ACQUISITIONS AND DISPOSALS

2017 Acquisitions and Disposals

Nowait, Inc.

On February 28, 2017, the Company acquired Nowait, Inc. (“Nowait”). In connection with the acquisition, all outstanding capital stock and options and warrants to purchase capital stock of Nowait — including the 20% equity investment in Nowait the Company acquired in July 2016 (see Note 9) — were converted into the right to receive an aggregate of approximately $39.8 million in cash. Of the total amount of consideration paid in connection with the acquisition, $7.9 million is being held in escrow for a two-year period after the closing to secure the Company’s indemnification rights. The key purpose underlying the acquisition was to secure waitlist system and seating tool technology. The Company utilized an income approach to determine the valuation of the Company’s existing equity investment in Nowait as of the acquisition date. The carrying value of the Company’s investment approximated its fair value.

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), with the results of Nowait’s operations included in the Company’s consolidated financial statements from February 28, 2017. The Company’s allocation of the purchase price is preliminary as the amounts related to identifiable intangible assets and the effects of any net working capital adjustments are still being finalized. Any material measurement period adjustments will be recorded in the period the adjustment is identified. The purchase price allocation, subject to finalization during the measurement period, is as follows (in thousands):



	February 28, 2017
Fair value of purchase consideration:
Cash:
Distributed to Nowait stockholders	$	31,892
Held in escrow account	7,945
Total purchase consideration	39,837
Fair value of net assets acquired:
Cash and cash equivalents	$	1,004
Intangible assets	12,670
Goodwill	25,959
Other assets	1,065
Total assets acquired	40,698
Liabilities assumed	(861		)
Total liabilities assumed	(861		)
Net assets acquired	$	39,837

Estimated useful lives and the amount assigned to each class of intangible assets acquired are as follows (dollars in thousands):



Intangible Asset Type	Amount Assigned		Useful Life
Enterprise restaurant relationships	$	8,500	12.0 years
Acquired technology	2,900		5.0 years
Trademarks	610		3.0 years
Local restaurant relationships	600		5.0 years
User relationships	60		3.0 years
Weighted average			9.6 years

The intangible assets are being amortized on a straight-line basis, which reflects the pattern in which the economic benefits of the intangible assets are being utilized. The goodwill results from the Company’s opportunity to drive daily engagement in its key restaurant vertical by allowing consumers to move more quickly from search and discovery to transacting at a local business. None of the goodwill is deductible for tax purposes.

For the year ended December 31, 2017, the Company recorded acquisition-related transaction costs of approximately $0.1 million, which were included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

The Company's Consolidated Statement of Operations for the year ended December 31, 2017 included $3.9 million of revenues attributable to Nowait. The Company has completed its integration of Nowait's operations into those of the Company and, as such, determining Nowait's contribution to the net income of the Company for the period after the acquisition date is impracticable.

Turnstyle Analytics Inc.

On April 3, 2017, the Company acquired all of the equity interests in Turnstyle Analytics Inc. (“Turnstyle”) for approximately $20.6 million, approximately $1.0 million of which represents compensation cost due to a continuous service requirement, and the remainder of which represents purchase consideration. Of the total consideration paid in connection with the acquisition, $3.1 million is being held in escrow for an 18-month period after the closing to secure the Company’s indemnification rights. The key factor underlying the acquisition was to obtain a customer retention and loyalty product in the form of a location-based marketing and analytics platform that provides wifi as a digital marketing tool to expand its product offerings for local businesses.

The acquisition was accounted for as a business combination in accordance with ASC 805, with the results of Turnstyle’s operations included in the Company’s consolidated financial statements from April 3, 2017. The Company’s allocation of the purchase price is preliminary as the amounts related to identifiable intangible assets and the effects of any net working capital adjustments are still being finalized. Any material measurement period adjustments will be recorded in the period the adjustment is identified. The purchase price allocation, subject to finalization during the measurement period, is as follows (in thousands):



	April 3, 2017
Fair value of purchase consideration
Cash:
Distributed to Turnstyle stockholders	$	16,648
Held in escrow account	3,093
Total purchase consideration	$	19,741
Fair value of net assets acquired:
Cash and cash equivalents	$	30
Intangible assets	4,252
Goodwill	16,048
Other assets	250
Total assets acquired	20,580
Deferred tax liability	(450		)
Liabilities assumed	(389		)
Total liabilities assumed	(839		)
Net assets acquired	$	19,741

