Yext, Inc. (NYSE:YEXT) Q1 2020 Results Earnings Conference Call May 30, 2019 5:00 PM ET Company Participants Conrad Grodd - Vice President of Investor Relations Howard Lerman - Founder, Chief Executive Officer Jim Steele - President, Chief Revenue Officer Steve Cakebread - Chief Financial Officer Conference Call Participants Koji Ikeda - Oppenheimer Brent Bracelin - KeyBanc Capital Markets Naved Khan - SunTrust Alex Zukin - Piper Jaffray Mark Randall - Morgan Stanley Brett Knoblauch - Berenberg Capital Mark ...

Part I [Business Overview](index=6&type=section&id=Item%201.%20Business) Yext offers a cloud platform for businesses to manage public digital information across 150+ services, achieving $228.3 million revenue but a $74.8 million net loss in FY2019 - Yext's platform enables businesses to control and synchronize digital knowledge across a **Knowledge Network** of over **150** services, including **Amazon Alexa**, **Apple Maps**, **Google**, and **Facebook**[23](index=23&type=chunk) - The company's growth strategy focuses on expanding its customer base, increasing sales to existing customers, international expansion (over **14%** of FY2019 revenue), developing new products, and extending its **Knowledge Network**[34](index=34&type=chunk)[37](index=37&type=chunk) - As of January 31, 2019, Yext had over **900** full-time employees and served businesses in over **100** countries, with no single customer accounting for more than **10%** of fiscal 2019 revenue[49](index=49&type=chunk)[64](index=64&type=chunk) Financial Performance (Fiscal Years 2017-2019) | Fiscal Year Ended Jan 31 | Revenue (in millions) | Net Loss (in millions) | | :--- | :--- | :--- | | 2019 | $228.3 | $(74.8) | | 2018 | $170.2 | $(66.6) | | 2017 | $124.3 | $(43.2) | [Overview](index=6&type=section&id=Item%201.%20Business%23Overview) Yext positions itself as a knowledge engine, providing a cloud platform to manage public digital information across a vast network of services, reporting $228.3 million revenue and a $74.8 million net loss in fiscal 2019 - Yext's platform serves as a system of record for digital knowledge, ensuring accuracy across its Knowledge Network including **Amazon Alexa**, **Apple Maps**, **Google**, and **Yelp**[23](index=23&type=chunk)[25](index=25&type=chunk) Key Financials (FY2017-FY2019) | Fiscal Year Ended | Revenue (in millions) | Net Loss (in millions) | | :--- | :--- | :--- | | Jan 31, 2019 | $228.3 | $(74.8) | | Jan 31, 2018 | $170.2 | $(66.6) | | Jan 31, 2017 | $124.3 | $(43.2) | [Growth Strategy](index=7&type=section&id=Item%201.%20Business%23Growth%20Strategy) Yext's growth strategy focuses on expanding its customer base, deepening existing customer relationships, developing new products, and extending its global Knowledge Network - Key growth strategies include expanding the customer base, up-selling to existing customers, and international expansion[34](index=34&type=chunk)[37](index=37&type=chunk) - International revenue comprised over **14%** of total revenue in fiscal 2019, with established presence in the **UK**, **Germany**, **France**, **Italy**, **Switzerland**, **Japan**, and **China**[37](index=37&type=chunk) - The company plans to expand its Knowledge Network, which included over **150** applications in FY2019, focusing on industry-specific and international services like **Amazon Alexa** integration[37](index=37&type=chunk) [The Yext Knowledge Engine](index=11&type=section&id=Item%201.%20Business%23The%20Yext%20Knowledge%20Engine) The Yext Knowledge Engine is a cloud-based platform enabling customers to manage digital knowledge through subscription packages for Listings, Pages, and Reviews - The platform's core features, **Listings**, **Pages**, and **Reviews**, are offered via subscription packages[40](index=40&type=chunk) - The technology features a cloud-based, microservices architecture built with open-source technology, hosted in co-location data centers for scalability and redundancy[42](index=42&type=chunk)[43](index=43&type=chunk) - Data is structured using **schema.org** standards, ensuring compatibility with search engines such as **Google** and **Bing**[44](index=44&type=chunk) [Sales and Marketing](index=13&type=section&id=Item%201.%20Business%23Sales%20and%20Marketing) Yext sells solutions globally via direct sales, resellers, and self-service, focusing on enterprise and mid-size businesses with a dollar-based net retention rate of 110% in fiscal 2019 - The quota-carrying sales force grew from **131** to **173** representatives in the year ended January 31, 2019[51](index=51&type=chunk) - Revenue from direct sales to small businesses was less than **10%** of total revenue in fiscal 2019, reflecting a shift towards larger customers[54](index=54&type=chunk) Dollar-Based Net Retention Rate | Fiscal Year Ended | Rate | | :--- | :--- | | Jan 31, 2019 | 110% | | Jan 31, 2018 | 109% | | Jan 31, 2017 | 119% | [Competition](index=15&type=section&id=Item%201.