Yext, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended July 31, 2022. Yext provides a subscription platform for managing business information across websites, search engines, and other third-party services.
Financial performance
| Metric | Three months ended July 31, 2022 | Year-over-year change | Six months ended July 31, 2022 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $100.9 million | +3% reported; +6% constant currency | $199.7 million | +5% reported; +7% constant currency |
| Gross profit / margin | $73.8 million / 73.2% | Margin: 72.9% prior year | $147.9 million / 74.1% | Margin: 74.5% prior year |
| Operating expenses | $93.3 million | Down from $97.9 million | $192.9 million | Up from $185.3 million |
| Operating loss | $19.5 million | Improved from $26.4 million | $45.0 million | Compared with $43.6 million |
| Net loss | $20.0 million; $0.16 per share | Improved from $27.6 million; $0.22 per share | $45.8 million; $0.36 per share | Compared with $45.2 million; $0.36 per share |
| Operating cash flow | Not presented separately for the quarter | $(7.3) million | Compared with $2.4 million provided |
- Quarterly revenue growth was primarily attributed to new customer subscriptions and expansion among existing customers. Foreign exchange reduced quarterly revenue by approximately $2.8 million and six-month revenue by approximately $4.2 million, on the company’s constant-currency calculation.
- Subscription and support revenue represented 91% of revenue; professional services represented 9%.
- Quarterly sales and marketing expense fell 8%, while six-month research and development expense rose 12%. Management cited lower headcount and stock-based compensation, and lower prior-period advertising, for quarterly sales and marketing reductions; increased personnel costs contributed to higher year-to-date R&D and G&A expense.
Financial position, liquidity, and capital allocation
- Cash and cash equivalents were $187.9 million at July 31, 2022, down from $261.2 million at January 31, 2022. Total assets were $480.3 million and stockholders’ equity was $138.9 million.
- Six-month cash outflow was $7.3 million from operations, $3.9 million from investing, and $56.6 million from financing. Financing outflow primarily reflected $58.7 million of share repurchases. Cash declined by $73.3 million overall, including a $5.6 million negative foreign-exchange effect.
- Management said existing cash was expected to meet projected operating requirements for at least the next 12 months. Cash flows may vary with billing, collections, lease payments, marketing events, and pandemic-related effects.
- No revolver borrowings are reported. The $50 million Silicon Valley Bank facility had $35.9 million available and $14.1 million allocated to letters of credit. Yext reported compliance with its debt covenants. The facility is secured and includes financial and other restrictive covenants.
- Yext repurchased 10.2 million shares for $58.9 million at an average $5.77 per share under its $100 million authorization; approximately $41.1 million remained. Shares outstanding were 123.8 million at July 31, versus 131.2 million at January 31.
- Current and non-current operating lease liabilities totaled $124.8 million. Remaining performance obligations were $326.6 million, of which $310.3 million was expected to be recognized over the next 24 months, compared with $404.9 million at January 31.
Outlook, risks, and notable developments
- The filing does not provide a clear numerical revenue or earnings forecast. Yext said it expected slower growth in the coming year and disclosed that it was reducing operating expenses in the near term.
- Management cited continuing uncertainty from COVID-19, inflation and weaker economic conditions, reduced customer technology spending, longer sales cycles, customer contract concessions or non-renewals, and foreign-currency movements. Subscription revenue is recognized over contract terms, so changes in sales and renewals may affect reported results with a lag.
- Leadership changed in March 2022: the former CEO and CFO resigned, and the chairman and chief accounting officer assumed those roles. The president and chief revenue officer resigned in June; the company said it had begun a search for a permanent replacement.
- A putative securities class action filed June 17, 2022 names Yext and its former CEO and CFO. It alleges misleading statements and omissions, including concerning COVID-19 effects, and seeks monetary damages. Yext said it believes it has meritorious defenses and intends to defend itself vigorously. The filing does not state a clear estimate of potential loss.
- Management said disclosure controls were effective as of July 31, 2022, with no material changes to internal control identified during the six-month period. A previously identified sales-commission control weakness was reported as remediated in fiscal 2022.
Important facts for investors to verify
- Whether customer additions, renewals, and expansion sustain growth amid the disclosed slower-growth outlook and reported decline in remaining performance obligations.
- Whether operating cash flow improves and how cash, unearned revenue, and collections trend in subsequent quarters.
- The amount and pace of any further buybacks, and their effect on cash resources and shares outstanding.
- Developments in the securities class action, including any later disclosure of potential financial exposure.
- Progress in stabilizing leadership and sales operations, and any effect on growth, expenses, or execution.
- Foreign-exchange impacts, customer spending trends, and compliance with the secured revolving credit facility’s covenants.