Estimated useful lives and the amount assigned to each class of intangible assets acquired are as follows (dollars in thousands):



Intangible Asset Type	Amount Assigned		Useful Life
Acquired technology	$	3,250	5.0 years
Business relationships	672		5.0 years
Trademarks	250		3.0 years
User relationships	80		3.0 years
Weighted average			4.9 years

The intangible assets are being amortized on a straight-line basis, which reflects the pattern in which the economic benefits of the intangible assets are being utilized. The goodwill results from the Company’s opportunity to expand its product offerings to local businesses through the Turnstyle marketing and analytics platform. None of the goodwill is deductible for tax purposes.

For the year ended December 31, 2017, the Company recorded acquisition-related transaction costs of approximately $0.3 million, which were included in general and administrative expenses in the accompanying consolidated statement of operations.

The consolidated statements of operations for the year ended December 31, 2017 include $1.3 million of revenue attributable to Turnstyle and $8.8 million of net loss attributable to Turnstyle.

Eat24, LLC

On October 10, 2017, pursuant to the terms of a Unit Purchase Agreement, dated as of August 3, 2017 (the “Purchase Agreement”), by and among the Company, Eat24, Grubhub Inc. (“Grubhub”) and Grubhub Holdings Inc. (“Purchaser”), a wholly owned subsidiary of Grubhub, the Company completed the sale of all of the outstanding equity interests in Eat24 to the Purchaser (the “Disposal”). Immediately prior to the closing of the Disposal, the Company transferred certain assets to Eat24, which consisted of assets that were material to or necessary for the operation of the Eat24 business that were not then owned by Eat24. The Company entered into a Marketing Partnership Agreement (“Partnership Agreement”) with the Purchaser concurrently with the Purchase Agreement. The purpose of the Disposal was to further capitalize on the Company's strong market position of connecting people with local businesses by selling Eat24 to the Purchaser, which has a strong presence in online and mobile food ordering, and entering into the Partnership Agreement, pursuant to which the Company earns a fee on all food orders placed through the Grubhub restaurant network, including Eat24 restaurants, that originate on the Company's Platform.

The Company received approximately $251.7 million in cash at closing; the Purchaser paid the remaining $28.8 million of the purchase price into an escrow account, which will be held for an 18-month period after closing to secure the Purchaser's rights of indemnification under the Purchase Agreement and is presented on the Company's Consolidated Balance Sheets as an Other non-current asset (see Note 9). The Company received approximately $1.0 million in additional purchase consideration on December 14, 2017 as a net working capital adjustment. As a result of the sale, the Company recognized during the three months ended December 31, 2017, a pre-tax gain of $164.8 million which is included in gain on disposal of a business unit in the Company's consolidated statement of operations, net of $0.3 million in disposal related costs. Prior to the Disposal, Eat24 was its own reporting unit and $110.8 million of goodwill associated with the Eat24 reporting unit was derecognized and included with the net assets disposed (see Note 7).

The Disposal was accounted for as an asset group disposal in accordance with Accounting Standards Codification 360, "Property, Plant, and Equipment." The results of Eat24's operations are included in the Company's consolidated financial statements through October 9, 2017. As the Disposal represented the sale of an individually significant component, the Company has disclosed the loss before provision for income taxes attributable to Eat24 for the year ended December 31, 2017, 2016 and 2015 are as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Loss before income taxes	$	(11,941	)	$	(4,873	)	$	(4,760	)

Pro Forma Financial Information

The unaudited pro forma financial information in the tables below summarizes: (a) the combined results of operations for the Company and Nowait; (b) the combined results of operations for the Company and Turnstyle; (c) the results of operations of the Company adjusted for the Disposal of Eat24; and (d) the combined results of operations for the Company, Nowait and Turnstyle adjusted for the Disposal of Eat24, in each case as though the respective transactions had occurred as of January 1, 2016. The unaudited pro forma financial information includes the accounting effects resulting from the transactions, including amortization charges from acquired intangible assets and changes in depreciation due to differing asset values and depreciation lives.

