Yext(YEXT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Yext, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows for the periods ended July 31, 2024 and January 31, 2024 (or July 31, 2023 for income statement and cash flow data), along with detailed notes Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheets (Unaudited) - Key Figures | Metric | July 31, 2024 (in thousands) | January 31, 2024 (in thousands) | | :----- | :------------ | :--------------- | | Total Assets | $458,204 | $508,810 | | Total Liabilities | $295,401 | $361,636 | | Total Stockholders' Equity | $162,803 | $147,174 | | Cash and Cash Equivalents | $234,823 | $210,184 | | Accounts Receivable, net | $45,870 | $108,198 | | Unearned Revenue, current | $156,194 | $212,210 | - Total assets decreased by $50.6 million from January 31, 2024, to July 31, 2024, primarily due to a significant reduction in accounts receivable and unearned revenue[13] Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Key Figures | Metric | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $97,887 | $102,598 | $193,877 | $202,051 | | Gross Profit | $75,594 | $80,205 | $150,038 | $158,308 | | Loss from Operations | $(7,566) | $(4,231) | $(12,992) | $(5,463) | | Net Loss | $(4,057) | $(3,437) | $(7,874) | $(3,849) | | Net Loss per Share (Basic & Diluted) | $(0.03) | $(0.03) | $(0.06) | $(0.03) | - The company experienced an increased net loss for both the three and six months ended July 31, 2024, compared to the same periods in the prior year, with revenue declining by 5% and 4% respectively[17] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Key Changes | Metric | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance, April 30, 2024 | $155,674 | $140,587 | $147,174 (Jan 31, 2024) | $128,023 (Jan 31, 2023) | | Stock-based compensation | $12,420 | $11,660 | $24,574 | $22,779 | | Net loss | $(4,057) | $(3,437) | $(7,874) | $(3,849) | | Balance, July 31, 2024 | $162,803 | $139,021 | $162,803 | $139,021 | - Total stockholders' equity increased from $147.2 million at January 31, 2024, to $162.8 million at July 31, 2024, primarily driven by stock-based compensation, partially offset by net loss[23] Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures | Metric | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $27,660 | $19,710 | | Net cash used in investing activities | $(1,192) | $(1,567) | | Net cash used in financing activities | $(2,008) | $(8,261) | | Net increase in cash and cash equivalents | $24,639 | $10,313 | | Cash and cash equivalents at end of period | $234,823 | $200,527 | - Net cash provided by operating activities increased to $27.7 million for the six months ended July 31, 2024, from $19.7 million in the prior year, mainly due to changes in accounts receivable and costs to obtain revenue contracts[27] Notes to Condensed Consolidated Financial Statements 1. Organization and Description of Business - Yext, Inc. provides a digital presence platform (Answers Platform) that helps businesses manage their brand information in a knowledge graph (Yext Content) and deliver it across over 200 first- and third-party websites and applications (Publisher Network), including Listings, Reviews, Pages, and Search products[29] - The company's fiscal year ends on January 31st[30] 2. Summary of Significant Accounting Policies - The condensed consolidated financial statements are prepared in accordance with GAAP and SEC interim reporting rules, consolidating Yext and its wholly-owned subsidiaries, with no material changes to significant accounting policies reported since the last 10-K[31] - Management uses estimates and assumptions for financial reporting, including standalone selling prices, lease liabilities, useful life of revenue contracts, income taxes, and stock-based compensation[32] - Yext operates as a single operating segment, with executive officers making resource allocation and performance assessment decisions on a consolidated basis[33] - The company is evaluating the impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Taxes), effective for fiscal 2025/2026 and 2026 respectively[35] 3. Revenue - Yext has two distinct performance obligations: subscription and associated support to its platform (predominant revenue source) and professional services (7% and 8% of total revenue for the six months ended July 31, 2024 and 2023, respectively)[35] Revenue by Geographic Region | Region | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $76,823 | $80,819 | $152,180 | $159,319 | | International | $21,064 | $21,779 | $41,697 | $42,732 | | Total Revenue | $97,887 | $102,598 | $193,877 | $202,051 | - North America (primarily U.S.) accounted for 78% of total revenue for the six months ended July 31, 2024, and 79% for the same period in 2023, with the UK representing 20% of total revenue for both periods[36] - Remaining performance