performance in the second quarter, with faster revenue growth than many of our advertising peers. I'm incredibly proud of the execution demonstrated by the entire Yelp team, which has enabled us to deliver consistently strong results. As we look ahead, we remain focused on growing revenue through our strong product pipeline and delivering shareholder value over the long term. With that, I'd like to turn it over to David.

David Schwarzbach (CFO)

Thanks, Jeremy. Second quarter net revenue increased by 13% year-over-year to $337 million, $7 million above the high end of our outlook range. We were pleased to see the full amount of this outperformance flow through to the bottom line. Net income increased by 84% year-over-year to $15 million. Adjusted EBITDA increased by 25% year-over-year to $84 million, $14 million above the high end of our outlook range and representing a 25% margin. Top-line growth was driven by an increase in average revenue per location, which reached a record level in the second quarter. Paying advertising locations were relatively flat, down 1% year-over-year. In services, ad revenue increased by 15% year-over-year to a record $200 million, primarily driven by growth in average revenue per location.

In restaurants, retail, and other, ad revenue increased by 11% year-over-year to a record $122 million, also driven by growth in average revenue per location. In the second quarter, we delivered value to advertisers through high-quality clicks and saw stability in the year-over-year growth rates of our ad clicks and average CPC metrics compared to the first quarter. Ad clicks were flat year-over-year, while average CPCs increased by 14% year-over-year. Turning to expenses. Other than general and administrative expenses, which include a one-time litigation settlement, second quarter expenses decreased from the first quarter and were lower than expected due to a number of factors, including lower employee-related expenses and marketing spends.

In addition, while employee attrition remains lower than anticipated, total headcount decreased slightly from the first quarter. We continue to anticipate that it will be approximately flat year-over-year by the end of 2023. We also remain focused on enhancing the quality of adjusted EBITDA by reducing stock-based compensation as a percentage of revenue to less than 8% by the end of 2025. To reach our target, we are focusing our product development hiring efforts outside of the United States, particularly in the U.K. and Canada, as well as adjusting our overall mix of compensation throughout the organization. Returning capital to shareholders through share repurchases remains an important element of our overall capital allocation strategy. In the second quarter, we repurchased $50 million worth of shares at an average purchase price of $31.98.

As of June 30th, 2023, we had $182 million remaining under our existing share repurchase authorization. We plan to continue repurchasing shares throughout the remainder of the year, subject to market and economic conditions. Turning to our outlook, now, halfway through the year, we are narrowing our outlook ranges for revenue and adjusted EBITDA. We expect net revenue will increase from the second quarter to be in the range of $337 million-$342 million in the third quarter. For the full year, we are raising our outlook range and now expect net revenue to be in the range of $1.32 billion-$1.33 billion, reflecting a $20 million increase at the midpoint compared to our previous outlook.

Turning to margin, we expect third quarter expenses will be approximately flat compared to second quarter expenses, excluding the litigation settlement, and as a result, we anticipate adjusted EBITDA will be in the range of $84 million-$89 million. For the full year, we now expect adjusted EBITDA will be in the range of $310 million-$320 million, an increase of $15 million at the midpoint compared to our previous outlook. In closing, with nine sequential quarters of double-digit revenue growth, Yelp's second quarter results demonstrate our ability to sustain top-line growth while delivering healthy profitability. Our product velocity across our strategic initiatives supports the durability of our business amid continued macro uncertainties. As we look to the second half of the year, we remain focused on executing against our strategic priorities and product roadmap.

With that, operator, please open up the line for questions.

