Yelp! Inc.

05/08/2026 | Press release | Distributed by Public on 05/08/2026 14:24

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled "Risk Factors" included under Part I, Item 1A in our Annual Report. See "Special Note Regarding Forward-Looking Statements" in this Quarterly Report.
Overview
As one of the best known Internet brands in the United States, Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust us for the more than 300 million ratings and reviews available on our platform of businesses across a broad range of categories, while businesses advertise with us to reach our large audience of what we believe are purchase-oriented and generally affluent consumers.
We generate substantially all of our revenue from the sale of performance-based advertising products, which our advertising platform matches to individual consumers through auctions priced on a cost-per-click ("CPC") basis. In the three months ended March 31, 2026, our net revenue was $361.5 million, up 1% from the three months ended March 31, 2025, and we recorded net income of $17.7 million and adjusted EBITDA of $79.4 million. For information on how we define and calculate adjusted EBITDA, and a reconciliation of this non-GAAP financial measure to net income, see "Non-GAAP Financial Measures" below.
In the first quarter of 2026, we continued to make progress transforming Yelp with artificial intelligence ("AI") through our strategic investments in product innovation:
•Reconceive Yelp Around Answers and Actions. In the first quarter, increased adoption of Yelp Assistant drove approximately 15% of all Request-a-Quote projects.1 Building on this momentum, we launched a new Yelp Assistant that supports local discovery across every business category on Yelp. To provide a more comprehensive consumer experience, we also announced new integrations with Vagaro and Zocdoc to enable users to book beauty, wellness, fitness and healthcare appointments.
•Deliver AI Tools that Help Businesses Grow, Operate and Succeed. We continued to scale Yelp Host, our AI-powered call answering service for restaurants, in the first quarter, which surpassed an annual run rate2 of more than 1.5 million calls handled in April 2026, more than doubling from January 2026. Hatch has also demonstrated early progress since we acquired it in February 2026 with an annual run rate revenue of $34.0 million in March 2026. We also introduced an improved business owner account experience, which streamlines administrative tasks through an AI-powered support chatbot that handles account access, billing and troubleshooting.
•Extend Our Reach to Power Local Discovery Across the AI Ecosystem. Demand for our data licensing products was robust in the first quarter, contributing to strong growth in other revenue. We secured new licensing agreements, including with OpenAI, and continued to expand our integrations with existing partners, including Alexa+, where users are now able to book and manage Yelp restaurant reservations through our Reservations API. Consumers can now find licensed Yelp content on Amazon Alexa, Apple Maps, Microsoft Bing, Meta.ai and Yahoo, among many other platforms.
In the first quarter, strength in other revenue and growth in advertising revenue from Services businesses drove modest year-over-year revenue growth as the economic environment facing consumers and local businesses continued to be challenging. We expect these adverse conditions to persist and continue impacting advertising revenue across categories in the second quarter, driving a modest year-over-year decrease in revenue. However, we expect revenue to increase sequentially in the second quarter due to continued strength in other revenue. As our other revenue streams continue to gain traction, we are targeting an annual run rate of $250 million in other revenue by the end of 2028.
We expect expenses will increase sequentially in the second quarter as we invest in our AI transformation and increase marketing spend, which we anticipate will result in a year-over-year decrease in adjusted EBITDA in the second quarter.
1 Projects created by users through a Request-a-Quote flow or Yelp Assistant.
2 References to the "annual run rate" of certain metrics included in this Quarterly Report are calculated by annualizing the metric's results for the indicated period. For example, we calculate annual run rate based on a metric's results for a given month by multiplying those results by 12, or for a given quarter by multiplying the results by four.
However, we believe we can drive strong growth in adjusted EBITDA margin over the next several years as a result of our top-line efforts and opportunities to drive operational efficiencies and employee productivity with AI.
Key Metrics
We regularly review a number of metrics, including the key metrics set forth below, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.
Ad Clicks and Average CPC
The amount of revenue we generate from our pay-for-performance advertising products is determined by the number of ad clicks we deliver to advertisers and the price we charge for each ad click.
