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For the Quarterly Period Ended September 30, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from                 to

Commission file number: 001-35444

(Exact Name of Registrant as Specified in Its Charter)

350 Mission Street, 10th Floor

(Address of principal executive offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code)

_________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☑

As of November 1, 2022, there were 69,702,309 shares outstanding of the registrant’s common stock, par value $0.000001 per share.

YELP INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

						Page
Part I.			Financial Information
Item 1.			Financial Statements (Unaudited)
			Condensed Consolidated Balance Sheets			4
			Condensed Consolidated Statements of Operations			5
			Condensed Consolidated Statements of Comprehensive Income			6
			Condensed Consolidated Statements of Stockholders' Equity			7
			Condensed Consolidated Statements of Cash Flows			9
			Notes to Condensed Consolidated Financial Statements			10
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			37
Item 4.			Controls and Procedures			37
Part II.			Other Information
Item 1.			Legal Proceedings			38
Item 1A.			Risk Factors			38
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3.			Defaults Upon Senior Securities			39
Item 4.			Mine Safety Disclosures			39
Item 5.			Other Information			39
Item 6.			Exhibits			40
Signatures

___________________________________

Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “Yelp,” the “Company,” “we,” “us” and “our” refer to Yelp Inc. and, where appropriate, its subsidiaries.

Unless the context otherwise indicates, where we refer in this Quarterly Report to our “mobile application” or “mobile app,” we refer to all of our applications for mobile-enabled devices; references to our “mobile platform” refer to both our mobile app and the versions of our website that are optimized for mobile-based browsers. Similarly, references to our “website” refer to versions of our website dedicated to both desktop- and mobile-based browsers, as well as the U.S. and international versions of our website.

This Quarterly Report contains forward-looking statements that involve risks, uncertainties and assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements contained in this Quarterly Report that are not purely historical, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include, but are not limited to, statements about:

•our financial performance, including our revenue, operating expenses and margins, as well as our ability to maintain profitability;

•our ability to maintain and expand our advertiser base;

•our strategic initiatives to support revenue growth and margin expansion;

•our investment plans and priorities, including planned investments in product development, marketing and our sales channels, as well as our ability to execute against those priorities and the results thereof;

•our ability to operate with a distributed workforce as well as the benefits and costs thereof;

•trends and expectations regarding customer and revenue retention;

•trends and expectations regarding our key metrics, including consumer traffic and engagement and the opportunity they present for growth;

•our liquidity and working capital requirements; and

•our plans with respect to our stock repurchase program.

Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements.

These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”), as updated by Part II, Item 1A of this Quarterly Report, and elsewhere in this Quarterly Report, such as:

•adverse macroeconomic conditions, including persistent inflation and continued interest hikes, and their impact on consumer behavior and advertiser spending;

•our ability to maintain and expand our advertiser base, particularly as many businesses continue to face macroeconomic challenges, including labor and supply chain difficulties;

•our ability to execute on our strategic initiatives and the effectiveness thereof;

•our ability to hire, retain, motivate and effectively manage well-qualified employees in a primarily remote work environment;

•our ability to maintain and increase user engagement on our platform, including our ability to generate, maintain and recommend sufficient content that consumers find relevant, helpful and reliable;

•our reliance on third-party service providers and strategic partners;

•our reliance on search engines and application marketplaces, certain providers of which offer products and services that compete directly with our products;

•our ability to maintain the uninterrupted and proper operation of our technology and network infrastructure;

•actual or perceived security breaches as well as errors, vulnerabilities or defects in our software or in products of third-party providers;

•our ability to generate sufficient revenue to maintain profitability, particularly in light of our limited operating history in an evolving industry, significant ongoing investments in our strategic initiatives, and the ongoing impact of macroeconomic challenges;

•our ability to accurately forecast revenue and appropriately plan expenses;

•our ability to operate effectively on mobile devices and other platforms beyond desktop computers;

•our actual or perceived failure to comply with laws and regulations applicable to our business;

•our ability to maintain, protect and enhance the Yelp brand and manage negative publicity that may arise; and

•our ability to successfully manage any strategic opportunities, including the acquisition and integration of any new businesses, solutions or technologies, as well as our ability to monetize the acquired products.

Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

We review a number of performance metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. Please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics” in this Quarterly Report and in our Annual Report for information on how we define our key metrics. Unless otherwise stated, these metrics do not include metrics from subscription products or our business-owner products.

While our metrics are based on what we believe to be reasonable calculations, there are inherent challenges in measuring usage across our large user base. Certain of our performance metrics, including the number of unique devices accessing our mobile app, ad clicks, average cost-per-click and active claimed local business locations, are tracked with internal company tools, which are not independently verified by any third party and have a number of limitations. For example, our metrics may be affected by mobile applications that automatically contact our servers for regular updates with no discernible user action involved; this activity can cause our system to count the device associated with the app as an app unique device in a given period. Although we take steps to exclude such activity and, as a result, do not believe it has had a material impact on our reported metrics, our efforts may not successfully account for all such activity.

Our metrics that are calculated based on data from third parties — the number of desktop and mobile website unique visitors — are subject to similar limitations. Our third-party providers periodically encounter difficulties in providing accurate data for such metrics as a result of a variety of factors, including human and software errors. In addition, because these traffic metrics are tracked based on unique cookie identifiers, an individual who accesses our website from multiple devices with different cookies may be counted as multiple unique visitors, and multiple individuals who access our website from a shared device with a single cookie may be counted as a single unique visitor. As a result, the calculations of our unique visitors may not accurately reflect the number of people actually visiting our website.

Our measures of traffic and other key metrics may also differ from estimates published by third parties (other than those whose data we use to calculate such metrics) or from similar metrics of our competitors. We are continually seeking to improve our ability to measure these key metrics, and regularly review our processes to assess potential improvements to their accuracy. From time to time, we may discover inaccuracies in our metrics or make adjustments to improve their accuracy, including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated.

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Yelp Inc. was incorporated in Delaware on September 3, 2004. Except where specifically noted or the context otherwise requires, the use of terms such as the "Company" and "Yelp" in these Notes to Condensed Consolidated Financial Statements refers to Yelp Inc. and its subsidiaries.

Yelp is a trusted local resource for consumers and a partner in success for businesses of all sizes. Consumers trust Yelp for its extensive ratings and reviews of businesses across a broad range of categories, while businesses advertise on Yelp to reach its large audience of purchase-oriented and generally affluent consumers.

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Annual Report.

The unaudited condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP, including certain notes to the financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation, including reclassifying amortization of deferred costs to a separate financial statement line item within the condensed consolidated statements of cash flows and combining foreign currency adjustments and unrealized gain (loss) on available-for-sale securities into one financial statement line item, other comprehensive income (loss), on the condensed consolidated statements of stockholders’ equity.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments of a normally recurring nature necessary for the fair presentation of the interim periods presented.

These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

The preparation of the Company’s unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates due to the uncertainty of the extent of the impacts of macroeconomic conditions and other factors.

Except as set forth below, there have been no material changes to the Company's significant accounting policies from those described in the Annual Report.

Marketable Securities—The Company considers highly liquid treasury notes, U.S. agency securities, corporate debt securities, money market funds and other funds with maturities of more than three months to be marketable securities. These securities are classified as short-term marketable securities on the condensed consolidated balance sheet as they represent the investment of cash available for current operations.

The Company has a policy that generally requires its securities to be investment grade (i.e. rated ‘A’ or higher by bond rating firms) with the objective of minimizing the potential risk of principal loss. The Company classifies its marketable securities as available-for-sale and determines the classification at the time of purchase based on the Company's investment strategy; such designation is reevaluated at each balance sheet date.

Available-for-sale securities are stated at fair value as of each balance sheet date and are periodically assessed for impairment. An investment is impaired if the fair value of the investment is less than its amortized cost basis. The Company reviews the securities in an unrealized loss position and evaluates whether credit loss exists by considering factors such as historical experience, market data, issuer-specific factors including their credit rating, and current economic conditions. If a credit loss exists, the Company measures the loss by comparing the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. An allowance for credit loss is recorded as a component of other income (expense), net, limited by the amount of unrealized loss. Any remaining unrealized losses are recorded to other comprehensive income (loss).