Operator (participant)

Thank you. If you have a question, please press star one on your telephone keypad. If you have queued up and want to withdraw your question, simply press star one again. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Eric Sheridan (Managing Director of Equity Research)

Thanks so much for taking the question. I want to come back to your comments on optimization of both the surfacing content for the platform as well as ad targeting overall. Is there a way to either qualitatively or quantitatively talk to us about the momentum you might be able to build around the company, looking out through the end of this year and into next year with respect to how underoptimized the platform might be, and elements like this could, could move you in a, in a very different direction in terms of revenue re-acceleration? That would be number one. Then just wanted to make sure I can understand the characterization of the way the implied Q4 revenue tracks. Is, is there elements of tougher comps or conservatism that might be implied in the implied Q4 revenue against your full year?

Just want to make sure we understand a little bit about the trajectory through the end of the year. Thanks so much.

Jeremy Stoppelman (CEO)

Hi, Eric. Thanks for the question. I'll take maybe the first half, and David can hop in for your second question there. You know, the ad tech stack and ad targeting in general has been incredibly deep well for us. We've been executing in this area for years and years, and we continue to have a super expansive portfolio of projects to tackle to improve our efficiency there and our ad matching. There's absolutely no slowing down. You know, we talked about how we put in place the infrastructure that allowed us to upgrade our matching algorithm using neural nets. You know, that proved to be a positive in the quarter. It also helped. You know, besides with helping with ad ranking, we also enhanced the photo selection in our ads, leveraging neural nets as well.

You know, if you look across the, the entire category of these advanced technologies, sort of in the AI sphere, you also have LLMs. We talked a lot about our initial efforts with LLMs last quarter. We continue to see a lot of green shoots and opportunities there to leverage LLMs. LLMs, of course, are really great at summarizing content, taking a query, for instance, and expanding across all the possible synonyms. We have a very concerted effort within Yelp to leverage that to, you know, the maximum possible. We are running full speed ahead. We anticipate that there will continue to be, you know, great, impactful optimization opportunities on the ad side. It's also not limited, you know, the impacts are not just limited to the ad side, there's also impacts on the consumer side.

You know, we had a win, with our Home feed, which is on the app, where we were able to, you know, choose, a better ranking as well using neural nets.

... That was a positive that resulted in better user retention. You know, that, that was great to see. Finally, we talked a little bit about this last quarter. I think there are, you know, there will continue to be opportunities with LLMs to do things that, you know, before were really difficult and expensive and may have involved humans, things like summarizing what's on a page. You think about, we have a business, there's lots of great reviews, but maybe you just want to get the, the essence or the gist of like, well, what do the reviews say? What's this business really about? What, what are they offering? We're able to do that now trivially. That's another example where just, you know, now that we have the technology, boom, you, you get an upgrade.

Maybe handing off to David on the second part here.

David Schwarzbach (CFO)

Hi, Eric. Obviously, we saw strong momentum through the second quarter, 13% growth on top of 13% growth in the first quarter. Obviously, for the guide, we were able to raise the full year. While we've all seen very encouraging macroeconomic data over the past couple of weeks, whether it's inflation or the GDP number for the second quarter, consumer sentiment, sentiment, there are still uncertainties as we go through the rest of the year. As usual, whenever we're providing guidance, we want to take those risks and uncertainties into account for how we expect to perform through the remainder of the year.

Eric Sheridan (Managing Director of Equity Research)

Thanks so much.

Operator (participant)

Your next question comes from the line of Justin Patterson with Keybanc. Your line is open.

Speaker 11

Great. Thank you. This is Sergio on for Justin. We had two questions. You know, first, on just the views of consumer demand and engagement on Yelp right now. In the letter, you noted that clicks were flat for the quarter and a 10% decrease in Request a Quote. Just wondering how you're seeing demand and engagement on the platform. Related to that, just how consumers are interacting with some of the new features that you guys rolled out earlier this year. The second question around services monetization. It looks like that's been driven by improved matching. Is there any way to quantify how much matching has improved, or just maybe some color on how the workflow has improved for service providers due to that matching improvements that you guys have made? Thank you.