The unaudited pro forma financial information, as presented below, is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the transactions had taken place as of January 1, 2016 (in thousands, except per share data):

Nowait, Inc.



	Year Ended
	December 31,
	2017		2016
Net revenue	$	847,587	$	717,140
Net income (loss)	151,817		(12,141		)
Basic net income (loss) per share attributable to common stockholders	1.86		(0.16		)
Diluted net income (loss) per share attributable to common stockholders	1.74		(0.16		)

Turnstyle Analytics Inc.



	Year Ended
	December 31,
	2017		2016
Net revenue	$	847,172	$	714,132
Net income (loss)	152,713		(6,741		)
Basic net income (loss) per share attributable to common stockholders	1.87		(0.09		)
Diluted net income (loss) per share attributable to common stockholders	1.75		(0.09		)

Eat24, LLC



	Year Ended
	December 31,
	2017		2016
Net revenue	$	792,904	$	654,996
Net income	164,799		203
Basic net income per share attributable to common stockholders	2.02		—
Diluted net income per share attributable to common stockholders	1.89		—

Combined



	Year Ended
	December 31,
	2017		2016
Net revenue	$	794,037	$	660,130
Net income (loss)	163,611		(9,340		)
Basic net income (loss) per share attributable to common stockholders	2.00		(0.12		)
Diluted net income (loss) per share attributable to common stockholders	1.88		(0.12		)

2015 Acquisition

On February 9, 2015, the Company acquired Eat24Hours.com, Inc. In connection with the acquisition, all of the outstanding capital stock of Eat24 was converted into the right to receive an aggregate of approximately $75.0 million in cash, less certain transaction expenses, and 1,402,844 shares of Yelp Class A common stock with an aggregate fair value of approximately $59.2 million, as determined on the basis of the closing market price of the Company’s Class A common stock on the acquisition date. Of the total consideration paid in connection with the acquisition, $16.5 million in cash and 308,626 shares were initially held in escrow to secure indemnification obligations. The balance remaining in the escrow fund was $1.9 million in cash as of December 31, 2017. The key purpose underlying the acquisition was to obtain an online food ordering solution to drive daily engagement in the Company’s key restaurant vertical.

The acquisition was accounted for as a business combination in accordance with ASC 805, with the results of Eat24’s operations included in the Company’s consolidated financial statements from February 9, 2015. The initial purchase price allocation was as follows (in thousands):



	February 9, 2015
Fair value of purchase consideration:
Cash:
Distributed to Eat24 stockholders	$	56,624
Held in escrow account	16,500
Payable on behalf of Eat24 stockholders	1,876
Total cash	75,000
Class A common stock:
Distributed to Eat24 stockholders	46,143
Held in escrow account	13,015
Total purchase consideration	$	134,158
Fair value of net assets acquired:
Cash and cash equivalents	$	1,578
Intangibles	39,600
Goodwill	110,927
Other assets	6,031
Total assets acquired	158,136
Deferred tax liability	(15,207		)
Other liabilities	(8,771		)
Total liabilities assumed	(23,978		)
Net assets acquired	$	134,158

Estimated useful lives and the amount assigned to each class of intangible assets acquired are as follows:



Intangible Asset Type	Amount Assigned		Useful Life
Restaurant relationships	$	17,400	12.0 years
Developed technology	$	7,400	5.0 years
User relationships	$	12,000	7.0 years
Trade name	$	2,800	4.0 years
Weighted average			8.6 years

Prior to the Disposal, the intangible assets were being amortized on a straight-line basis, which reflected the pattern in which the economic benefits of the intangible assets were being utilized. The goodwill resulted from the Company’s opportunity to drive daily engagement in its restaurant vertical and the potential to expand Eat24’s offering to the U.S. restaurants listed on the Company’s platform. None of the goodwill is deductible for tax purposes.

The Company recorded no acquisition-related costs for the years ended December 31, 2017 and 2016, and $0.2 million in acquisition-related costs in the year ended December 31, 2015, which were included in the general and administrative expense in the accompanying consolidated statements of operations.

The consolidated statements of operations for the year ended December 31, 2015 include $39.2 million of revenue attributable to Eat24.