obligations totaled $396.5 million as of July 31, 2024, with $349.4 million expected to be recognized as revenue over the next 24 months[40] 4. Investments in Marketable Securities Investments in Marketable Securities | Type | Amortized Cost (July 31, 2024) (in thousands) | Fair Value (July 31, 2024) (in thousands) | Amortized Cost (Jan 31, 2024) (in thousands) | Fair Value (Jan 31, 2024) (in thousands) | | :--- | :----------------------------- | :------------------------- | :---------------------------- | :------------------------ | | Money market funds | $415 | $415 | $63,966 | $63,966 | | U.S. treasury securities | $44,150 | $44,148 | $82,642 | $82,635 | | Total | $44,565 | $44,563 | $146,608 | $146,601 | - Marketable securities, primarily U.S. treasury securities and money market funds, are classified as cash and cash equivalents due to maturities of 90 days or less, with total marketable securities decreasing significantly from $146.6 million at January 31, 2024, to $44.6 million at July 31, 2024[42] 5. Fair Value of Financial Instruments - The company uses a fair value hierarchy (Level 1, 2, 3) to categorize inputs for fair value measurements, with cash equivalents and marketable securities valued using quoted market prices or observable market inputs, classifying them as Level 1 or Level 2[43][44] Fair Value of Cash Equivalents | Type | July 31, 2024 (Level 1) (in thousands) | July 31, 2024 (Level 2) (in thousands) | January 31, 2024 (Level 1) (in thousands) | January 31, 2024 (Level 2) (in thousands) | | :--- | :---------------------- | :---------------------- | :------------------------- | :------------------------- | | Money market funds | $415 | — | $63,966 | — | | U.S. treasury securities | — | $44,148 | — | $82,635 | | Total | $415 | $44,148 | $63,966 | $82,635 | 6. Property and Equipment, Net Property and Equipment, Net | Category | July 31, 2024 (in thousands) | January 31, 2024 (in thousands) | | :------- | :------------ | :--------------- | | Total property and equipment, gross | $114,952 | $113,650 | | Less: accumulated depreciation | $(70,915) | $(65,108) | | Total property and equipment, net | $44,037 | $48,542 | | Depreciation expense (six months) | $5,800 (approx) | $9,100 (approx) | - Property and equipment, net, decreased by $4.5 million from January 31, 2024, to July 31, 2024, primarily due to higher accumulated depreciation, with depreciation expense for the six months ended July 31, 2024, at $5.8 million, down from $9.1 million in the prior year[45] 7. Accounts Payable, Accrued Expenses and Other Current Liabilities Accounts Payable, Accrued Expenses and Other Current Liabilities | Category | July 31, 2024 (in thousands) | January 31, 2024 (in thousands) | | :------- | :------------ | :--------------- | | Accounts payable | $5,673 | $7,430 | | Accrued employee compensation | $12,086 | $15,961 | | Accrued professional services and associated costs | $4,456 | $2,307 | | Total | $33,740 | $38,766 | - Total accounts payable, accrued expenses, and other current liabilities decreased by $5.0 million from January 31, 2024, to July 31, 2024, mainly due to decreases in accrued employee compensation and accounts payable, partially offset by an increase in accrued professional services costs[46] 8. Stock-Based Compensation Stock-Based Compensation Expense | Category | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $698 | $768 | $1,386 | $1,412 | | Sales and marketing | $3,155 | $4,067 | $5,906 | $7,886 | | Research and development | $2,607 | $2,768 | $5,390 | $5,563 | | General and administrative | $5,873 | $3,962 | $11,716 | $7,716 | | Total | $12,333 | $11,565 | $24,398 | $22,577 | - Total stock-based compensation expense increased to $12.3 million for the three months ended July 31, 2024, from $11.6 million in the prior year, and to $24.4 million for the six months ended July 31, 2024, from $22.6 million in the prior year, primarily driven by an increase in general and administrative expenses[47] - As of July 31, 2024, there were 1.75 million outstanding stock options and 10.83 million restricted stock and restricted stock units, with performance-based restricted stock units (PSUs) totaling 3.53 million, none of which vested as market conditions were not met[48][49][50] 9. Debt - Yext's Credit Agreement with Silicon Valley Bank was amended on July 26, 2024, extending maturity to December 22, 2025, replacing LIBOR with SOFR, and updating financial covenants to consolidated total leverage ratio and minimum liquidity[51] - The Credit Facility provides a $50.0 million senior secured revolving loan facility, with $36.6 million available and $13.4 million allocated for letters of credit as of July 31, 2024, and the company was in compliance with all debt covenants[51] 10. Income Taxes Benefit from (Provision for) Income Taxes | Period | 2024 (in thousands) | 2023 (in