The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method and records such gains and losses as a component of other income (expense), net. Amortization of premiums and accretion of discounts are included in interest income. If the Company has the intent to sell an available-for-sale security in an unrealized loss position or it is more likely than not that it will be required to sell the security prior to recovery of its amortized cost basis, any previously recorded allowance is reversed and the entire difference between the amortized cost basis of the security and its fair value is recognized in the consolidated statements of operations.

Cash, cash equivalents and restricted cash as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

The Company’s investments in money market accounts are recorded as cash equivalents at fair value on the condensed consolidated balance sheets. Additionally, the Company carries its available-for-sale debt securities at fair value. See Note 4, "Marketable Securities" for further details.

The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value in the following hierarchy:

Level 1—Observable inputs, such as quoted prices in active markets,

Level 2—Inputs other than quoted prices in active markets that are observable either directly or indirectly, or

Level 3—Unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions.

This hierarchy requires the Company to use observable market data, when available, to minimize the use of unobservable inputs when determining fair value. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets. The Company's certificates of deposit, commercial paper, corporate bonds, agency bonds and U.S. government bonds are classified within Level 2 of the fair value hierarchy because they have been valued using inputs other than quoted prices in active markets that are observable directly or indirectly.

The following table represents the fair value of the Company’s financial instruments, including those measured at fair value on a recurring basis, as of September 30, 2022 and December 31, 2021 (in thousands):

The certificates of deposit are reflected in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

The Company's long- and indefinite-lived assets, such as property, equipment and software, goodwill and other intangible assets, are measured at fair value on a non-recurring basis if the assets are determined to be impaired. The Company recognized an impairment charge related to right-of-use ("ROU") assets and leasehold improvements associated with certain of its operating leases that it subleased during the three months ended September 30, 2022. See Note 8, "Leases," for further details. The Company estimated the fair value of these assets as of the effective dates of the agreements using an income approach based on expected future cash flows from the subleased properties, which relied on certain assumptions made by management based on both internal and external data, such as the incremental borrowing rates used to discount these cash flows to its present values. As a result, these assets are classified within Level 3 of the fair value hierarchy.

Short-term investments and certain cash equivalents consist of investments in debt securities that are classified as available-for-sale. The amortized cost, gross unrealized gains and losses and fair value of investments as of September 30, 2022 were as follows (in thousands):

The following table presents gross unrealized losses and fair values for those securities that were in an unrealized loss position as of September 30, 2022, aggregated by investment category and the length of time that the individual securities have been in a continuous loss position (in thousands):

As of September 30, 2022, the Company did not recognize any credit loss related to available-for-sale marketable securities. As of December 31, 2021, the Company did not have any marketable securities and a majority of the Company's investments were in highly liquid money market funds.

The contractual maturities for marketable securities classified as available-for-sale as of September 30, 2022 were as follows (in thousands):

Prepaid expenses and other current assets as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

Prepaid expenses included $0.7 million of short-term capitalized implementation costs related to cloud computing arrangements that are service contracts. The long-term portion of capitalized cloud computing implementation costs of $1.7 million are included in other non-current assets. The Company recorded an immaterial amount of amortization expense during the three and nine months ended September 30, 2022 and 2021 related to capitalized implementation costs. As of September 30, 2022, other current assets primarily consisted of non-trade receivables, current tax receivables and deferred costs related to unsettled share repurchases.

Property, equipment and software, net as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

(1) The cost basis was reduced to reflect an impairment of $1.5 million recorded during the nine months ended September 30, 2022. For more information, see Note 8, "Leases."

Depreciation and amortization expense related to property, equipment and software was $11.0 million and $11.9 million for the three months ended September 30, 2022 and 2021, respectively, and $32.8 million and $36.4 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s goodwill is the result of its acquisitions of other businesses and represents the excess of purchase consideration over the fair value of assets acquired and liabilities assumed. The Company performed its annual goodwill impairment analysis as of August 31, 2022 and concluded that goodwill was not impaired, as the fair value of the reporting unit exceeded its carrying value.

