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¢ Metrics could remain under pressure: Investors likely will look for stabilization in key metrics such as app unique devices growth and local ad account growth, but it could take time for incremental marketing and sales investments to bear fruit. « Stock comp could create overhang: With Alphabet’s decision to only report GAAP profits, Yelp’s high stock comp (67% of 2017E EBITDA) could create overhang to the valuation. Leading indicator data points: Salesforce growth decelerating While it possible that Yelp sees improving productivity per salesperson, and the mix shift to national and self-serve reduces reliance on direct sales, the deceleration in salesforce headcount is a negative leading indicator for revenues. Chart 16: Salesforce growth versus local advertising revenue growth 80% 70% 60% 50% 40% 30% 20% 10% 0% <x + oC 1Q15A 1Q16A 2Q16A 3Q16A 4016 1Q17E 2Q17E 3Q17E 2014A 314A 4Q14A 2015A 3015A 4Q15A = Salesforce y/y % =—= == Salesforce y/y % ( 2-qtr shift) == Local ad rev y/y % Source: Company, BofA Merrill Lynch Global Research Accrued sales bonus and commissions tracking lower We note that 4Q accrued bonuses and commissions are down y/y and reflect only 0.3% of NTM revenue, which would be the lowest ratio seen in recent years. Even on an absolute basis, the total accrued bonuses and commissions of $3.1mn is the lowest since mid-2013. While this is likely due in part to gains in self-serve and perhaps increased sales focus on National accounts, the change is noteworthy, in our view. Chart 17: Accrued bonuses and commissions as a % of NTM revenue 1.2% 1.0% 3-year avg: 0.76 0.8% 0.6% 04% 0.2% 0.0% FP HP FP TM OOOO OST Ce COO PPS GSO LH LH Oo Source: Company, BofA Merrill Lynch Global Research 46 Internet/e-Commerce | 06 April 2017 Bankof America <2 Merrill Lynch HOUSE_OVERSIGHT_014932