thousands) | | :----- | :--- | :--- | | Three months ended July 31 | $1,442 | $(661) | | Six months ended July 31 | $1,221 | $(982) | - The company recorded a benefit from income taxes of $1.4 million and $1.2 million for the three and six months ended July 31, 2024, respectively, compared to provisions in the prior year, with the effective tax rate differing from the U.S. federal statutory rate due to full valuation allowances on net deferred tax assets and foreign rate differentials[52] 11. Commitments and Contingencies Contractual Obligations as of July 31, 2024 | Fiscal Year Ending January 31 | Leases (in thousands) | Other (in thousands) | | :---------------------------- | :----- | :---- | | 2025 (remainder) | $8,562 | $21,342 | | 2026 | $19,274 | $15,675 | | 2027 | $19,340 | $8,937 | | 2028 | $19,437 | $4,525 | | 2029 | $19,297 | $16 | | 2030 and thereafter | $36,473 | $94 | | Total | $122,383 | $50,589 | - The company's contractual obligations primarily relate to operating and short-term lease arrangements for office space, and contracts with its Publisher Network application providers and software vendors[54] - Yext is involved in various legal proceedings but deems the likelihood of any material adverse impact on its financial position or results of operations to be remote[55] 12. Net Loss Per Share Attributable to Common Stockholders Net Loss Per Share Attributable to Common Stockholders | Metric | Three Months Ended July 31, 2024 (in thousands, except share and per share data) | Three Months Ended July 31, 2023 (in thousands, except share and per share data) | Six Months Ended July 31, 2024 (in thousands, except share and per share data) | Six Months Ended July 31, 2023 (in thousands, except share and per share data) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(4,057) | $(3,437) | $(7,874) | $(3,849) | | Weighted-average common shares outstanding | 126,535,481 | 124,358,526 | 125,967,631 | 123,821,653 | | Net loss per share, basic and diluted | $(0.03) | $(0.03) | $(0.06) | $(0.03) | - Net loss per share remained at $(0.03) for the three months ended July 31, 2024, and increased to $(0.06) for the six months ended July 31, 2024, compared to $(0.03) in the prior year, due to higher net losses[58] - Anti-dilutive common equivalent shares totaled 16.5 million as of July 31, 2024, including stock options, restricted stock units, ESPP shares, and performance-based restricted stock units[59] 13. Subsequent Events - On August 1, 2024, Yext completed the acquisition of Hearsay Social, Inc. for approximately $125 million in cash, plus assumed equity awards and a potential contingent earnout of up to $75 million based on annual recurring revenue targets[60] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Yext's financial condition and results of operations, highlighting key business developments, financial performance metrics, and a detailed analysis of revenue and expenses, also discussing non-GAAP financial measures, liquidity, and capital resources, including recent debt amendments and share repurchase activities Overview - Yext's digital presence platform, the Answers Platform, helps businesses manage brand information via Yext Content (Knowledge Graph) and distribute it across over 200 Publisher Network providers, including Amazon Alexa, Apple, Bing, Facebook, Google Business Profile, and Yelp[63] - Revenue is driven by customer count, licenses/capacity purchased, package subscriptions, pricing, and renewal rates, with subscriptions offered in discrete packages based on features and licenses/capacity[63] - Macroeconomic conditions, including foreign currency fluctuations, interest rates, inflation, and recession risks, continue to influence operating results and may negatively impact customer spending and contract renewals[65] - Yext committed to a restructuring plan on June 4, 2024, reducing its workforce by approximately 12% to cut operating expenses and position for profitable growth, incurring $5 million in costs during Q2 FY2025[66] - On August 1, 2024, Yext acquired Hearsay Social, Inc. for approximately $125 million in cash, plus assumed equity awards and potential earnout consideration of up to $75 million based on revenue targets[68] Key Metrics Customer Count - As of July 31, 2024, Yext's customer count was approximately 2,970, representing enterprise and mid-size customers with active contracts and unique administrative accounts[70] Annual Recurring Revenue ("ARR") Annual Recurring Revenue (ARR) | Category | July 31, 2024 (in thousands) | July 31, 2023 (in thousands) | Variance (Dollars) (in thousands) | Variance (Percent) | | :------- | :------------ | :------------ | :----------------- | :----------------- | | Direct Customers | $313,392 | $327,212 | $(13,820) | (4)% | | Third-Party Reseller Customers | $68,361 | $70,502 | $(2,141) | (3)% | | Total Annual