Ad clicks represent user interactions with our pay-for-performance advertising products, including clicks on advertisements on our website and mobile app, clicks on syndicated advertisements on third-party platforms and Request-a-Quote submissions, among others. Ad clicks include only user interactions that we are able to track directly, and therefore do not include user interactions with ads sold through our advertising partnerships. We do not expect the exclusion of such user interactions to materially affect this metric. We report the year-over-year percentage change in ad clicks as a measure of our success in monetizing more of our consumer activity and delivering more value to advertisers.
Average CPC is calculated as revenue from our performance-based ad products - excluding certain revenue adjustments that do not impact the outcome of an auction for an individual ad click, such as refunds, as well as revenue from our advertising partnerships - divided by the total number of ad clicks for a given period. Average CPC represents the average amount we charge advertisers for each ad click.
We believe that ad clicks and average CPC together reflect one of the most significant dynamics affecting our advertising revenue performance: the interplay of advertiser demand and consumer activity. At the level of an auction for an individual ad click, advertiser demand - consisting of advertiser budgets and the number of advertisers competing to purchase the ad click - intersects with the supply of consumer activity - consisting of the predicted levels of relevant consumer traffic and engagement - to determine CPC, with higher advertiser demand putting upward pressure on the CPC and higher consumer activity putting downward pressure on the CPC. In aggregate, advertiser demand consists of the number of business locations advertising with us (which we refer to as paying advertising locations, as discussed below) and the aggregate budget they allocate to purchasing our advertising products. Aggregate monetizable consumer activity depends on the levels of consumer traffic and engagement with our ads, the numbers of locations where we can display ads and other monetizable features, and our click-through rate, which is the ratio of ad clicks to the number of times the ads were displayed to consumers. The relative strengths of these factors in aggregate are reflected in average CPC.
Ad clicks and average CPC also provide important insight into the value we deliver to advertisers, which we believe is a significant factor in our ability to retain both revenue and customers. For example, a positive change in ad clicks for a given period combined with lower growth or a negative change in average CPC over the same period would indicate that we delivered more ad clicks at lower prices, thereby delivering more value to our advertisers; we would expect this to have a positive impact on retention. Conversely, growth in average CPC paired with a negative or lower growth rate in ad clicks would indicate we charged more without delivering more ad clicks; we would expect this to have a negative impact on retention unless we are able to increase the value we deliver through higher performing ad clicks.
The following table presents year-over-year changes in our ad clicks and average CPC for the periods presented (each expressed as a percentage):
Three Months Ended
March 31,
2026 2025
Ad Clicks (10)% (3)%
Average CPC 8% 9%
Ad clicks decreased year over year in the three months ended March 31, 2026, primarily due to a decrease in Restaurants, Retail & Other ("RR&O") ad clicks, partially offset by a slight increase in Services ad clicks.
Average CPC increased in the three months ended March 31, 2026, primarily due to an increase in average CPC in RR&O categories as advertiser demand outpaced consumer demand in these categories, partially offset by a modest decrease in average CPC in Services categories resulting from relatively stable advertiser demand together with the slight increase in ad clicks. In
addition, Services ad clicks, which generally have higher CPCs, comprised a greater portion of total ad clicks compared to the prior-year period.
These trends reflect the economic uncertainties facing consumers, the challenging operating environment for local businesses and, to a lesser extent, competitive pressures in RR&O categories from food ordering and delivery providers.
Advertising Revenue by Category
We generate advertising revenue from the sale of our advertising products - including business page upgrades and performance-based advertising in search results and elsewhere on our platform - to businesses of all sizes, from single-location local businesses to multi-location national businesses ("Yelp Ads"). Advertising revenue also includes revenue generated from the resale of our advertising products by certain partners and monetization of advertising inventory through third-party ad networks, as well as revenue generated from RepairPal.
To reflect our strategic focus on creating two differentiated experiences on Yelp, we provide a breakdown of our advertising revenue attributable to businesses in two high-level category groupings: Services and RR&O. Our Services categories consist of home, local, auto, professional, pets, events, real estate and financial services. Our RR&O categories consist of restaurants, shopping, beauty & fitness, health and other.
