Yext, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended July 31, 2023 (the second quarter of Yext’s fiscal 2024). Yext provides its Answers platform for managing and publishing business information across its own sites and a network of more than 200 third-party services.
Financial performance
| Metric | Three months ended July 31, 2023 | Year-over-year change | Six months ended July 31, 2023 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $102.6 million | Up 2% | $202.1 million | Up 1% |
| Gross profit / margin | $80.2 million / 78.2% | Margin up from 73.2% | $158.3 million / 78.4% | Margin up from 74.1% |
| Operating expenses | $84.4 million | Down 10% | $163.8 million | Down 15% |
| Operating loss | $4.2 million | Improved from $19.5 million | $5.5 million | Improved from $45.0 million |
| GAAP net loss | $3.4 million | Improved from $20.0 million | $3.8 million | Improved from $45.8 million |
| Adjusted EBITDA, non-GAAP | $11.8 million | Compared with $0.9 million | $26.2 million | Compared with a $2.2 million loss |
Quarterly revenue growth reflected new and expanded direct-customer subscriptions; direct-customer revenue rose 4% to $82.8 million, while reseller revenue fell 6% to $19.8 million, primarily due to attrition. Gross-margin improvement and lower operating expenses—particularly sales and marketing costs—helped narrow losses. Stock-based compensation was $11.6 million for the quarter and $22.6 million for the six-month period; the company’s non-GAAP measures exclude this expense.
Cash, liquidity and capital
- Cash and cash equivalents were $200.5 million at July 31, 2023, versus $190.2 million at January 31, 2023. They included $145.7 million of money market funds and U.S. Treasury securities.
- Six-month operating cash flow was positive $19.7 million, compared with negative $7.3 million in the prior-year period. Cash flow included significant working-capital movements, including a $54.9 million benefit from accounts receivable and a $55.3 million reduction in unearned revenue.
- Capital expenditures were $1.6 million. Financing activities used $8.3 million, including $11.0 million for share repurchases and $7.8 million in taxes related to net share settlement of stock awards.
- The balance sheet reports no borrowings. The $50 million secured revolving facility matures December 22, 2025; $36 million was available and $14 million was allocated to letters of credit. Yext reported compliance with its debt covenants.
- Current assets were $300.6 million and current liabilities $222.0 million. Unearned revenue, current, was $169.5 million, down from $223.7 million at January 31, 2023.
Operating trends and material changes
- Annual recurring revenue was $397.7 million at July 31, up 3% year over year. Direct-customer ARR increased 5% to $327.2 million; reseller ARR declined 6% to $70.5 million.
- Total customer dollar-based net retention was 97%, compared with 96% a year earlier; direct retention was 98%, and reseller retention was 92%.
- Remaining performance obligations were $424.5 million, down from $447.7 million at January 31, 2023. Yext expected $370.7 million to be recognized over the next 24 months.
- Management cited lower headcount as a primary reason for reduced cost of revenue and sales and marketing expense. The filing reports that a reduction in force affecting approximately 8% of overall headcount took effect in the quarter ended April 30, 2023.
- International revenue grew to $21.8 million in the quarter from $19.8 million; North American revenue was nearly flat. Currency movements added approximately $0.4 million to quarterly revenue but reduced six-month revenue by approximately $1.0 million on a constant-currency comparison.
Outlook, risks and notable items
- Yext stated that existing cash and cash equivalents were expected to fund projected operating requirements for at least the next 12 months. The filing provides no quantified revenue or earnings guidance in the supplied text.
- Management cautioned that macroeconomic uncertainty, inflation, currency movements, and lower customer technology spending could lengthen sales cycles, pressure renewals, or lead customers to reduce or delay spending. Subscription revenue recognition may delay the effect of changes in bookings or retention on reported results.
- Key business risks include slowing revenue growth, a history of GAAP losses, customer and reseller attrition, competition, dependence on Publisher Network partners, execution of the transition of some professional services to third parties, cybersecurity and privacy requirements, and risks from emerging generative AI technology.
- In July 2023, a fire at a data center forced the facility to shut down. Yext failed over to a backup data center with minimal disruption to consumer-facing services, though some customers experienced an administrative-services outage. The company did not expect a material financial impact but noted possible reputational effects.
- In September 2023, after the reporting date, the board authorized an additional $50 million for the share repurchase program. As of July 31, $11.6 million remained under the prior $100 million authorization.
- Yext reported no material legal proceedings, effective disclosure controls as of July 31, and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth and ARR trends improve, particularly given declining reseller revenue and reseller ARR.
- Whether retention, renewals, and remaining performance obligations support future revenue growth; ARR and RPO are not GAAP revenue measures.
- Whether cost reductions can be sustained without impairing sales execution, customer support, product development, or growth.
- How much operating cash flow reflects recurring performance versus billing, collections, and deferred-revenue timing.
- The implications of the secured credit facility, its covenants and collateral, and the company’s continued share repurchases alongside ongoing GAAP losses and stock-based compensation.
- Whether data-center resilience, cybersecurity, privacy compliance, and generative-AI controls adequately address the risks described in the filing.