Recurring Revenue | $381,753 | $397,714 | $(15,961) | (4)% | - Total ARR decreased by 4% to $381.8 million as of July 31, 2024, compared to $397.7 million as of July 31, 2023, primarily due to the attrition of a large direct customer[73] Dollar-Based Net Retention Rate Dollar-Based Net Retention Rate | Category | July 31, 2024 | July 31, 2023 | | :------- | :------------ | :------------ | | Direct Customers | 91% | 98% | | Third-Party Reseller Customers | 94% | 92% | | Total Customers | 91% | 97% | - The total dollar-based net retention rate decreased to 91% as of July 31, 2024, from 97% in the prior year, largely reflecting the attrition of a significant direct customer[75] Components of Results of Operations Revenue - Revenue is primarily derived from subscription and associated support to the platform, typically recognized ratably over contract terms (usually one to three years)[78] Cost of Revenue - Cost of revenue includes employee-related costs (salaries, stock-based compensation), Publisher Network fees, data center costs, depreciation, operating lease expenses, and software expenses[79] Operating Expenses - Operating expenses are categorized into Sales and marketing, Research and development, and General and administrative, each primarily consisting of employee-related costs, allocated lease and software expenses, and other specific costs like advertising or professional fees[80] Results of Operations Three Months Ended July 31, 2024 Compared to Three Months Ended July 31, 2023 Revenue and Gross Profit | Metric | 2024 (in thousands) | 2023 (in thousands) | Variance (Dollars) (in thousands) | Variance (Percent) | | :----- | :--- | :--- | :----------------- | :----------------- | | Revenue | $97,887 | $102,598 | $(4,711) | (5)% | | Cost of revenue | $22,293 | $22,393 | $(100) | (0)% | | Gross profit | $75,594 | $80,205 | $(4,611) | (6)% | | Gross margin | 77.2% | 78.2% | | | - Total revenue decreased by 5% to $97.9 million, primarily due to the attrition of a large customer, with subscription revenue accounting for 93% of total revenue[84] Revenue by Sales Channel | Channel | 2024 (in thousands) | 2023 (in thousands) | Variance (Dollars) (in thousands) | Variance (Percent) | | :------ | :--- | :--- | :----------------- | :----------------- | | Direct Customers | $79,261 | $82,826 | $(3,565) | (4)% | | Third-Party Reseller Customers | $18,626 | $19,772 | $(1,146) | (6)% | | Total Revenue | $97,887 | $102,598 | $(4,711) | (5)% | - Sales and marketing expenses decreased by 12% ($5.6 million) due to lower employee-related costs and headcount, while general and administrative expenses increased by 26% ($4.7 million) due to acquisition-related professional costs and stock-based compensation[86][87] Six Months Ended July 31, 2024 Compared to Six Months Ended July 31, 2023 Revenue and Gross Profit | Metric | 2024 (in thousands) | 2023 (in thousands) | Variance (Dollars) (in thousands) | Variance (Percent) | | :----- | :--- | :--- | :----------------- | :----------------- | | Revenue | $193,877 | $202,051 | $(8,174) | (4)% | | Cost of revenue | $43,839 | $43,743 | $96 | (0)% | | Gross profit | $150,038 | $158,308 | $(8,270) | (5)% | | Gross margin | 77.4% | 78.4% | | | - Total revenue decreased by 4% to $193.9 million, primarily due to the attrition of a large customer, with subscription revenue accounting for 93% of total revenue[88] Revenue by Sales Channel | Channel | 2024 (in thousands) | 2023 (in thousands) | Variance (Dollars) (in thousands) | Variance (Percent) | | :------ | :--- | :--- | :----------------- | :----------------- | | Direct Customers | $156,696 | $162,871 | $(6,175) | (4)% | | Third-Party Reseller Customers | $37,181 | $39,180 | $(1,999) | (5)% | | Total Revenue | $193,877 | $202,051 | $(8,174) | (4)% | - Sales and marketing expenses decreased by 7% ($6.4 million) due to lower employee-related costs and depreciation, while general and administrative expenses increased by 15% ($5.6 million) due to higher stock-based compensation and acquisition-related professional costs[92] Net Loss Net Loss | Period | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(4,057) | $(3,437) | $(7,874) | $(3,849) | - Net loss increased to $4.1 million for the three months ended July 31, 2024, and to $7.9 million for the six months ended July 31, 2024, compared to $3.4 million and $3.8 million respectively in the prior year periods[94] Non-GAAP Financial Measures Recent Changes in Non-GAAP Metrics - Beginning in fiscal 2025, Yext revised its Non-GAAP net income (loss) and Adjusted EBITDA definitions to exclude acquisition-related costs, providing a clearer view of core operations[96] Non-GAAP Net Income and Adjusted EBITDA Reconciliation GAAP Net Loss to Non-GAAP Net Income Reconciliation | Metric | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net loss | $(4,057) | $(3,437) | $(7,874) | $(3,849) | | Plus: Stock-based compensation expense | $12,333 | $11,565 | $24,398 | $22,577 | | Plus: Acquisition-related costs | $2,169 | — | $2,169 | — | | Less: Tax adjustment | $(3,693) | — | $(5,589) | — | | Non-GAAP net income | $6,752 | $8,128 | $13,104 | $18,728 | - Non-GAAP net income decreased to $6.8 million for the three months ended July 31, 2024, from $8.1 million in the prior year, and to $13.1 million for the six months ended July 31, 2024, from $18.7 million in the prior year[98] GAAP Net Loss to Adjusted EBITDA Reconciliation | Metric | Three Months Ended July 31, 2024 (in thousands) | Three Months Ended July 31, 2023 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net loss | $(4,057) | $(3,437) | $(7,874) | $(3,849) | | Interest (income) expense | $(2,271) | $(1,752) | $(4,239) | $(3,213) | | (Benefit from) provision for income taxes | $(1,442) | $661 | $(1,221) | $982 | | Depreciation and amortization | $2,851 | $4,420 | $5,814 | $9,089 | | Other expense (income) | $204 | $297 | $342 | $617 | | Stock-based compensation expense | $12,333 | $11,565 | $24,398 | $22,577 | | Acquisition-related costs | $2,169 | — | $2,169 | — | | Adjusted EBITDA | $9,787 | $11,754 | $19,389 | $26,203 | - Adjusted EBITDA decreased to $9.8 million for the three months ended July 31, 2024, from $11.8 million in the prior year, and to $19.4 million for the six months ended July 31, 2024, from $26.2 million in the prior year[99] Constant Currency Revenue on a Constant Currency Basis (Non-GAAP) | Metric | Three Months Ended July 31, 2024 (in thousands) | Growth Rates | Six Months Ended July 31, 2024 (in thousands) | Growth Rates | | :----- | :------------------------------- | :----------- | :----------------------------- | :----------- | | Revenue (GAAP) | $97,887 | (5)% | $193,877 | (4)% | | Effects of foreign currency rate fluctuations | $(70) | | $(394) | | | Revenue on a constant currency basis (Non-GAAP) | $97,817 | (5)% | $193,483 | (4)% | - Revenue for the three months ended July 31, 2024, was not significantly impacted by foreign currency exchange rates, while for the six months ended July 31, 2024, foreign currency exchange rates had a positive impact of approximately $0.4 million on revenue[84][88] Liquidity and Capital Resources Credit Arrangements - Yext's Credit Facility, amended on July 26, 2024, provides a $50.0 million senior secured revolving loan facility maturing on December 22, 2025, and includes financial covenants requiring minimum liquidity of $35.0 million and a consolidated total leverage ratio no greater than 3.00 to 1.00[104] - As of July 31, 2024, $36.6 million was available under the revolving loan facility, and the company was in compliance with all debt covenants[109] Operating Activities - Net cash provided by operating activities increased to $27.7 million for the six months ended July 31, 2024, from $19.7 million in the prior year, driven by changes in accounts receivable and costs to obtain revenue contracts, partially offset by unearned revenue changes[105] Investing Activities - Net cash used in investing activities was $1.2 million for the six months ended July 31, 2024, reflecting capital expenditures, a decrease from $1.6 million in the prior year[106] Financing Activities - Net cash used in financing activities was $2.0 million for the six months ended July 31, 2024, primarily due to $3.8 million in tax payments for stock-based compensation, partially offset by $1.8 million from employee stock purchase plan withholdings[107] Contractual Obligations - Contractual obligations are detailed in Note 11, primarily related to operating and short-term lease arrangements, Publisher Network contracts, and software vendor agreements[108] Share Repurchase Program - Yext's Board authorized a $100.0 million share repurchase program in March 2022, with an additional $50.0 million authorized in September 2023, leaving approximately $49.8 million available for future purchases as of July 31, 2024[109] Cash Flows Summary of Cash Flows | Activity | Six Months Ended July 31, 2024 (in thousands) | Six Months Ended July 31, 2023 (in thousands) | | :------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $27,660 | $19,710 | | Net cash used in investing activities | $(1,192) | $(1,567) | | Net cash used in financing activities | $(2,008) | $(8,261) | Critical Accounting Policies and Estimates - There have been no material changes to Yext's critical accounting policies and estimates as compared to those disclosed in its Annual Report on Form 10-K[111] Recent Accounting Pronouncements - Yext is evaluating the impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Taxes), effective for fiscal 2025/2026 and 2026 respectively[35][112] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines Yext's exposure to market risks, including foreign currency exchange rates, inflation, and