%20Business%23Competition) Yext operates in an evolving digital knowledge management market, primarily competing with in-house manual processes and smaller firms offering limited features - Primary competition stems from businesses managing digital knowledge in-house via manual processes[62](index=62&type=chunk) - Yext also competes with smaller firms offering lower-priced products or a subset of its features[62](index=62&type=chunk) - Competitive strengths include the breadth of its **Knowledge Network**, platform features, ease of integration, and customer **ROI**[63](index=63&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) Yext faces significant risks including persistent net losses, rapid growth management, reliance on key partners, security breaches, and material weaknesses in internal controls - The company has a history of losses, with a net loss of **$74.8 million** in fiscal 2019 and an accumulated deficit of **$301.1 million** as of January 31, 2019[68](index=68&type=chunk) - Growth is highly dependent on expanding the direct sales force and successfully managing international operations, which expose the company to regulatory, economic, and political risks[75](index=75&type=chunk)[77](index=77&type=chunk) - The business relies on strategic relationships with over **150** third-party application providers in its **Knowledge Network**, where the loss of a key partner like **Google** could significantly impact customer retention[81](index=81&type=chunk) - A material weakness in internal control over financial reporting related to information technology general controls was identified as of January 31, 2019, potentially affecting investor confidence[112](index=112&type=chunk)[114](index=114&type=chunk) - The company is subject to evolving data privacy laws such as **GDPR** and the **California Consumer Privacy Act (CCPA)**, potentially increasing compliance costs and liability[132](index=132&type=chunk)[134](index=134&type=chunk) [Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[192](index=192&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) Yext's corporate headquarters are in New York, NY, occupying 95,000 sq ft of leased space, with other domestic and international leased offices deemed adequate - Corporate headquarters are in **New York, NY**, with approximately **95,000 sq. ft.** of leased space[193](index=193&type=chunk) - All facilities are leased, and the company believes existing space is adequate for current needs[193](index=193&type=chunk) [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings material to its business or financial condition - The company is not currently a party to any material legal proceedings[194](index=194&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[195](index=195&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Yext's common stock trades on the NYSE since April 2017, with no dividends paid, and details on equity compensation plans are provided - Common stock trades on the **NYSE** under the symbol **"YEXT"** since April 13, 2017[198](index=198&type=chunk) - The company has never paid dividends and does not anticipate paying them in the foreseeable future[199](index=199&type=chunk) Equity Compensation Plan Information (as of Jan 31, 2019) | Plan Category | Securities to be issued upon exercise/vesting | Weighted-average exercise price of outstanding options | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 23,680,940 | $6.54 | 2,966,657 | [Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data shows consistent revenue growth from $60.0 million in FY2015 to $228.3 million in FY2019, alongside widening net losses and increased operating expenses Selected Consolidated Statements of Operations Data (in thousands) | Fiscal year ended January 31, | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$228,283** | **$170,201** | **$124,261** | **$89,724** | **$60,002** | | Gross profit | $170,870 | $126,106 | $87,311 | $58,691 | $35,170 | | Loss from operations | $(75,645) | $(66,640) | $(42,700) | $(26,138) | $(17,351) | | **Net loss** | **$(74,837)** | **$(66,565)** | **$(43,150)** | **$(26,495)** | **$(17,273)** | Selected Consolidated Balance Sheet Data (in thousands) | As of January 31, | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $91,755 | $34,367 | $24,420 | $30,028 | | Total assets | $267,128 | $203,489 | $86,465 | $85,497 | | Total liabilities | $182,579 | $122,036 | $93,605 | $60,118 | | Total stockholders' equity (deficit) | $84,549 | $81,453 | $(127,755) | $(95,236) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses FY2019 financial performance, noting a 34% revenue increase to $228.3 million, a $74.8 million net loss due to rising expenses, and $142.8 million in liquidity - Revenue for fiscal 2019 was **$228.3 million**, a **34%** increase from **$170.2 million** in fiscal 2018, driven by new customers and expanded subscriptions[222](index=222&type=chunk)[232](index=232&type=chunk) - Net loss increased to **$74.8 million** in fiscal 2019 from **$66.6 million** in fiscal 2018, driven by higher operating expenses across sales & marketing, R&D, and G&A to support growth[229](index=229&type=chunk) - The company adopted the new revenue recognition standard **ASU 2014-09** on a modified retrospective basis effective February 1, 2018, resulting in increased capitalization and longer amortization of contract acquisition costs[236](index=236&type=chunk)[302](index=302&type=chunk) - As of January 31, 2019, the company held **$142.8 million** in cash, cash equivalents, and marketable securities, deemed sufficient for at least the next **12 months** of operating requirements[255](index=255&type=chunk) [Results of Operations](index=44&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Results%20of%20Operations) Fiscal 2019 revenue grew 34% to $228.3 million with improved gross margin, while operating expenses rose 28% due to increased personnel costs across departments Comparison of Fiscal Years 2019 and 2018 (in thousands) | | FY 2019 | FY 