Yext, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended January 31, 2022. The filing is an annual report, not a standalone Q4 report; it also provides unaudited results for the three months ended January 31, 2022.
Business context
Yext sells subscription software that helps organizations manage business information in its Knowledge Graph and publish it across customer websites and a network of approximately 200 search, map, social and voice applications. Its main products include Listings, Pages and Answers. Revenue is primarily subscription and support revenue, generally recognized over contract terms.
Financial highlights
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $390.6 million | $354.7 million |
| Revenue growth | 10% | 19% |
| Gross profit / margin | $292.3 million / 74.8% | $268.3 million / 75.6% |
| Operating loss | $90.0 million | $94.3 million |
| Net loss | $93.3 million | $94.7 million |
| Operating cash flow | $21.8 million | $1.2 million |
| Cash and cash equivalents at year-end | $261.2 million | $230.4 million |
FY2022 diluted and basic net loss per share was $0.73. Non-GAAP net loss, which excludes stock-based compensation, was $19.8 million, versus $22.4 million in FY2021; stock-based compensation was $73.5 million. Operating cash flow benefited in part from $33.3 million of increased unearned revenue and substantial non-cash expenses.
At January 31, 2022, total liabilities were $408.5 million, including $132.6 million of operating lease liabilities; the balance sheet lists no drawn debt. The $50 million revolving credit facility had $35.7 million available, with $14.3 million allocated to letters of credit. Yext reported compliance with its covenants. Current assets were $410.4 million and current liabilities $290.7 million.
For Q4 FY2022, revenue was $100.9 million, gross margin 75.7%, operating loss $22.0 million and net loss $23.1 million.
Changes versus prior comparable periods
- Revenue rose 10%, slower than FY2021’s 19% growth and FY2020’s 31% growth. Management said it expected growth to be slower in the coming year.
- Gross margin declined 0.8 percentage points to 74.8%. Cost of revenue grew 14%, faster than revenue, partly reflecting higher personnel, depreciation and data-center costs; lower Knowledge Network provider fees partly offset those increases.
- Operating loss narrowed to $90.0 million from $94.3 million, and net loss improved modestly. Research and development expense rose 18%, while sales and marketing expense increased 1% and general and administrative expense rose 10%.
- Dollar-based net retention fell to 98% from 102% (and 106% in FY2020), indicating contraction in existing-customer revenue cohorts.
- Operating cash flow improved to $21.8 million from $1.2 million. Investing cash outflow decreased to $13.4 million from $65.1 million, largely because the prior year included substantial office-related capital expenditures.
Outlook, commentary and risks
- No quantified revenue or earnings guidance is included in the supplied filing text. Management stated that growth in the coming year was expected to be slower and believed cash on hand would fund projected operating requirements for at least 12 months.
- Management cited COVID-19-related customer spending pressure, delayed or shortened contracts, renewal risk and continued uncertainty, particularly for retail, food services and some European markets. Because subscription revenue is recognized over time, changes in bookings may take time to appear in reported results.
- On March 7, 2022, after the fiscal year-end, CEO Howard Lerman and CFO Steven Cakebread announced plans to step down effective March 25. Chairman Michael Walrath was named CEO, Darryl Bond CFO, and Marc Ferrentino President and COO. Management anticipated further strategy and personnel changes that had not yet been determined. The company also reduced quota-carrying sales representatives by approximately 35.
- Other notable risks include declining customer retention, competition and pricing pressure, dependence on third-party Knowledge Network and reseller relationships, privacy and cybersecurity obligations, international and currency exposure, and the possibility of continued losses. Russia’s invasion of Ukraine was cited as a source of uncertainty for global markets and operations.
- A material weakness identified in FY2021 relating to sales-commission accounting was reported as remediated in FY2022. Management and the independent auditor concluded that internal control over financial reporting was effective at year-end. The auditor identified revenue recognition and capitalization of costs to obtain revenue contracts as critical audit matters.
- The company reported no legal proceedings material to its business or financial condition. It had $404.9 million of remaining performance obligations at year-end, of which $379.0 million was expected to be recognized over the next 24 months.
Investor verification priorities
- Check subsequent results against the stated expectation of slower growth, and monitor bookings, renewal trends and the 98% net retention rate.
- Assess whether the cash-flow improvement is sustainable, given the contribution from unearned revenue, and track cash, capital spending and lease commitments.
- Review gross-margin trends and the cost of scaling infrastructure and international operations.
- Follow execution and any strategic or personnel changes after the CEO and CFO transitions, including effects of the sales-force reduction.
- Monitor the credit facility’s covenants and availability, customer and reseller concentration, and the company’s continuing GAAP losses and substantial stock-based compensation.