Refer to "Results of Operations - Net Revenue" below for further discussion of our advertising revenue by category.
Paying Advertising Locations
Paying advertising locations comprise all business locations associated with a business account from which we recognized advertising revenue in a given month, excluding business accounts that purchased advertising through partner programs other than Yelp Ads Certified Partners, averaged over a given period. We also provide a breakdown of paying advertising locations between our Services categories and RR&O categories.
We provide our paying advertising locations as a measure of the reach and scale of our business; however, this metric may exhibit short-term volatility as a result of factors such as seasonality and macroeconomic conditions. For example, macroeconomic factors, particularly those affecting local economies such as labor and supply chain issues, inflation and recessionary concerns, and interest rates, have had a predominant negative impact on RR&O paying advertising locations in recent periods. Short-term fluctuations in paying advertising locations may also reflect the acquisition or loss of single advertising accounts associated with large numbers of locations, or the pausing/restarting of advertising campaigns by such multi-location advertisers.
The following table presents the number of paying advertising locations for the periods presented (in thousands, except percentages):
Three Months Ended
March 31, 		% Change
2026 2025
Services 250 261 (4)%
Restaurants, Retail & Other 235 256 (8)%
Total Paying Advertising Locations 485 517 (6)%
Paying advertising locations decreased in the three months ended March 31, 2026 compared to the prior-year period, reflecting year-over-year decreases in both Services and RR&O paying advertising locations. We believe the decrease in paying advertising locations reflects the challenging operating environment facing businesses in these categories and, to a lesser extent, competition for ad spend from such businesses, including from food ordering and delivery providers.
Results of Operations
The following table sets forth our results of operations for the periods presented (in thousands, except percentages). The period-to-period comparison of financial results is not necessarily indicative of the results of operations to be anticipated for the full year 2026 or any future period.
Three Months Ended
March 31,
% Change(1)
2026 2025 $ Change
Condensed Consolidated Statements of Operations Data:
Net revenue by product:
Services $ 233,786 $ 231,576 $ 2,210 1 %
Restaurants, Retail & Other 98,702 110,425 (11,723) (11) %
Total advertising
332,488 342,001 (9,513) (3) %
Other 28,969 16,533 12,436 75 %
Total net revenue 361,457 358,534 2,923 1 %
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 38,409 34,828 3,581 10 %
Sales and marketing 153,010 146,284 6,726 5 %
Product development 77,157 83,905 (6,748) (8) %
General and administrative 49,350 51,707 (2,357) (5) %
Depreciation and amortization 16,233 12,350 3,883 31 %
Total costs and expenses 334,159 329,074 5,085 2 %
Income from operations 27,298 29,460 (2,162) (7) %
Other income, net 2,586 5,771 (3,185) (55) %
Income before income taxes 29,884 35,231 (5,347) (15) %
Provision for income taxes 12,149 10,840 1,309 12 %
Net income attributable to common stockholders $ 17,735 $ 24,391 $ (6,656) (27) %
(1) Percentage changes may not recalculate using the rounded numbers presented in this table.
Three Months Ended March 31, 2026 and 2025
Net Revenue
Net revenue increased slightly in the three months ended March 31, 2026 compared to the prior-year period, primarily driven by growth in other revenue and an increase in advertising revenue from Services businesses, partially offset by a decrease in advertising revenue from RR&O businesses.
Advertising. Advertising revenue for the three months ended March 31, 2026 decreased 3% year over year, as a result of a decrease in revenue from RR&O businesses, partially offset by an increase in revenue from Services businesses. The decrease in RR&O revenue was driven by a decrease in ad clicks, partially offset by an increase in average CPC. Services revenue growth in the three months ended March 31, 2026 was driven by an increase in ad clicks, partially offset by a decrease in average CPC.
Other. We generate other revenue through non-advertising contracts, such as our subscription services, which include our Yelp Guest Manager, Yelp Receptionist, Yelp Host and Hatch offerings, as well as our Yelp Places API, Yelp AI API and Yelp Insights API programs, which provide Yelp content and data for a fee. In addition, other revenue includes revenue from various transactions with consumers. We generate revenue from our partnership integrations for food ordering through a combination of transaction-based, revenue-sharing agreements, under which we act as an agent and recognize fees on a net basis upon completion of each transaction, and fixed annual fee arrangements that may be adjusted based on engagement metrics such as click to order volume.