Jeremy Stoppelman (CEO)

Hi, Sergio. I think I can try and handle both your questions here. On the consumer demand side, you know, I would characterize as, you know, continued, steady, you know, much like last quarter. We have pivoted a lot of resources in the past year over to the consumer side, and we see a lot of white space opportunity and some early signs of success. Contributions are up, and so we're happy to see that. We continue to make improvements like we talked, you know, in the letter, and I just mentioned earlier, you know, some of the Home feed improvements we've got that are showing, you know, user retention improvements. You know, the projects are launching, we're seeing impacts.

Of course, there's a backdrop here of, you know, a little bit of a, a headwind from macro. You know, I think what, what we're seeing. Well, we've had a bit of a headwind with, with macro, but what we're seeing is, you know, the economy, I think the consensus is that's actually improving. What was a headwind, you know, is, is now potentially a tailwind. You know, between that and some of the investments and, and things we're shipping on the consumer side, I think there's a lot of opportunity ahead in terms of consumer demand. Switching gears to the second question you had there on services, monetization. You know, we continue to chip away and make improvements to our ad tech stack.

That's been a winner for us for a number of years, continue to execute well there. In fact, if you, you know, on the ad click side and services, we were up year-over-year in Q2, so that was great to see. With Request a Quote, we continue to invest deeply there. We highlight in the letter, you know, we're masking phone numbers, so we're able to capture phone numbers from consumers to the extent they're willing to volunteer it and then hand that to our advertisers, which improves the quality of the lead. While there was some softness, there has been softness for a while, in terms of project volume, the quality of those leads remains strong, and in fact, we're doing things to boost the quality of those leads.

I think when you look at-- look forward into or you look into home services revenue, you can see the power of that quality, which was 25% year-over-year revenue growth. Advertisers are clearly seeing value. I think at this time with, you know, those macro headwinds, you know, maybe business has been a little slow for a lot of folks, and they've, you know, been out there looking for what are the best ROI positive opportunities to invest their hard-earned dollars, and clearly, they're turning to Yelp. That's great to see.

Operator (participant)

Your next question comes from the line of Jason Kreyer with Craig-Hallum. Your line is open.

Jason Kreyer (Senior Research Analyst)

Great. Thank you, guys. I just wanted to dissect ad revenue in terms of clicks and CPCs. You know, clicks have been relatively flat recently, but, you know, CPCs have grown a lot. Curious if you think there's any upward limits there or, or if you can continue to grow CPCs going forward.

David Schwarzbach (CFO)

Hey, Jason, it's David. Maybe just on clicks and CPCs, if I can step back for 1 moment. Importantly, when advertisers come to Yelp, they provide us with budget, and then it's up to us to optimize that budget on their behalf. The way we do that is by running an auction, and we're really looking to find the market clearing price at that time for that visitor in that category.

... in that geography. So we are not trying to determine the CPC or the clicks. We're actually really using all of the machine learning tools that have been built into the ad tech stack, and that Jeremy has talked about, to optimize the deployment of that budget. That being said, one of the things that is very important is that we are delivering valuable leads to advertisers, and we believe that we have been able to continue to increase the value of those leads that are being provided to advertisers. One of the ways that we assess that is whether revenue per paying advertising location has been increasing. We did reach a record overall in the second quarter, and particularly, revenue per paying advertising location and services reached a record in the second quarter.

Our belief is that as we can continue to deliver valuable leads, it does provide meaningful headroom on CPCs. Again, I just wanna underscore, we don't per se try to set the CPC. We are trying to optimize the best way to deliver value to the advertiser, given their budget.

Jason Kreyer (Senior Research Analyst)

Perfect. Thanks for the clarification. In the letter, you also highlighted positive early results from Yelp Guaranteed in the, you know, the nationwide rollout. Just wondering if you can unpack those early returns or what you saw during testing?

