Yext, Inc. — Form 10-Q summary
Business and period. Yext provides a platform for businesses to manage and publish information across their websites and a network of third-party services. This filing covers the fiscal third quarter and first nine months ended October 31, 2022; Yext’s fiscal year ends January 31.
Financial performance
| Metric | Three months ended Oct. 31, 2022 | Nine months ended Oct. 31, 2022 |
|---|---|---|
| Revenue | $99.3 million, down 0.2% year over year | $299.0 million, up 3% |
| Gross margin | 74.2%, versus 74.6% | 74.1%, versus 74.5% |
| Operating loss | $12.1 million, versus $24.4 million | $57.2 million, versus $68.0 million |
| Net loss | $12.3 million, versus $24.9 million | $58.1 million, versus $70.1 million |
| Net loss per share | $0.10 | $0.46 |
Quarterly revenue was approximately flat as foreign exchange reduced reported revenue by about $3.7 million; management reported 4% constant-currency growth. Nine-month constant-currency growth was 6%, with an estimated $7.9 million FX headwind. Direct-customer revenue grew 2% in the quarter and 5% year to date; reseller revenue fell 8% and 4%, respectively, primarily due to attrition. Sales and marketing expense declined, contributing to narrower losses; gross margin eased.
For the nine months, operating cash flow was negative $18.1 million, investing cash flow was negative $5.4 million (capital expenditures), and financing cash flow was negative $68.3 million, primarily due to share repurchases. Cash and cash equivalents were $162.3 million at October 31, down from $261.2 million at January 31. Stockholders’ equity was $129.9 million.
Yext reported $389.5 million of ARR at October 31, up 1% year over year: direct-customer ARR increased 3% to $317.3 million, while reseller ARR declined 8% to $72.3 million. Customer count increased 6% to approximately 2,900. Remaining performance obligations were $365.4 million, of which $312.8 million was expected to be recognized over the next 24 months.
Liquidity, debt and capital allocation
Management said existing cash was expected to fund projected operating requirements for at least 12 months. The $50 million secured revolving credit facility had $35.9 million available and $14.1 million allocated to letters of credit; Yext reported compliance with its covenants. The balance sheet reports no borrowings. Operating lease liabilities totaled approximately $120.5 million. Under its $100 million repurchase authorization, Yext had repurchased 12.4 million shares for $69.1 million, leaving approximately $30.9 million available.
Outlook, commentary and risks
The filing provides no numerical revenue or earnings guidance. Yext identified slower expected growth in the coming year and said it was reducing operating expenses in the near term, while noting expenses could rise in future years. Management attributed revenue growth to new and expanded subscriptions, but highlighted reseller attrition and foreign-exchange pressure. Subscription revenue is recognized over contract terms, so changes in sales and renewals may affect reported results with a delay.
Principal risks include economic weakness and reduced customer technology spending, continuing effects of COVID-19, competition and renewal risk, reliance on third-party resellers and Knowledge Network providers, currency movements, and privacy, cybersecurity and service-continuity risks. The company also cited recent senior leadership changes. A securities class action concerning alleged disclosures about the business and COVID-19 effects was voluntarily dismissed without prejudice on November 28, 2022, after the quarter ended. Management stated disclosure controls were effective as of October 31, 2022.
Important facts for investors to verify
- Whether ARR and customer retention trends improve, particularly the decline in reseller ARR and revenue.
- How much of reported growth is being offset by foreign exchange and whether constant-currency growth converts into reported revenue.
- Whether expense reductions can sustain narrower losses without impairing sales capacity or growth.
- Cash burn, the pace of share repurchases, and the effect of repurchases on liquidity and remaining capital needs.
- Developments in the securities litigation and the company’s ability to meet credit-facility covenants and manage lease commitments.