In an internal email this morning, Yelp co-founder and CEO Jeremy Stoppelman shared with all employees that due to the impact of COVID-19 on our business, the company is taking the painful but necessary step to reduce the size of our workforce through a combination of layoffs, furloughs, and reduction of hours.
It’s been an extremely difficult and painful last month: the world is facing a global health crisis none of us have ever witnessed in our lifetimes. It has disrupted daily life for nearly everyone — from businesses that rely on foot traffic or human contact, to workers who have no visibility into when they will earn their next paycheck; and parents, including many of us here at Yelp, who are trying to juggle childcare with job responsibilities. People everywhere are staying in to stay safe, wondering when life will go back to normal.
The physical distancing measures and shelter-in-place orders, while critical to flatten the curve, have dealt a devastating blow to the local businesses that are core to our mission. The impact we’ve seen on consumer behavior is staggering: interest in restaurants, our most popular category, has dropped 64% since March 10, and the nightlife category is down 81%. Gyms and similar businesses are down 73%, and salons and other beauty businesses are down 83%. All told, the millions of local businesses hit hardest by the effects of COVID-19 face the prospect of closing and laying off their employees, without knowing when, or if, they’ll be able to reopen.
Yelp connects people with these great local businesses, and as their worlds have been turned upside down, these businesses are understandably forced to pause or reduce spending on the products and services that Yelp provides. The duration and impact of this is unknown, but it will have a direct impact on our own revenues. As local businesses urgently figure out how to manage this crisis, we must do the same. To help Yelp get through this period of great uncertainty, we have had to make some incredibly hard decisions to reduce our operating costs. Today we will let 1,000 of our colleagues go and furlough approximately 1,100 more, while reducing hours for others. Your department leaders will be in touch this morning to discuss how this affects you individually, and letters with more details and FAQs will follow this afternoon.
We came to this decision as a last resort only after cutting non-employee expenses where possible. We have reduced server costs, deprioritized dozens of projects, and redone our budget based on ensuring company survival (instead of growth). We have implemented cost savings at the top, including 20-30% pay cuts for all execs. Beyond not taking a salary, I also will not vest any of my 2020 stock awards for the remainder of the year.
These extreme actions wouldn’t make sense in normal times. We entered this crisis with a strong cash position, and had built serious revenue momentum across all categories in the last year. We did what many outside the company didn’t think was possible — we overhauled our business and re-accelerated growth. This was a testament to all the hard work and tenacity that you brought each and every day. We had an ambitious 2020 plan that we were executing successfully, and never could we have imagined such a rapid shutdown of the many local economies that drive our business.
What led to this decision to part with employees, even temporarily, was not the present or near past, but where the data indicate we are headed. With revenue levels expected to be substantially lower, Yelp must make these severe cost reductions to sustain itself as a business, which I fully understand will negatively impact so many of my colleagues and friends. I do not take lightly the additional difficulties each one of those affected and their families will face in the coming months, and I’m truly sorry. Many of these colleagues have played an integral role in making Yelp the company it is today — from building great products for businesses and our users, and ensuring the quality and integrity of our content, to helping customers succeed on our platform, as well as supporting our teams in various other capacities. I’m forever grateful for their contributions.
We want to do everything we can to support our departing colleagues. Employees affected by the layoff will be offered severance pay, and reimbursement for up to three months of health insurance coverage. Employees on furlough will be put on unpaid leave, unless otherwise noted, but will retain the bulk of their benefits during this time and receive two weeks of additional pay. Those who have hours reduced will also continue to retain their benefits. Your managers, directors, and VPs are here to support you through this transition and will reach out to you this morning, and over the course of the day.
This is very tough news to take in. In all of our nearly 16 years, I’ve never seen a crisis of this magnitude and impact on our business. Today is an awful day for all of us, and especially for our departing colleagues and friends. I want to be clear that these personnel decisions are not reflective of an individual’s talents or worth to Yelp and I hope you all remain proud of the impact you’ve had. We sincerely thank you, wish you well and will support you through this challenging transition as best we can.
We also want to continue to offer support to the small local businesses that are struggling to survive, as they are the lifeblood of our cities, our everyday life, and are so core to Yelp. I’m proud of how our teams rallied to find ways to provide aid — from working to waive fees and provide free products and services for hard-hit businesses, to quickly building new features to help them connect with their customers in today’s rapidly changing environment. I’m also encouraged by the steps the federal government is taking to help ensure their survival. Swift action by the public sector in containing the virus and providing continued financial support to local businesses will be critical in helping local economies recover from this disaster.
To those who are furloughed, we will be laser focused on getting the company to a point where we can all return to work. As we move beyond this crisis, Yelp will remain an essential resource, helping consumers and local businesses find and connect with one another. While this pandemic has dealt us an unprecedented and unexpected setback, I couldn’t be more proud of how our teams across the company came together over the past few weeks. The coming months will require us to stay nimble and adapt, like many local businesses have been doing. I have no doubt that ultimately we will come out of this stronger and more prepared to deal with the peaks and valleys that lay ahead in the years to come.
Cautionary Statement Regarding Forward-Looking Statements
The above communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to COVID-19 and its impact on the economy, consumers, local businesses, Yelp Inc. (the “Company”) and demand for its products, including the duration thereof; the recovery of local economies from COVID-19 and the resulting rebound of demand for the Company’s products and services; and the Company’s financial position, operating trends, its planned cost-cutting efforts, including the duration thereof, and the expected impact of such efforts, including their ability to position it well to serve both consumers and local businesses in the recovery and beyond. Forward-looking statements involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those predicted or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include, among others, (x) the impact of fears or actual outbreaks of disease, changes in consumer behavior, economic conditions, governmental actions, actions of competitors and other factors beyond the Company’s control; and (y) those factors that could affect the Company’s business, operating results and stock price included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Undue reliance should not be placed on the forward-looking statements in the above communication, which are based on information available to the Company as of the date hereof.