Yext(YEXT) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Yext, Inc. reported $190.1 million revenue and a $45.2 million net loss for the six months ended July 31, 2021, with total assets of $568.7 million and improved operating cash flow to $2.4 million Condensed Consolidated Balance Sheets As of July 31, 2021, total assets decreased to $568.7 million and total liabilities to $352.2 million, while stockholders' equity increased to $216.6 million Balance Sheet Data | Balance Sheet Items (In thousands) | July 31, 2021 (In thousands) | January 31, 2021 (In thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $240,490 | $230,411 | | Accounts receivable, net | $59,110 | $97,455 | | Total current assets | $349,220 | $376,184 | | Total assets | $568,744 | $595,989 | | Liabilities & Stockholders' Equity | | | | Unearned revenue, current | $165,377 | $191,810 | | Total current liabilities | $228,875 | $260,161 | | Total liabilities | $352,165 | $388,754 | | Total stockholders' equity | $216,579 | $207,235 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended July 31, 2021, revenue grew 11.4% to $98.1 million with a $27.6 million net loss, while the six-month period saw revenue increase 9.6% to $190.1 million and net loss narrow to $45.2 million Statements of Operations Data | Statement of Operations (In thousands) | Q2 2022 (ended Jul 31, 2021) (In thousands) | Q2 2021 (ended Jul 31, 2020) (In thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $98,124 | $88,055 | +11.4% | | Gross Profit | $71,509 | $66,071 | +8.2% | | Loss from operations | $(26,412) | $(24,240) | +9.0% | | Net loss | $(27,592) | $(25,116) | +9.9% | | Net loss per share, basic and diluted | $(0.22) | $(0.21) | +4.8% | Statements of Operations Data | Statement of Operations (In thousands) | Six Months ended Jul 31, 2021 (In thousands) | Six Months ended Jul 31, 2020 (In thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $190,116 | $173,406 | +9.6% | | Gross Profit | $141,647 | $130,238 | +8.8% | | Loss from operations | $(43,644) | $(53,429) | -18.3% | | Net loss | $(45,223) | $(54,340) | -16.8% | | Net loss per share, basic and diluted | $(0.36) | $(0.46) | -21.7% | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $2.4 million for the six months ended July 31, 2021, while net cash used in investing activities decreased to $10.6 million and net cash from financing activities increased to $17.6 million Cash Flow Data | Cash Flow Items (In thousands) | Six months ended July 31, 2021 (In thousands) | Six months ended July 31, 2020 (In thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,449 | $(16,295) | | Net cash used in investing activities | $(10,555) | $(40,055) | | Net cash provided by financing activities | $17,585 | $9,664 | | Net increase (decrease) in cash and cash equivalents | $10,079 | $(44,829) | | Cash and cash equivalents at end of period | $240,490 | $223,347 | Notes to Condensed Consolidated Financial Statements Notes highlight subscription-based revenue, with North America contributing 79%, $341.6 million in remaining performance obligations, a $50.0 million revolving loan facility with $35.7 million available, and $35.0 million in stock-based compensation expense Revenue by Geographic Region | Revenue by Geographic Region (In thousands) | Six months ended July 31, 2021 (In thousands) | Six months ended July 31, 2020 (In thousands) | | :--- | :--- | :--- | | North America | $150,699 | $140,398 | | International | $39,417 | $33,008 | | Total revenue | $190,116 | $173,406 | - As of July 31, 2021, the company had $341.6 million of remaining performance obligations, with $323.8 million expected to be recognized as revenue over the next twenty-four months[42] Stock-Based Compensation Expense | Stock-Based Compensation Expense (In thousands) | Six months ended July 31, 2021 (In thousands) | Six months ended July 31, 2020 (In thousands) | | :--- | :--- | :--- | | Cost of revenue | $3,757 | $2,540 | | Sales and marketing | $12,878 | $15,741 | | Research and development | $9,816 | $7,876 | | General and administrative | $8,549 | $8,445 | | Total | $35,000 | $34,602 | - The company has a $50.0 million senior secured revolving loan facility. As of July 31, 2021, $35.7 million was available, with $14.3 million allocated for letters of credit. The company was in compliance with all debt covenants[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2022 revenue growth to new and expanded subscriptions, while acknowledging ongoing COVID-19 risks, with the company reporting a GAAP net loss of $27.6 million and maintaining strong liquidity with $240.5 million in cash - The COVID-19 pandemic continues to impact business, with potential for customers in highly affected industries (retail, food services) and geographies (Europe) and to reduce, suspend, or delay technology spending[104] Revenue and Gross Profit Data | Revenue and Gross Profit (In thousands) | Q2 2022 (ended Jul 31, 2021) (In thousands) | Q2 2021 (ended Jul 31, 2020) (In thousands) | Variance ($) (In thousands) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $98,124 | $88,055 | $10,069 | 11% | | Cost of revenue | $26,615 | $21,984 | $4,631 | 21% | | Gross profit | $71,509 | $66,071 | $5,438 | 8% | | Gross margin | 72.9% | 75.0% | - | - | - The increase in cost of revenue was primarily driven by a $2.9 million increase in personnel-related costs and a $1.0 million increase in stock-based compensation, reflecting higher headcount[115] Reconciliation of GAAP to Non-GAAP Net Loss | Reconciliation of GAAP Net Loss to Non-GAAP Net Loss (In thousands) | Q2 2022 (ended Jul 31, 2021) (In thousands) | Q2 2021 (ended Jul 31, 2020) (In thousands) | | :--- | :--- | :--- | | Net loss (GAAP) | $(27,592) | $(25,116) | | Plus: Stock-based compensation expense | $20,402 | $17,230 | | Non-GAAP net loss | $(7,190) | $(7,886) | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency, inflation, and interest rates, but management does not anticipate a material effect on financial position or results from a hypothetical 10% change in these factors - The company's primary market risks are related to foreign currency, inflation, and interest rates[156] - Management states that a 10% change in the value of the U.S. dollar or a 10% change in interest rates would not have a material effect on the company's financial statements[157][160] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of July 31, 2021, due to a material weakness in sales commission accounting processes, which the company is actively remediating - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were ineffective as of July 31, 2021[163] - The ineffectiveness is due to a material weakness related to the processes to calculate, record, and account for sales commissions, as described in the Annual Report on Form 10-K[163][164] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings that are considered material to its business or financial condition - As of the filing date, Yext is not a party to any material legal proceedings[167] Risk Factors The company faces significant risks including a history of net losses, ongoing COVID-19 impacts, intense competition, operational challenges in sales and partner relationships, and a material weakness in internal controls over financial reporting - The company has a history of losses, with a net loss of $94.7 million in fiscal 2021 and an accumulated deficit of $517.3 million as of January 31, 2021. It may not achieve profitability in the future[175] - The COVID-19 pandemic is expected to continue to have an adverse effect on business, as some customers may reduce, suspend, or delay technology spending[176] - Growth is dependent on strategic relationships with approximately 200 third-party application providers in its Knowledge Network, including Google, Apple, and Amazon. Losing access to key providers could significantly harm the business[195] - A material weakness in internal control over financial reporting associated with the process to calculate, record, and account for sales commissions continued to exist as of January 31, 2021[221] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[313] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[314] Mine Safety Disclosures This item is not applicable to the company - Not applicable[315] Other Information There is no other information to report for the period - None[315] Exhibits The report lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, and Interactive Data Files (Inline XBRL) - Key exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[316]