The changes in carrying amount of goodwill during the nine months ended September 30, 2022 were as follows (in thousands):

Balance as of December 31, 2021			$	105,128
Effect of currency translation			(6,872)
Balance as of September 30, 2022			$	98,256

        

Intangible assets that were not fully amortized as of September 30, 2022 and December 31, 2021 consisted of the following (dollars in thousands):

Amortization expense related to intangible assets was $0.3 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $1.3 million and $2.1 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, estimated future amortization expenses were as follows (in thousands):

The components of lease cost, net for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

The Company's leases and subleases do not include any variable lease payments, residual value guarantees, related-party leases, or restrictions or covenants that would limit or prevent the Company from exercising its right to obtain substantially all of the economic benefits from use of the respective assets during the lease term.

Supplemental cash flow information related to leases for the nine months ended September 30, 2022 and 2021 was as follows (in thousands):

As of September 30, 2022, maturities of lease liabilities were as follows (in thousands):

As of September 30, 2022 and December 31, 2021, the weighted-average remaining lease terms and weighted-average discount rates were as follows:

During the three months ended September 30, 2022, the Company entered into a sublease agreement for a portion of its office space in New York. The Company evaluated the associated ROU asset and leasehold improvements for impairment as a result of the sublease in accordance with Accounting Standards Codification Topic 360, "Property, Plant, and Equipment," because the change in circumstances indicated that the carrying amount of such assets may not be recoverable. The Company compared the future undiscounted cash flows under the sublease agreement to the carrying amounts of the respective ROU asset and leasehold improvements and determined that an impairment existed.

Other non-current assets as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

Deferred contract costs as of September 30, 2022 and December 31, 2021, and changes in deferred contract costs during the nine months ended September 30, 2022, were as follows (in thousands):

The changes in the allowance for doubtful accounts during the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

The net increase in the allowance for doubtful accounts in the nine months ended September 30, 2022 was primarily related to an anticipated increase in customer delinquencies due to an increase in both the number of advertiser accounts and customer spend during the nine month period. The net decrease in the allowance for doubtful accounts in the nine months ended September 30, 2021 was primarily a result of a reduction in expected customer delinquencies as collection rates continued to improve. In calculating the allowance for doubtful accounts as of September 30, 2022 and 2021, the Company considered expectations of probable credit losses, including probable credit losses associated with the COVID-19 pandemic, based on observed trends in cancellations, observed changes in the credit risk of specific customers, the impact of anticipated closures and bankruptcies using forecasted economic indicators in addition to historical experience and loss patterns during periods of macroeconomic uncertainty.

Contract liabilities consist of deferred revenue, which is recorded on the condensed consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.

The changes in deferred revenue during the nine months ended September 30, 2022 were as follows (in thousands):

The majority of the deferred revenue balance as of September 30, 2022 is expected to be recognized as revenue in the subsequent three-month period ending December 31, 2022. An immaterial amount of long-term deferred revenue is included in other long-term liabilities as of September 30, 2022. No other contract assets or liabilities were recorded on the Company's condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

Accounts payable and accrued liabilities as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):

As of September 30, 2022, other accrued liabilities primarily consisted of accrued costs related to unsettled share repurchases as well as accrued general and administrative, purchase orders and workplace costs.

Legal Proceedings—In January 2018, a putative class action lawsuit alleging violations of the federal securities laws was filed in the U.S. District Court for the Northern District of California (the "Court"), naming as defendants the Company and certain of its officers (the “Securities Class Action”). The complaint, which the plaintiff amended on June 25, 2018, alleges violations of the Securities Exchange Act of 1934, as amended, by the Company and its officers for allegedly making materially false and misleading statements regarding its business and operations on February 9, 2017. The plaintiff seeks unspecified monetary damages and other relief. On November 27, 2018, the Court granted in part and denied in part the defendants’ motion to dismiss. On October 22, 2019, the Court approved a stipulation to certify a class in this action and, on September 9, 2021, it denied the defendants’ motion for summary judgment. The case was scheduled for trial to begin on February 7, 2022. However, on December 3, 2021, the defendants reached a preliminary agreement with the plaintiff to settle this matter for $22.25 million. The proposed settlement was subsequently filed with the Court, which preliminarily approved it on July 25, 2022. The settlement was then funded by defendants' insurers during the three months ended September 30, 2022. After it receives final approval from the Court, the settlement will resolve all claims asserted against all defendants in the Securities Class Action without any liability or wrongdoing attributed to them. The Court has scheduled a hearing for January 19, 2023, at which it will consider whether to grant final approval of the settlement.