Jeremy Stoppelman (CEO)

Hi there. Yeah, I, I'm happy to touch on Yelp Guaranteed. As of today, we are nationwide, so that's some exciting updates to come up or to provide on, on Yelp Guaranteed. We're really proud to have that rolled out. The early results showed an increase in project submissions as well as ad clicks. You know, this is built on top of Request a Quote. You know, I think the way to think about it is it's part of our continued investment in Request a Quote, which provides really great consumer experience, you know, puts consumers in touch with multiple pros, allows them to start conversations. Consumer can provide the information that, that they feel is necessary on the project side, as well as their own contact information. We also had a phone number masking launch in the quarter.

We highlighted that in the letter. That maintains the consumer's privacy, but provides something that we know is really important to pros. They love getting that phone number so that they can try to pitch on the phone, pitch live. You know, they all feel that, you know, they have strong sales skills, and we wanna give them the opportunity to close that business. We continue to invest significantly in Request a Quote, and, and Yelp Guaranteed, I think, is a great demonstration of that commitment.

Jason Kreyer (Senior Research Analyst)

Thank you.

Operator (participant)

Your next question comes from the line of Colin Sebastian with Baird. Your line is open.

Colin Sebastian (Senior Research Analyst)

Thanks, guys. Good afternoon. Congrats on a really good quarter. Maybe just following up on that, on Request a Quote, just kinda looking at the trends sequentially and, you know, perhaps wondering what you guys may be focused on in terms of driving more velocity there. On the Audience Network, you know, just curious if that has a larger influence on the business. What are your thoughts there on the go-to-market strategy? Is this something that you wanna invest in more, maybe, you know, dedicate sales to that, or what's the approach? Thank you.

Jeremy Stoppelman (CEO)

Hey, Colin, this is Jeremy. I think I can tackle the first one here on Request a Quote and services trends generally. I think, you know, stepping back and looking at the performance in the quarter, pretty fantastic, 15% year-over-year revenue growth on services, 25% year-over-year revenue growth in home services. Really, it appears like Yelp is taking share. We're very excited to see that. Ad clicks and services were up year-over-year in Q2. You know, from that perspective, the pie is growing. I think if you look at macro, you can see there's been headwinds. You know, the consumer hasn't been as bold as they were in 2021, you know, early half of 2022.

Still, I think the overall performance for Yelp is incredibly strong in the face of that. As we look out in the second half, you know, I think the consensus view is that the economy is improving, and the consumer is in decent shape. That, that could, take a headwind and turn it into the tailwind.

David Schwarzbach (CFO)

Hey, Colin, this is David. Maybe just to clarify on Audience Network, did you mean Yelp Audience, or perhaps you were referring to, SEM marketing? Just wanna make sure we understood what you were asking.

Colin Sebastian (Senior Research Analyst)

Yeah, the, the Yelp Audiences, the Yelp Audience Network.

Jed Nachman (COO)

Great. Hi, Colin, this is Jed. I can take that one. You know, overall, we were really pleased with the progress that we've made on... in, in, with Yelp Audiences. You know, this is largely an incremental product, that, you know, if you look back a couple of years, it was at a $15 million run rate, and we moved to a $30 million run rate last year, approximately, and are at approximately a $45 million run rate this year. You know, for location-based businesses, it's blended into what they're already buying, and allows us to expand wallet share within our existing book of business. And to that extent, we have the go-to-market team in place, and we've actually built it up over the, over the past year and, and continue to see, you know, kind of further penetration there.

You know, one of the things we also talked about, particularly with that multi-location channel, is that we have a, you know, kind of an agency development team now that we've grown, whose job it is to kinda get out there to the traditional Madison Avenue advertising agencies and do two things: number one, educate them on what is more, a more broad product strategy within multi-location. You know, as we've kind of released products, it's important that we're in front of those agencies. Number two, take out some of the friction involved in those purchases, i.e., you know, master service agreements in some cases, and really understanding how those agencies work. You know, and that really helps on not only the location-based businesses, but on the brand side.