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $228,283 | $170,201 | $58,082 | 34% | | Gross Profit | $170,870 | $126,106 | $44,764 | 35% | | Sales and marketing | $158,845 | $126,980 | $31,865 | 25% | | Research and development | $36,098 | $25,687 | $10,411 | 41% | | General and administrative | $51,572 | $40,079 | $11,493 | 29% | Comparison of Fiscal Years 2018 and 2017 (in thousands) | | FY 2018 | FY 2017 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $170,201 | $124,261 | $45,940 | 37% | | Gross Profit | $126,106 | $87,311 | $38,795 | 44% | | Sales and marketing | $126,980 | $81,529 | $45,451 | 56% | | Research and development | $25,687 | $19,316 | $6,371 | 33% | | General and administrative | $40,079 | $29,166 | $10,913 | 37% | [Liquidity and Capital Resources](index=50&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Liquidity%20and%20Capital%20Resources) As of January 31, 2019, Yext had $142.8 million in liquidity, deemed sufficient for the next 12 months, and a credit facility with Silicon Valley Bank - Principal sources of liquidity as of January 31, 2019, were cash, cash equivalents, and marketable securities totaling **$142.8 million**[255](index=255&type=chunk) - The company maintains a credit agreement with **Silicon Valley Bank** including a **$15.0 million** revolving line (fully available as of January 31, 2019) and a **$7.0 million** Letter of Credit facility[257](index=257&type=chunk)[260](index=260&type=chunk) Cash Flow Summary (in thousands) | Fiscal year ended January 31, | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $5,240 | $(32,409) | $(13,532) | | Net cash provided by (used in) investing activities | $28,134 | $(88,123) | $(3,803) | | Net cash provided by financing activities | $24,384 | $129,604 | $5,968 | [Critical Accounting Policies and Estimates](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant judgment in revenue recognition, capitalizing contract costs, stock-based compensation, and income taxes - **Revenue Recognition:** The company adopted **ASC 606**, recognizing revenue as services are transferred, requiring judgment in identifying performance obligations and allocating transaction prices[276](index=276&type=chunk)[277](index=277&type=chunk) - **Costs Capitalized to Obtain Revenue Contracts:** Incremental costs like sales commissions are capitalized and amortized straight-line over an estimated **three-year** benefit period for new contracts[279](index=279&type=chunk) - **Stock-Based Compensation:** Fair value of awards is measured at grant date and recognized over the service period, requiring significant judgment for forfeiture rates, volatility, and expected life[281](index=281&type=chunk)[282](index=282&type=chunk) - **Income Taxes:** The company provides for deferred income taxes and establishes a valuation allowance against deferred tax assets if their realization is not probable[285](index=285&type=chunk)[286](index=286&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to foreign currency, inflation, and interest rate risks, though a 10% change in these factors is not expected to materially impact financials - The company is exposed to foreign currency, inflation, and interest rate risks[290](index=290&type=chunk) - A hypothetical **10%** change in foreign exchange rates or interest rates is not expected to materially affect the company's financial position or results[291](index=291&type=chunk)[294](index=294&type=chunk) - The investment portfolio of **$142.8 million** as of January 31, 2019, is primarily for capital preservation and not held for trading or speculative purposes[293](index=293&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements with an unqualified opinion, but an adverse opinion on internal controls due to a material weakness - Includes audited Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, Statements of Cash Flows, and related notes[297](index=297&type=chunk) - The independent auditor, **Ernst & Young LLP**, issued an unqualified opinion on the consolidated financial statements[300](index=300&type=chunk) - The independent auditor issued an adverse opinion on the effectiveness of internal control over financial reporting as of January 31, 2019, due to a material weakness in information technology general controls[301](index=301&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=92&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting or financial disclosure matters - None[461](index=461&type=chunk) [Controls and Procedures](index=92&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in IT general controls, leading to an adverse auditor opinion, with remediation underway - Management concluded that disclosure controls and procedures were ineffective as of January 31, 2019[463](index=463&type=chunk) - A material weakness was identified in information technology general controls (**ITGC**), impacting controls related to revenue recognition and financial close processes[465](index=465&type=chunk)[468](index=468&type=chunk) - The auditor issued an adverse opinion on the effectiveness of internal control over financial reporting[467](index=467&type=chunk) - Remediation activities are underway, focusing on improving logical security, program change management, computer operations controls, and IT training[471](index=471&type=chunk)[473](index=473&type=chunk) [Other Information](index=93&type=section&id=Item%209B.