Other revenue for the three months ended March 31, 2026 increased compared to the prior-year period, driven by the addition of revenue from Hatch, an increase in revenue from our Yelp Places API program, and food ordering partnerships.
Trends and Uncertainties of Net Revenue. We expect our strategic initiatives to drive strong growth in other revenue, resulting in a sequential increase in net revenue for the three months ending June 30, 2026. However, we anticipate net revenue will decrease compared to the prior-year period, reflecting the continued economic challenges facing consumers and local businesses.
Costs and Expenses
Cost of Revenue (exclusive of depreciation and amortization). Our cost of revenue consists primarily of website infrastructure expense, which includes website hosting costs and employee-related costs (including stock-based compensation expense) for the infrastructure teams responsible for operating our website and mobile app and the RepairPal and Hatch websites, and excludes depreciation and amortization expense. Cost of revenue also includes third-party advertising fulfillment costs, credit card processing fees and revenue share payments, which primarily consist of payments to RepairPal referral partners.
Cost of revenue for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:
•a $2.3 million increase in website infrastructure expenses, primarily driven by ongoing investments in maintaining and enhancing our infrastructure, including the integration of AI products; and
•an additional $1.7 million of infrastructure expense due to our acquisition of Hatch.
These increases were partially offset by a $1.4 million decrease in advertising fulfillment costs, largely attributable to lower Yelp Audiences spend.
We expect cost of revenue to increase on an absolute dollar basis in 2026 compared to 2025, primarily due to our planned investments in AI capabilities.
Sales and Marketing. Our sales and marketing expenses primarily consist of employee-related costs (including sales commission and stock-based compensation expenses) for our sales and marketing employees. Sales and marketing expenses also include business and consumer acquisition marketing, community management, as well as allocated workplace and other supporting overhead costs.
Sales and marketing expenses for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:
•a $5.3 million increase in marketing and advertising costs, primarily driven by higher consumer and business owner marketing; and
•a $1.5 million increase in sales and marketing employee-related costs, resulting from higher average headcount in these roles, including headcount added from the acquisition of Hatch.
We expect sales and marketing expenses to increase on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025, primarily due to marketing investments and additional headcount from the acquisition of Hatch.
Product Development. Our product development expenses primarily consist of employee-related costs (including bonuses and stock-based compensation expense, net of capitalized employee-related costs associated with capitalized website and internal-use software development) for our engineers, product management and corporate infrastructure employees. In addition, product development expenses include allocated workplace and other supporting overhead costs.
Product development expenses for the three months ended March 31, 2026 decreased compared to the prior-year period primarily due to an $8.9 million decrease in employee-related costs resulting from more employee costs being capitalized, a higher proportion of employee work directed toward infrastructure enhancements (resulting in more costs included in cost of revenue), and lower cost of labor. These decreases were partially offset by an additional $1.5 million in headcount costs related to the acquisition of Hatch.
We expect product development expenses to decrease both on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025, inclusive of additional headcount from the acquisition of Hatch, as we realize cost efficiencies within our organization.
General and Administrative. Our general and administrative expenses primarily consist of employee-related costs (including bonuses and stock-based compensation expense) for our executive, finance, user operations, legal, people operations and other administrative employees. Our general and administrative expenses also include our provision for credit losses, certain consulting and professional services costs, including litigation settlements, as well as allocated workplace and other supporting overhead costs.
General and administrative expenses for the three months ended March 31, 2026 decreased compared to the prior-year period primarily due to:
•a $4.2 million decrease in indemnifiable expenses related to the RepairPal acquisition;
•a $1.1 million decrease in our provision for credit losses, primarily due to lower customer delinquencies; and
•a $1.1 million decrease in general and administrative employee-related costs, primarily driven by lower stock-based compensation expense.
These decreases were partially offset by a $3.9 million increase in acquisition and integration costs related to the acquisition of Hatch.