On August 26, 2022, the Court granted final approval of the settlement of a stockholder derivative action (the “Derivative Action”) asserting claims against certain current and former officers, and naming the Company as a nominal defendant, which arose out of the same facts as the Securities Class Action and was also pending before the Court. The settlement resolved all claims asserted against all defendants in the Derivative Action without any liability or wrongdoing attributed to them personally or to the Company. Under the terms of the settlement, the Company’s board of directors adopted certain corporate governance modifications and the Company received $18.0 million of insurance proceeds. The Company has paid $3.75 million of such insurance proceeds to the plaintiff’s attorneys as fees. The remaining insurance proceeds were applied to the funding of the Securities Class Action settlement.

The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies, which it will accrue when it believes a loss is probable and the amount can be reasonably estimated. Although final approval of the settlement agreement for the Securities Class Action remains pending, the Company believes the losses for both the settlements of the Securities Class Action and the Derivative Action are probable and the payment amounts described above, which total $26.0 million, represent reasonable estimates of loss contingencies. The Company also believes that the anticipated insurance proceeds related to the settlement of each action described above, which also total $26.0 million, are probable and represent reasonable estimates for loss recovery. Accordingly, the Company recorded a $26.0 million accrual for loss contingency within accounts payable and accrued liabilities as well as a $26.0 million receivable for loss recovery within prepaid expenses and other current assets, of which $3.75 million was released from each the receivable for loss recovery and the accrual for loss contingency during the three months ended September 30, 2022 upon payment to the plaintiff's attorneys in the Derivative Action. As of September 30, 3022, the Company had a $22.25 million remaining accrual for the settlement of the Securities Class Action on its condensed consolidated balance sheets within each of accounts payable and accrued liabilities as well as prepaid expenses and current assets.

The Company is subject to other legal proceedings arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently does not believe that the final outcome of any of these other matters will have a material effect on the Company’s business, financial position, results of operations or cash flows.

Indemnification Agreements—In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

While the outcome of claims cannot be predicted with certainty, the Company does not believe that the outcome of any claims under the indemnification arrangements will have a material effect on the Company’s business, financial position, results of operations or cash flows.

Revolving Credit Facility—The Company is a party to a Credit Agreement with Wells Fargo Bank, National Association (as amended by the Letter Agreement, dated as of September 27, 2022, the "Credit Agreement"), which provides for a three-year, $75.0 million senior unsecured revolving credit facility including a letter of credit sub-limit of $25.0 million. As of September 30, 2022, the Company had $20.5 million of letters of credit under the sub-limit related to lease agreements for certain office locations, which are required to be maintained and issued to the landlords of each facility, and $54.5 million remained available under the revolving credit facility as of this date. The Company was in compliance with all covenants associated with the credit facility and there were no loans outstanding under the Credit Agreement as of September 30, 2022. For additional information on the terms of the Credit Agreement, including fees payable by the Company, financial covenants, events of default and other limitations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" included under Part II, Item 7 in our Annual Report.

The following table presents the number of shares authorized and issued as of the dates indicated (in thousands):

As of September 30, 2022, the Company's board of directors had authorized it to repurchase up to an aggregate of $1.2 billion of its outstanding common stock, $81.7 million of which remained available as of September 30, 2022. The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing.

During the nine months ended September 30, 2022, the Company repurchased on the open market and retired 4,639,373 shares for an aggregate purchase price of $150.0 million. The Company had no treasury stock balance as of September 30, 2022.

During the nine months ended September 30, 2021, the Company repurchased on the open market 4,687,066 shares for an aggregate purchase price of $177.8 million and retired 4,680,484 shares. As of September 30, 2021, the Company had a treasury stock balance of 105,600 shares, which were excluded from its outstanding share count as of such date and subsequently retired in October 2021.