You know, it's, it's still early, but we're pleased with, with the growth that we've seen, particularly in the current macro environment, you know, for, for brands, and especially when compared to the performance by, by some of our peers on the brand side. You know, we are encouraged by the, the signals that we're getting out of the Yelp Audiences, and, and we'll continue to invest going forward.

Colin Sebastian (Senior Research Analyst)

Thank you.

Operator (participant)

Your next question comes from the line of Stanislav Velikov with Wells Fargo. Your line is open.

Stanislav Velikov (Equity Research Analyst)

Hi, thanks for taking my question. I, I guess, first of all, just, on your latest product initiatives, which do you think are the lowest hanging fruits there? Which do you expect, among those to provide the most, growth opportunities?

Jeremy Stoppelman (CEO)

Hi there, Stan, this is Jeremy. You know, looking at a growth, we see a lot of opportunity ahead of us, both in the short term and long term. You know, we're at nine consecutive quarters now of double-digit revenue growth. We've really been leaning into our product-led strategy for some time now, and I think it's clear it's working. You know, Self-serve and Multi-location, for the first time, we're 51%, the majority of our revenue, so we feel really good about that. Leaning into Self-serve and Multi-location channels has been a big part of our strategy, continues to be a big part of our strategy.

In terms of, you know, where do we continue to get, you know, low-hanging fruit and a lot of leverage, it's back to some of the topics that, that were earlier on the call, like our ad tech innovation. You know, we have our own ad tech stack. You know, with the addition of LLM capabilities as well as neural net capabilities, which we highlighted in the letter, this quarter, we continue to make improvements in the efficiency of our algorithms. The more efficient that we make our matching algorithms, that essentially generates inventory for advertisers out of thin air, because we're just wasting less inventory because we know what the consumer is really looking for. We're matching them with a better provider. The consumer is actually getting a better experience, and the quality of the lead goes up.

It's a really positive feedback loop to the extent that we continue to find wins there. Again, our, our portfolio in- on the ad tech side is strong. We're not running out of ideas. We're not sort of scraping the bottom of the barrel. It's, it's a deep well, and we're gonna keep going for it. We also have some exciting opportunities off Yelp. You know, Jed just touched, touched on Yelp Audiences. That's a newer, exciting area for us. We highlighted on the last call, SEM, as a big opportunity that's hanging out there. It's not something that we've really pursued, but we know there's, you know, public companies that rely on SEM leads, you know, in the services sector, and that's, that's an area we haven't even participated in.

When we look at Request a Quote and Yelp Guaranteed and some of our investments there, that's all building towards tapping into that to the SEM paid leads, which we think provides another- yet another avenue for growth. It's not the only one, but it's an exciting one for us to tap into as well. You know, Request a Quote side, we continue to make great strides. We've got, obviously, the Yelp Guaranteed improvement to highlight, as well as, you know, phone number masking is just yet another improvement. You know, last quarter, there was, you know, taking friction out of the flow and streamlining the consumer login experience, as well as the business owner side experience. Then on the consumer side, there's plenty of opportunity. We continue to improve contributions and the contribution flows.

We're now getting in twice as many video contributions as we were, now that we incorporated video into our review contribution flow, for example. You know, finally, we, we talked about in the letter our Home feed improvements that we just released that improved user engagement. That's just kind of a quick tour around all the areas we're investing in, but, you know, from my perspective, there's a lot, and there's a lot of different paths towards growth, which gives us confidence in the long term.

Stanislav Velikov (Equity Research Analyst)

All right. Great, thank you.

Operator (participant)

Once again, ladies and gentlemen, if you have a question or a follow-up question, it is star one on your telephone keypad. Your next question comes from the line of Shweta Khajuria with Evercore ISI. Your line is open.