interest rates, and discusses the potential impact of these risks on its financial position and results of operations Foreign Currency Risk - Yext is exposed to foreign currency exchange rate movements, but a hypothetical 10% change in the U.S. dollar's value is not expected to materially affect its financial position or results of operations as of July 31, 2024[115] Inflation Risk - Inflation has not had a material effect on Yext's business, but sustained inflationary pressures, particularly on labor costs, could harm financial results if not offset by price increases[116] Interest Rate Risk - As of July 31, 2024, Yext had $234.8 million in cash and cash equivalents, and a hypothetical 10% change in interest rates would not have a material impact on its financial statements[117] Financial Institution Risk - Yext holds significant cash balances in large financial institutions, exposing it to counterparty risk and potential uninsured losses if these institutions fail[118] Item 4. Controls and Procedures This section details the evaluation of Yext's disclosure controls and procedures and internal control over financial reporting, concluding on their effectiveness and acknowledging inherent limitations Evaluation of Disclosure Controls and Procedures - Yext's CEO and CFO concluded that the company's disclosure controls and procedures were effective as of July 31, 2024[120] Changes in Internal Control over Financial Reporting - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended July 31, 2024[121] Limitations on the Effectiveness of Disclosure Controls and Procedures - Management acknowledges that control systems provide only reasonable assurance and have inherent limitations, meaning not all errors or fraud may be prevented or detected[122] PART II. OTHER INFORMATION Item 1. Legal Proceedings Yext is not currently a party to any legal proceedings deemed material to its business or financial condition, though it may be involved in various litigation matters in the ordinary course of business - Yext is not currently involved in any legal proceedings considered material to its business or financial condition[124] Item 1A. Risk Factors This section details various risks that could materially harm Yext's business, financial condition, operating results, and stock price, categorized into business and industry, information technology and intellectual property, laws and regulation, and ownership of common stock Risk Factor Summary - Key risks include slowing/contracting revenue, history of losses, adverse economic conditions, acquisition challenges, unpredictable sales cycles, dependence on few customers/resellers, and the need for additional capital[125][127] - Information technology risks involve security breaches, intellectual property infringement claims, reliance on open-source/third-party software, network failures, and errors in software[128] - Regulatory risks include compliance with privacy/data protection laws (e.g., CCPA, GDPR), evolving AI regulations, and export/import controls[129] - Risks related to common stock ownership include volatile quarterly results, stock price volatility, potential dilution from future equity issuances, and no intent to pay dividends[129] Risks Related to Our Business and Industry - Yext's revenue growth has slowed and contracted, with a 4% contraction for the six months ended July 31, 2024, primarily due to the departure of a large customer and cost-cutting measures[130] - The company has a history of net losses, with an accumulated deficit of $687.0 million as of July 31, 2024, and expects operating expenses to increase, making future profitability uncertain[131][132] - Acquisitions, such as Hearsay Social, Inc., pose integration challenges, potential liabilities, and diversion of management attention, which could adversely affect operating results[133] - Changes in organizational structure, including workforce reductions (e.g., 12% in June 2024) and leadership changes, may disrupt business, growth, and profitability[135] - Significant international operations expose Yext to regulatory, economic, and political risks, including currency fluctuations, difficulties in managing international sales, and compliance with local laws[138][139] - Dependence on strategic relationships with over 200 Publisher Network application providers (e.g., Google, Apple) means loss of access or renegotiation of terms could impair competitiveness and revenue growth[139] - A significant portion of revenue is dependent on a few large customers (top five accounted for 8% of revenue in FY2024) and third-party reseller customers, whose efforts Yext does not control[144][145] Risks Related to Information Technology, Intellectual Property, and Data Security - Security breaches, network attacks, or incidents could interrupt service, lead to unauthorized data access, harm reputation, and