Stock options are granted at a price per share not less than the fair value of a share of the Company’s common stock on the grant date. Options generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining shares vesting monthly thereafter or (b) ratably on a monthly basis. Options granted are generally exercisable for contractual terms of up to 10 years. The Company issues new shares when stock options are exercised.

A summary of stock option activity for the nine months ended September 30, 2022 is as follows:

Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock as quoted on the New York Stock Exchange on a given date and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $2.1 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $3.0 million and $13.2 million for the nine months ended September 30, 2022 and 2021, respectively.

There were no options granted during each of the three months ended September 30, 2022 and 2021. The weighted-average grant date fair value of options granted was $16.07 and $18.55 per share for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, total unrecognized compensation costs related to nonvested stock options were approximately $2.4 million, which the Company expects to recognize over a weighted-average time period of 1.6 years.

RSUs generally vest over a four-year period, on one of two schedules: (a) 25% vesting at the end of one year and the remaining vesting quarterly thereafter or (b) ratably on a quarterly basis.

RSUs also include performance-based restricted stock units ("PRSUs"), which are subject to either (a) a market condition or (b) the achievement of performance goals. PRSUs may also be subject to a time-based vesting schedule of quarterly over four years (the "Time-Based Vesting Schedule"). For PRSUs subject to a market condition, the Company recognizes expense from the date of grant. For PRSUs subject to performance goals, the Company recognizes expense when it is probable that the performance condition will be achieved.

The Company granted PRSUs subject to market conditions in 2019 and 2022. The shares underlying each PRSU award granted in 2019 will be eligible to vest only if the average closing price of the Company's common stock equals or exceeds $45.3125 over any 60-day trading period during the four years following the grant date of February 7, 2019. If this market condition is met, the shares underlying each PRSU award will vest according to the Time-Based Vesting Schedule. Any shares subject to the PRSUs that have met the Time-Based Vesting Schedule at the time the market condition is achieved will fully vest as of such date; thereafter, any remaining nonvested shares subject to the PRSUs will continue vesting solely according to the Time-Based Vesting Schedule, subject to the applicable employee's continued service as of each such vesting date.

The shares underlying each PRSU award granted in 2022 that is subject to market conditions vest based on the relative performance of the Company's total stockholder return ("TSR") over a three-year period. A percentage of the target number of shares underlying each award, ranging from zero to 200%, will vest based on the percentile rank of the Company's TSR relative to that of the other companies in the Russell 2000 Index over the period beginning January 1, 2022 and ending December 31, 2024. The Company’s TSR, as well as the TSR of the other companies in the Russell 2000 Index, will be calculated based on the average closing price of each company's stock over the last 20 trading days of the performance period compared to the average closing price over the first 20 trading days of the performance period. Any shares that become eligible to vest based on the Company's level of achievement of the market goal will fully vest on or following certification of the Company's performance on February 20, 2025 or, if certification occurs following such date, March 15, 2025, subject to the applicable employee's continued service as of such vesting date.

For PRSUs subject to performance goals, a percentage of the target number of shares, ranging from zero to 200%, will become eligible to vest based on the Company's level of achievement of certain financial targets, subject to the Time-Based Vesting Schedule. The shares subject to performance goals become eligible to vest once the achievement against the financial targets is known, which will be no later than March of the year following the year in which the PRSUs are granted. On the quarterly vest date immediately following such determination (or a vest date otherwise specified in the agreement), the eligible shares, if any, will vest to the extent that the employee has met the Time-Based Vesting Schedule as of such date. Thereafter, the eligible shares will continue to vest in accordance with the Time-Based Vesting Schedule, subject to the applicable employee's continued service as of each such vesting date. The Company performed an analysis as of September 30, 2022 to assess the probability of achievement of the PRSU financial targets and, as a result, recorded compensation costs in the three and nine months ended September 30, 2022 for the PRSUs that it expected to vest.

As the PRSU activity during the nine months ended September 30, 2022 was not material, it is presented together with the RSU activity in the table below. A summary of RSU and PRSU activity for the nine months ended September 30, 2022 is as follows (in thousands, except per share amounts):

(1) Includes 1,460,121 shares that vested but were not issued due to net share settlement for payment of employee taxes.