Shweta Khajuria (Managing Director of Equity Research)

Thanks for taking my question. I guess. Thanks for that summary, Jeremy. That was, that was well put. I guess my follow-up is on Multi-location. How would you- what is the low-hanging fruit there? Maybe where do you see the biggest opportunity when you think about the product suite that Yelp has today, for Multi-location versus maybe where, you know, the market is or where you were, two years ago? You are much, better in terms of the offerings you have, but where do you see the biggest opportunity? Hi, Shweta, this is Jed. I can, I can start out. You know, obviously, we're really pleased with the, the performance of the Multi-location, channel over the course of Q2.

Jed Nachman (COO)

You know, it was up 15% year-over-year on, on, on a relatively tough comp from last year. It was actually up 15% quarter-over-quarter sequentially. The team is really performing, you know, kind of on the blocking and tackling side. We've obviously invested in the team a lot, and I think it's, it's, kind of a world-class team at this point. We're able to kinda tackle it at all ends of the spectrum, i.e., directly to client, in the mid-market section, in the, in the, in the mid-market channel, in the partner channel, in the enterprise channel as well. Those relationships continue to be deeper and deeper as time goes by.

You know, we've highlighted Yelp Audiences as a growth driver for both location-based customers, as well as brand advertisers that we've never been able to kind of access before. Also made a ton of improvements, kind of on the UI of the ads. You know, Multi-location advertisers have a different need in a lot of cases than some of the local versus some of the local advertisers, and really making sure that we continue to innovate on the product side in terms of what those advertisers are looking for in terms of our larger customers. You know, overall, you know, we do have another area I would just highlight that we continue to be, you know, on top of, is attribution.

You know, clearly in the Multi-location channel, attribution becomes really important, and particularly in, in the economic environments that we're in. Folks wanna know that they're getting ROI on their advertising, and we're able to show that through various in various ways. Off Yelp attribution is important, but we also have YSV, which is our Yelp Store Visits, which has really come into its own over the last few years. I think it's a real asset of Yelp that we have our own first-party data and are not completely reliant on third parties in order to kinda show the efficacy of our ads. In general, obviously, there's a lot of spend that goes through that channel, and we feel like we're well positioned to kinda take that as we go forward.

Shweta Khajuria (Managing Director of Equity Research)

Okay, thanks, Jed.

Operator (participant)

Your next question comes from the line of John Colantuoni of Jefferies. Your line is open.

Speaker 10

Hi, there. This is Chris on for John. Thanks for taking our question. You've called out macro uncertainty a few times in the shareholder letter. Could you just unpack that in a little more detail for us and maybe talk about what you're specifically seeing and kinda how you measure the impact on, you know, each of your segments, maybe the staffing services versus RRO? Is it kinda fair to say those macro headwinds might be subsiding a bit? Thank you.

David Schwarzbach (CFO)

Chris, thanks for the question. On the, on the macro front, it's obviously been complex. It's been very hard for folks broadly to forecast where we think we'll land. Clearly, we've seen the U.S. economy holding up very nicely. I just want to underscore, in particular, when we look on the SMB side in the second quarter, we did broadly see strength in advertising demand. Obviously, we're pleased with our ability to generate that. I just want to underscore, in SMB, we saw a strength in advertising demand. Because we support the local economy, we think that we're very well-placed, obviously, to help local advertisers, SMB businesses, to reach consumers. They have proven durable in both their business and in their demand for advertising. That's definitely a strength that we've been seeing.

In terms of the overall economy and how it may play out in the coming months, I unfortunately, I'm not sure we have more insights than everybody else who's paying so much attention to this. I just wanna underscore that we think that our focus on executing around delivering value to advertisers is what has enabled us to perform among the best companies of our peers. You just look at Q2 for us, we delivered 13% growth, and we delivered 25% adjusted EBITDA margin. That's a 2 percentage point improvement there. We were really pleased with our ability to obviously, stay focused on the things that are in our control, and that's what we're gonna do through the rest of the year.

Speaker 10

Great. Thanks so much.

Operator (participant)

This concludes the question and answer session, as well as today's conference call. Thank you for joining. You may now disconnect your lines.