result in significant liability and costs[161] - Assertions of intellectual property infringement by third parties could lead to substantial costs, damages, or restrictions on offering the platform[161] - Failure to protect Yext's own intellectual property rights, including patents and trade secrets, could adversely affect its business and competitive position[162] - Reliance on open-source and third-party licensed software carries risks, including potential requirements to release proprietary source code or increased costs if licenses cannot be maintained[164] - The reliability of Yext's network and support infrastructure is critical; sustained failures or outages could lead to significant costs, service disruptions, and reputational damage[164] - Incorporating generative AI into products presents compliance and reputational risks, including unintended biases, reliance on limited AI service providers, and potential intellectual property or privacy liabilities[165][166] Risks Related to Laws, Regulation and Taxation - Yext is subject to various governmental regulations and legal obligations related to privacy, data protection (e.g., CCPA, GDPR), and information security, with non-compliance potentially leading to investigations, fines, and reputational harm[167][169] - Evolving regulatory and legislative developments concerning AI, such as the EU AI Act, could impose significant compliance costs, increase liability risks, and affect Yext's ability to develop and use AI technologies[170] - Compliance with anti-corruption, anti-bribery (e.g., FCPA, U.K. Bribery Act), and economic sanctions laws is critical, with violations potentially leading to criminal penalties, significant fines, and reputational damage[171] - Unanticipated changes in effective tax rates, new tax laws (e.g., R&D amortization, excise tax on stock repurchases), or adverse interpretations of existing tax laws could increase costs and negatively impact financial results[173][174] - Yext's ability to use its significant U.S. federal and state net operating loss carryforwards and R&D tax credit carryforwards may be limited by ownership changes (Sections 382 and 383 of the Code) or regulatory changes[175] Risks Related to Ownership of Our Common Stock and Our Status as a Public Company - Quarterly results may fluctuate significantly due to various factors, including customer acquisition/retention, new product launches, and macroeconomic conditions, leading to potential stock price volatility[176] - The market price of Yext's common stock has been and may continue to be volatile, influenced by financial results, competitive dynamics, and general market conditions, potentially leading to securities class action litigation[177] - Future sales and issuances of capital stock or rights to purchase capital stock could result in substantial dilution for existing stockholders and cause the stock price to decline[178] - Yext does not intend to pay dividends in the foreseeable future, requiring stockholders to rely on stock price appreciation for returns[179] - Delaware law and provisions in Yext's corporate documents could make mergers, tender offers, or proxy contests difficult, potentially depressing the trading price of its common stock[180][181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details Yext's issuer purchases of equity securities under its share repurchase program for the six months ended July 31, 2024 Issuer Purchases of Equity Securities (Six Months Ended July 31, 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | | :----- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :----------------------------------------------------------------------------------------- | | July 1, 2024 - July 31, 2024 | 43,270 | $5.78 | 43,270 | $49.8 | | Total (Six Months) | 43,270 | | 43,270 | | - During the six months ended July 31, 2024, Yext repurchased 43,270 shares at an average price of $5.78 per share, with approximately $49.8 million remaining available under the share repurchase program[183] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[183] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[183] Item 5. Other Information This section provides other information, specifically regarding insider trading arrangements and policies Insider Trading Arrangements and Policies - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2024[184] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, merger agreements, credit agreement amendments, and certifications - Key exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, the Agreement and Plan of Merger for Hearsay Social, Inc. acquisition, and the Third Amendment to Credit Agreement[186] - Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are furnished[186] SIGNATURES - The report was signed on September 4, 2024, by Darryl Bond, Chief Financial Officer of Yext, Inc[189]