We expect general and administrative expenses to increase on an absolute dollar basis and as a percentage of revenue in 2026 compared to 2025 as we continue to support our business and integrate Hatch.
Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation and amortization on capitalized website and internal-use software development costs, computer equipment, leasehold improvements, and intangible assets.
Depreciation and amortization expense for the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to:
•a $2.8 million increase resulting from the amortization of intangible assets acquired in the Hatch acquisition; and
•a $1.8 million increase due to higher capitalized website and internal-use software development costs.
Other Income, Net
Other income, net consists primarily of the interest income earned on our cash, cash equivalents and marketable securities, research and development tax credits, the portion of our sublease income in excess of our lease cost, accretion of discounts and amortization of premiums on investments, and credit facility-related interest and fees.
Other income, net for the three months ended March 31, 2026 decreased compared to the prior-year period, primarily due to:
•a $1.8 million decrease in interest income as a result of lower average cash, cash equivalents, and marketable securities balances and lower interest rates in the current quarter; and
•a $1.0 million increase in interest expense related to the credit facility borrowings incurred during the current period.
Provision for Income Taxes
Provision for income taxes consists of: federal and state income taxes in the United States and income taxes in certain foreign jurisdictions; and deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Provision for income taxes for the three months ended March 31, 2026 increased from the prior-year period primarily due to an increase in the discrete tax expense primarily related to stock-based compensation.
As of December 31, 2025, we had approximately $115.5 million in net deferred tax assets ("DTAs"). As of March 31, 2026, we consider it more likely than not that we will have sufficient taxable income in the future that will allow us to realize these DTAs. However, it is possible that some or all of these DTAs will not be realized. Therefore, unless we are able to generate sufficient taxable income from our operations, a substantial valuation allowance may be required to reduce our DTAs, which would materially increase our expenses in the period in which we recognize the allowance and have a materially adverse impact on our condensed consolidated financial statements. The exact timing and amount of the valuation allowance recognition are subject to change on the basis of the net income that we are able to actually achieve. We will continue to evaluate the possible recognition of a valuation allowance on a quarterly basis.
In July 2025, the congressional bill known as the One Big Beautiful Bill Act ("OBBBA") was signed into law, which, among other things, restored certain favorable corporate tax provisions, including permitting full expensing of domestic research and development expenses. As of March 31, 2026, the impacts of the OBBBA are reflected in the 2026 estimated annual effective tax rate calculated in accordance with accounting principles generally accepted in the United States ("GAAP").
Non-GAAP Financial Measures
Our condensed consolidated financial statements are prepared in accordance with GAAP. However, we have also disclosed below adjusted EBITDA, adjusted EBITDA margin and free cash flow, each of which is a non-GAAP financial measure.
Adjusted EBITDA and free cash flow have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, adjusted EBITDA and free cash flow should not be viewed as substitutes for, or superior to, net income (loss) or net cash provided by (used in) operating activities prepared in accordance with GAAP as measures of profitability or liquidity. Some of these limitations are:
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•adjusted EBITDA does not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;
•adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
•adjusted EBITDA does not take into account certain income and expense items, such as indemnifiable expenses, acquisition and integration costs, or other costs that management determines are not indicative of ongoing operating performance;
•free cash flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations; and
•other companies, including those in our industry, may calculate adjusted EBITDA and free cash flow differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider adjusted EBITDA, adjusted EBITDA margin and free cash flow alongside other financial performance measures, including net income (loss), net cash provided by (used in) operating activities and our other GAAP results.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: provision for (benefit from) income taxes; other income, net; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other operating income and expense items, such as expenses for which we expect to be indemnified, acquisition and integration costs, and other items we deem not to be indicative of our ongoing operating performance.
Adjusted EBITDA margin. Adjusted EBITDA margin is a non-GAAP financial measure that we calculate as adjusted EBITDA divided by net revenue.