The aggregate fair value as of the vest date of RSUs and PRSUs that vested during the nine months ended September 30, 2022 and 2021 was $122.2 million and $127.7 million, respectively. As of September 30, 2022, the Company had approximately $333.4 million of unrecognized stock-based compensation expense related to RSUs and PRSUs, which it expects to recognize over the remaining weighted-average vesting period of approximately 2.6 years.

The Employee Stock Purchase Plan ("ESPP") allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations, during designated offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of the offering period, based on the closing sales price of the Company's common stock as quoted on the New York Stock Exchange on such date.

There were no shares purchased by employees under the ESPP in the three months ended September 30, 2022 or 2021. There were 364,436 shares purchased by employees under the ESPP at a weighted-average price of $25.00 in the nine months ended September 30, 2022. There were 254,449 shares purchased by employees under the ESPP at a weighted-average price of $34.09 in the nine months ended September 30, 2021. The Company recognized stock-based compensation expense related to the ESPP of $0.8 million in the each of the three months ended September 30, 2022 and 2021, and $2.3 million in each of the nine months ended September 30, 2022 and 2021.

The following table summarizes the effects of stock-based compensation expense related to stock-based awards in the condensed consolidated statements of operations during the periods presented (in thousands):

The Company capitalized $1.9 million and $2.9 million of stock-based compensation expense as website development costs and, to a lesser extent, implementation costs incurred related to cloud computing arrangements that are service contracts in the three months ended September 30, 2022 and 2021, respectively, and $6.7 million and $8.5 million in the nine months ended September 30, 2022 and 2021, respectively.

Other income, net for the three and nine months ended September 30, 2022 and 2021 consisted of the following (in thousands):

The Company is subject to income taxes in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income taxes. The provision for income taxes for the nine months ended September 30, 2022 was $13.7 million, which was due to $13.7 million of U.S. federal, state and foreign income tax expense. The benefit from income taxes for the nine months ended September 30, 2021 was $3.0 million, which was due to $2.7 million of U.S. federal, state and foreign income tax provision, offset by $5.7 million of net discrete tax benefit primarily related to stock-based compensation.

Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, excluding unusual or infrequently occurring discrete items, for the reporting period. For the three and nine months ended September 30, 2022, the difference between the effective tax rate and the federal statutory tax rate primarily related to stock-based compensation and the inclusion of global intangible low-taxed income ("GILTI"), offset by tax credits. As currently enacted, beginning in 2022, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which is expected to increase the amount of the Company's GILTI. For the three and nine months ended September 30, 2021, the difference between the effective tax rate and the federal statutory tax rate primarily related to tax credits, offset by non-deductible expenses.

As of September 30, 2022, the total amount of gross unrecognized tax benefits was $60.2 million, $30.9 million of which was subject to a full valuation allowance and would not affect the Company’s effective tax rate if recognized. In the three and nine months ended September 30, 2022, the Company recorded an immaterial amount of interest and penalties.

As of September 30, 2022, the Company estimated that it had accumulated undistributed earnings generated by its foreign subsidiaries of approximately $14.4 million. Any taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of the Company's foreign investments would generally be limited to foreign and state taxes. The Company has not recognized a deferred tax liability related to unremitted foreign earnings, as it intends to indefinitely reinvest these earnings, and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs.

In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company’s federal and state income tax returns for tax years subsequent to 2003 remain open to examination. In the Company’s foreign jurisdictions — Canada, Germany, Ireland and the United Kingdom — the tax years subsequent to 2016 remain open to examination. The Company regularly assesses the likelihood of adverse outcomes resulting from examinations to determine the adequacy of its provision for income taxes and monitors the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. As of September 30, 2022, although the timing of the resolution or closure of audits is not certain, the Company believes it is reasonably possible that its unrecognized tax benefits could be reduced by $0.9 million over the next 12 months.

Basic net income per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted net income per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Potential common shares consist of the incremental shares of common stock issuable upon the exercise of stock options, shares issuable upon the vesting of RSUs (including PRSUs) and, to a lesser extent, purchase rights related to the ESPP.

The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except per share data):

The following stock-based instruments were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive for the periods presented (in thousands):