%20Other%20Information) The company reports no other information to disclose under this item - None[472](index=472&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=94&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information regarding directors, executive officers, corporate governance, and the audit committee is incorporated by reference from the **2019 Proxy Statement**[475](index=475&type=chunk)[479](index=479&type=chunk) [Executive Compensation](index=94&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the 2019 Proxy Statement - Information on executive and director compensation is incorporated by reference from the **2019 Proxy Statement**[480](index=480&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=94&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2019 Proxy Statement - Information on security ownership is incorporated by reference from the **2019 Proxy Statement**[482](index=482&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=94&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2019 Proxy Statement - Information on related transactions and director independence is incorporated by reference from the **2019 Proxy Statement**[483](index=483&type=chunk) [Principal Accountant Fees and Services](index=94&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2019 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the **2019 Proxy Statement**[484](index=484&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and a comprehensive index of exhibits filed as part of the Form 10-K - This item lists the financial statements, financial statement schedules, and exhibits filed as part of the **Form 10-K**[485](index=485&type=chunk)[486](index=486&type=chunk) [Form 10-K Summary](index=97&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no Form 10-K summary provided - None[491](index=491&type=chunk)

Financial Data and Key Metrics Changes - Total revenue grew 33% year-over-year in Q4, reaching $63.8 million, exceeding guidance [9][30] - Full year revenue increased 34%, totaling $228.8 million [9][30] - Operating cash flow for Q4 was nearly $31 million, marking the first full year of positive operating cash flow [9][36] - Net loss for Q4 increased to $19.9 million from $17 million a year ago, with a net loss per share of $0.20 [34] Business Line Data and Key Metrics Changes - Signed 128 new enterprise logos in Q4, a 68% increase from the previous year [10][19] - New annual contract value (ACV) from new customers and expansions was balanced, with approximately half coming from each segment [30] - Deferred revenue increased 54% year-over-year to $137.4 million [31] Market Data and Key Metrics Changes - International results were strong, with Japan achieving the largest first-year results in company history [25] - Significant growth in Europe, particularly in northern and southern regions [25] Company Strategy and Development Direction - The company aims to provide verified answers online, positioning itself as a critical technology provider for brands [16][24] - Focus on expanding sales capacity, particularly in mid-market and enterprise segments, with plans to hire more quota-carrying sales representatives [20][63] - Strategic discussions with customers are leading to larger contracts, with 169 deals above $100,000 closed in Q4 [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's state and growth opportunities, citing strong demand indicators and increased C-level engagement [19][106] - The company plans to continue investing in sales and marketing, as well as R&D, to support growth [38][66] Other Important Information - The company adopted ASC-606 accounting standards, with minimal impact on revenue recognition [27][29] - Remaining performance obligations (RPO) stood at $262 million, with an additional $34 million in backlog [32] Q&A Session Summary Question: Can you discuss the RPO metric and its historical growth? - Management noted that the RPO reflects contracted but unbilled revenue, with the $34 million representing exclusions under ASC-606 [44] Question: How is the focus on mid-market accounts progressing? - The company has ramped up hiring for mid-market sales teams and is seeing significant growth in that segment [46] Question: What is the retention trend for the SMB segment? - Retention for the SMB segment remains in the mid-40% to 50% range, with a strategic shift towards mid-market and enterprise [51] Question: How is sales hiring trending? - The company is aggressively hiring, currently at 18% quota-carrying sales headcount, with a goal of reaching 20% [63] Question: What drove the increase in deferred revenue in Q4? - The increase is attributed to strong new business and renewals, typical for the software industry [92]

You. In Control. Everywhere. JMP Securities 2019 Technology February 26, 2019 Conference PRESENTED TO: DATE: PRESENTED BY: Steve Cakebread, CFO Legal Disclosures These slides and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements regarding future results of the operations and financial position of Yext, Inc. ("Yext" or the "Company"), financial targets, business strategy, and plan ...

| --- | --- | --- | --- | |-------|-------|-------|-------| | | | | | | | | | | | | | | | "Company"), financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. Yext has based these forward-looking statements primarily on its current expectations and projections about future events and trends that it believes may affect its business, those that may be described in greater detail in the Company's periodic filings with the U.S. Securities and Exchange ...