The following is a reconciliation of net income to adjusted EBITDA, as well as the calculation of net income margin and adjusted EBITDA margin, for the periods presented (in thousands, except percentages):
Three Months Ended
March 31,
2026 2025
Reconciliation of Net Income to Adjusted EBITDA:
Net income $ 17,735 $ 24,391
Provision for income taxes 12,149 10,840
Other income, net
(2,586) (5,771)
Depreciation and amortization 16,233 12,350
Stock-based compensation 30,507 37,469
Indemnifiable expenses(1)(2)
896 5,126
Acquisition and integration costs(1)(3)
4,420 539
Adjusted EBITDA $ 79,354 $ 84,944
Net revenue $ 361,457 $ 358,534
Net income margin 5 % 7 %
Adjusted EBITDA margin 22 % 24 %
(1) Recorded within general and administrative expenses on our condensed consolidated statements of operations.
(2) Represents expenses for which we expect to be indemnified in connection with our acquisition of RepairPal. Indemnifiable expenses during the three months ended March 31, 2025 consist of expenses recorded in connection with an indemnification obligation assumed in the RepairPal acquisition, for which we were subsequently indemnified through the release of a portion of the RepairPal holdback. See Note 6, "Acquisitions," of the Notes to Consolidated Financial Statements for further detail.
(3) Acquisition and integration costs during the three months ended March 31, 2026 represent costs related to the Hatch acquisition and include accrued acquisition- and integration-related compensation. Acquisition and integration costs during the three months ended March 31, 2025 represent costs related to the RepairPal acquisition. For more information on the acquisition and integration costs, see Note 6, "Acquisitions."
Free Cash Flow. Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities, less cash used for purchases of property, equipment and software.
The following is a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):
Three Months Ended
March 31,
2026 2025
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:
Net cash provided by operating activities $ 57,816 $ 97,995
Purchases of property, equipment and software (12,660) (10,531)
Free cash flow $ 45,156 $ 87,464
Net cash used in investing activities $ (167,881) $ (12,003)
Net cash provided by (used in) financing activities $ 4,915 $ (81,713)
Liquidity and Capital Resources
Sources of Liquidity
Our principal sources of liquidity are our cash and cash generated from operations. As of March 31, 2026, we had cash and cash equivalents of $110.4 million, including cash held internationally of $30.6 million.
We also have the ability to access backup liquidity to fund working capital and for other capital requirements, as needed, through the credit facility established pursuant to the Credit Agreement (as defined in Note 11, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report). The Credit Agreement provides for a $325.0 million senior secured revolving credit facility, which includes a $35.0 million letter of credit sub-limit, a $25.0 million bilateral letter of credit facility and an accordion option, which, if exercised, would allow us to increase the aggregate commitments by up to $250.0 million, plus additional amounts if we are able to satisfy a leverage test, subject to certain conditions. The commitments under the credit facility expire on April 28, 2028.
As of March 31, 2026, we had $130.0 million of outstanding borrowings and $4.2 million of letters of credit outstanding under the credit facility sub-limit, with $190.8 million remaining available under the credit facility. The letters of credit are primarily related to lease agreements for certain office locations and are required to be maintained and issued to the landlords of each facility. We were in compliance with all conditions and financial covenants thereunder as of March 31, 2026. As of May 1, 2026, we had $105.0 million of outstanding borrowings following payments made subsequent to the quarter end.
Material Cash Requirements
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" included under Part I, Item 1A in our Annual Report. We believe that our existing cash, together with any cash generated from operations, will be sufficient to meet our material cash requirements in the next 12 months and beyond, including: working capital requirements; our anticipated repurchases of common stock pursuant to our stock repurchase program; payment of taxes related to the net share settlement of equity awards; payment of lease costs related to our operating leases; income tax payments; and purchases of property, equipment and software and website hosting services. However, this estimate is based on a number of assumptions that may prove to be materially different and we could fully utilize our available cash earlier than presently anticipated.
On February 2, 2026, we completed our acquisition of Hatch for approximately $271.2 million in cash. In connection with the acquisition, we have also agreed to provide certain continuing Hatch employees with acquisition- and integration-related compensation valued in the aggregate of $30 million, to be paid over the next two to three years. See Note 6, "Acquisitions," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail.
