Yext, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2024, the three months ended April 30, 2023; comparisons are with the three months ended April 30, 2022 unless stated otherwise. Yext provides a subscription-based business information and search platform.
Financial performance and position
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Revenue | $99.5 million | $98.8 million | Up 1%; up 2% at constant currency |
| Gross profit / margin | $78.1 million / 78.5% | $74.1 million / 75.0% | Profit up 5%; margin up 3.5 points |
| Operating expenses | $79.3 million | $99.6 million | Down 20% |
| Operating loss | $(1.2) million | $(25.5) million | Improved |
| Net loss | $(0.4) million | $(25.8) million | Improved |
| Operating cash flow | $26.7 million | $17.9 million | Up $8.9 million |
Adjusted EBITDA was $14.4 million, versus a loss of $3.0 million a year earlier; non-GAAP net income was $10.6 million, versus a non-GAAP net loss of $7.8 million. Both are company-defined non-GAAP measures and exclude stock-based compensation.
At April 30, cash and cash equivalents were $216.9 million, including $143.8 million of money market funds and U.S. Treasury securities. Current assets were $322.9 million and current liabilities $247.6 million. Total liabilities were $348.2 million, including $114.8 million of operating lease liabilities; the filing reports no funded borrowings. The $50 million revolving facility had $36 million available, with $14 million allocated to letters of credit. Yext reported compliance with its debt covenants. Stockholders’ equity was $140.6 million.
Changes and operating metrics
- Revenue growth remained modest: direct-customer revenue rose 4% to $80.0 million, while reseller revenue fell 10% to $19.4 million, primarily due to reseller customer attrition. Foreign exchange reduced reported revenue by approximately $1.3 million.
- Cost of revenue fell 14%, while sales and marketing expense fell 28%, R&D fell 3%, and G&A fell 14%. Management attributed much of the expense reduction to lower headcount and reduced stock-based compensation. The company said an approximately 8% workforce reduction initiated in late January took effect during the quarter.
- Gross margin improved to 78.5%. The company’s small GAAP net loss contrasts with positive non-GAAP results after excluding $11.0 million of stock-based compensation.
- ARR was $398.3 million, up 3% year over year: direct-customer ARR increased 5% to $326.1 million, while reseller ARR decreased 6% to $72.2 million. Total dollar-based net retention was 96%, compared with 97% a year earlier; direct retention was 97% and reseller retention 92%.
- Customer count exceeded 2,970, up 5% year over year. Remaining performance obligations were $427.9 million, of which $373.1 million was expected to be recognized over the next 24 months.
Cash flow, outlook, risks, and other matters
Operating cash flow increased to $26.7 million, but benefited substantially from a $50.6 million reduction in accounts receivable, which management linked mainly to billing and collection timing. A $27.3 million decrease in unearned revenue partly offset this source of cash. Capital expenditures were $0.9 million. Cash increased $26.6 million during the quarter.
Management said existing cash and cash equivalents should fund projected operating requirements for at least the next 12 months. The filing provides no specific numerical revenue or earnings guidance; it warns that growth is expected to be slower. Management cited macroeconomic uncertainty, inflation, foreign-exchange effects, and the possibility that customers may reduce, delay, renegotiate, or not renew technology subscriptions. Subscription revenue recognition can delay the impact of changing sales and renewals on reported results.
Key risks include slowing growth, declining reseller activity and retention, competition, reliance on third-party Publisher Network providers, long enterprise sales cycles, cybersecurity and privacy exposure, and execution risks related to organizational changes and transitioning some professional services to third parties. Yext also disclosed risks associated with emerging generative AI features, including inaccurate or biased outputs. It reported no material legal proceedings and said disclosure controls were effective as of April 30, 2023.
The company repurchased 563,569 shares for $4.6 million during the quarter; approximately $18.0 million remained under its $100 million repurchase authorization. Outstanding shares increased during the quarter, and the filing reports $79.2 million of unrecognized compensation cost on unvested stock awards.
Investor verification points
- Assess whether modest reported revenue growth, lower reseller ARR, and 96% total net retention indicate continuing pressure on renewals and expansion.
- Separate recurring operating performance from the quarter’s cash-flow benefit attributable to accounts-receivable collections and billing timing.
- Evaluate the durability of expense reductions and improved margins alongside continued GAAP losses and stock-based compensation.
- Review liquidity and covenant headroom, including the $14 million in letters of credit, lease commitments, and the terms of the secured revolving facility.
- Track foreign-exchange effects, customer spending and renewal trends, workforce and leadership changes, and the impact of shifting services to third parties.
- Consider share repurchases, equity awards, and the increase in shares outstanding when assessing per-share performance and dilution.