Yext, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2025, the three months ended April 30, 2024. Comparative figures are for the three months ended April 30, 2023. Amounts below are in U.S. dollars.
Business context and reporting period
Yext provides a digital presence platform that helps businesses manage and distribute business information through its products and a network of more than 200 service and application providers. Revenue is predominantly subscription and support revenue recognized over contract terms. The company operates as one reportable segment.
Financial performance and liquidity
| Metric | Q1 FY2025 | Q1 FY2024 | Change / context |
|---|---|---|---|
| Revenue | $96.0 million | $99.5 million | Down 3% |
| Gross profit / margin | $74.4 million / 77.6% | $78.1 million / 78.5% | Margin down 0.9 percentage points |
| Operating expenses | $79.9 million | $79.3 million | Up 1% |
| Operating loss | $5.4 million | $1.2 million | Loss widened |
| Net loss | $3.8 million | $0.4 million | Loss widened; diluted loss per share was $0.03 |
| Adjusted EBITDA (non-GAAP) | $9.6 million | $14.4 million | Down from prior year |
| Non-GAAP net income | $6.4 million | $10.6 million | Down from prior year |
| Cash from operating activities | $38.3 million | $26.7 million | Increase included a $54.3 million benefit from accounts-receivable changes, mainly billing and collection timing |
| Capital expenditures | $0.6 million | $0.9 million | Net investing cash outflow was $0.6 million |
At April 30, 2024, cash and cash equivalents were $246.1 million, versus $210.2 million at January 31, 2024. Current assets were $339.6 million and current liabilities were $235.5 million. Total liabilities were $326.1 million, including operating lease liabilities; the filing does not present a funded borrowing balance. The $50 million revolving credit facility had $36.6 million available and $13.4 million allocated to letters of credit. Yext reported compliance with its debt covenants. Management said existing cash was expected to cover projected operating requirements for at least 12 months.
Stock-based compensation was $12.1 million, compared with $11.0 million a year earlier. The non-GAAP measures exclude stock-based compensation; FY2025 non-GAAP net income also uses a projected 25% tax rate, which affects comparability. These measures supplement, not replace, GAAP results.
Material changes versus the prior comparable period
- Revenue fell $3.5 million, primarily due to the attrition of a large customer during the prior quarter. Foreign exchange contributed an approximately $0.3 million positive impact to reported revenue.
- Direct-customer and reseller revenue declined 3% and 4%, respectively. Total ARR decreased 4% to $382.6 million from $398.3 million; direct-customer ARR was down 4% and reseller ARR down 2%.
- Total dollar-based net retention was 91%, compared with 96% a year earlier. Direct-customer retention fell to 91% from 97%; the company attributed the direct-customer comparison to the large customer’s attrition. Reseller retention was 94%, up from 92%.
- Gross margin declined to 77.6% from 78.5%. Operating expenses rose modestly, with general and administrative expense up 5%, partly due to higher stock-based compensation.
- Remaining performance obligations were $431.6 million at April 30, down from $465.1 million at January 31, 2024; $375.2 million was expected to be recognized over the next 24 months.
Outlook, management commentary, risks and unusual items
- The filing provides no specific quarterly or full-year revenue or earnings guidance. Management described subscription revenue as relatively predictable near term but warned that macroeconomic uncertainty could lead customers to reduce, delay, renegotiate or not renew subscriptions.
- On June 4, 2024, after quarter-end, Yext committed to a restructuring plan expected to reduce the workforce by approximately 12% compared with January 31, 2024 headcount. Estimated charges are approximately $5 million, mostly expected in Q2 FY2025; actual costs may differ.
- On June 10, 2024, Yext entered an agreement to acquire Hearsay Social for $125 million in cash, subject to customary adjustments and closing conditions. The agreement also provides for a $20 million employee/founder bonus pool, payable in cash or stock, and potential milestone-based earnout consideration of up to $75 million, also payable in cash or stock at Yext’s election. Closing was expected in the second half of FY2025, subject to regulatory approvals and other conditions.
- Key risks include continued revenue contraction, customer attrition and retention, dependence on resellers and large customers, competition, macroeconomic pressure on technology spending, execution of cost reductions and the Hearsay acquisition, and cybersecurity, privacy, AI and regulatory risks. Foreign exchange and interest-rate exposures were described as not expected to have a material effect under the stated sensitivities; cash balances above insured limits create counterparty risk.
- The company reported no material legal proceedings and said the likelihood of a material adverse impact from ordinary-course claims was remote. Disclosure controls were assessed as effective at April 30, 2024, with no material change in internal control over financial reporting identified during the quarter.
Important facts for investors to verify
- Whether the large-customer loss and lower retention continue to weigh on revenue, ARR and renewals.
- Whether operating cash generation remains strong after adjusting for billing and collection timing and movements in unearned revenue.
- The expected timing, actual cost and operating effects of the workforce reduction.
- Hearsay’s closing conditions, total consideration, funding approach, integration costs and progress toward earnout targets.
- How the 25% projected tax rate and stock-based-compensation exclusions affect non-GAAP comparisons with GAAP performance.