In addition, we are still assessing the OBBBA's impact on our income tax payments for 2026 and beyond. We are not able to reasonably estimate the timing of future cash flows related to $54.5 million of uncertain tax positions. We also may be required to draw down additional funds from our credit facility or seek additional funds through equity or debt financings to respond to business challenges associated with the uncertain macroeconomic environment or other challenges, including the need to develop new features and products or enhance existing services, improve our operating infrastructure or acquire complementary businesses and technologies.
We lease office facilities under operating lease agreements that expire from 2026 to 2031. Our cash requirements related to these lease agreements are $27.1 million, of which $8.1 million is expected to be paid within the next 12 months. The total lease obligations are partially offset by our future minimum rental receipts to be received under non-cancelable subleases of $13.4 million. SeeNote 8, "Leases," of the Notes to Condensed Consolidated Financial Statements included under Part I, Item 1 in this Quarterly Report for further detail on our operating lease obligations.
Our cash requirements related to off-balance sheet purchase obligations consisting of non-cancelable agreements to purchase goods and services required in the ordinary course of business - primarily website hosting services - are approximately $132.9 million, of which approximately $79.5 million is expected to be paid within the next 12 months.
The cost of capital associated with any additional funds sought in the future might be adversely impacted by the effects of macroeconomic conditions on our business. Additionally, amounts deposited with third-party financial institutions exceed the Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits, as applicable. These cash and cash equivalents could be impacted if the underlying financial institutions fail or are subjected to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to our cash and cash equivalents; however, we can provide no assurances that access to our invested cash, cash equivalents and short-term marketable securities will not be impacted by adverse conditions in the financial markets.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
Three Months Ended
March 31,
2026 2025
Net cash provided by operating activities $ 57,816 $ 97,995
Net cash used in investing activities $ (167,881) $ (12,003)
Net cash provided by (used in) financing activities $ 4,915 $ (81,713)
Operating Activities. Net cash provided by operating activities during the three months ended March 31, 2026 decreased by $40.2 million compared to the prior-year period, primarily due to an increase of $33.7 million in employee-related payments for salaries, commissions, bonuses and benefits, which was primarily driven by higher labor costs and higher average headcount, including headcount from the acquisition of Hatch. Income taxes paid also increased $7.5 million compared to the prior period, due to refunds in the prior-year period that did not recur in the current period. These outflows were partially offset by a $10.7 million increase in cash collected from customers and a $2.7 million decrease in payments to vendors.
Investing Activities. Net cash used in investing activities during the three months ended March 31, 2026 increased compared to the prior-year period, primarily due to the acquisition of Hatch in February 2026 and higher capitalized website and internal-use software development costs. These increases were partially offset by net proceeds from sales and maturities of marketable securities and other investments.
Financing Activities. Net cash provided by financing activities during the three months ended March 31, 2026 increased compared to the prior-year period primarily due to proceeds from net borrowings under our credit facility, lower taxes paid related to the net share settlement of equity awards and increased proceeds from the issuance of common stock under employee stock-based plans, partially offset by increased repurchases of our common stock.
Stock Repurchase Program
Since its initial authorization in July 2017, our board of directors (the "Board") has authorized us to repurchase up to an aggregate of $2.45 billion of our outstanding common stock, including the $500.0 million authorized in February 2026, of which $388.7 million remained available as of May 1, 2026.
We may repurchase shares at our discretion in the open market, privately negotiated transactions, in transactions structured through investment banking institutions or a combination of the foregoing. The program is not subject to any time limit and may be modified, suspended or discontinued at any time. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow and market conditions.
During the three months ended March 31, 2026, we repurchased 5,086,834 shares on the open market for an aggregate purchase price of $125.0 million (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022).
We have funded all repurchases to date and currently expect to fund any future repurchases with cash and cash equivalents available on our condensed consolidated balance sheet.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates and assumptions are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from those estimates. Due to macroeconomic conditions and other factors, certain estimates and assumptions have required and may continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may materially change in future periods.
We believe that the assumptions and estimates associated with revenue recognition, business combinations and income taxes have the greatest potential impact on our condensed consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report.
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