Yext, Inc. (NYSE: NYSE:YEXT), a leader in AI search, announced its fiscal third-quarter 2024 earnings with mixed results amid challenging market conditions. The company reported revenue of $101.2 million, a modest increase from the same period last year, and a non-GAAP EPS of $0.09. Despite facing softness in Q3 bookings and budget pressures affecting renewals, Yext is confident in its potential for high single-digit ARR growth in the upcoming year. The company is banking on improvements in profitability, sales productivity, and the reseller channel to offset current headwinds.
Key Takeaways
- Yext's Q3 revenue reached $101.2 million, with a 2% year-over-year increase.
- Adjusted EBITDA stood at $13.5 million, and non-GAAP EPS was reported at $0.09.
- The company experienced a downturn in Q3 bookings and anticipates significant churn in Q4.
- Annual recurring revenue (ARR) grew to $396.8 million, reflecting a 2% increase year-over-year.
- Yext expects Q4 revenue between $100 million to $100.5 million and full fiscal year '24 revenue between $403.2 million to $403.7 million.
- The company is focusing on sales productivity and operating efficiency to drive ARR growth.
Company Outlook
Yext is optimistic about the future, projecting a return to high single-digit ARR growth next year. The company's strategic focus remains on enhancing customer satisfaction and innovating its product offerings, particularly in search and AI content generation. Despite current challenges, Yext plans to capitalize on the ongoing digital transformation and sees potential growth in the reseller channel through usage-based pricing.
Bearish Highlights
The company acknowledged the difficulties in closing deals due to widespread budgetary pressures, which have led to a decrease in the size of deals and an impact on subscription software renewals. These pressures are expected to cause a large churn in Q4, particularly from a key customer facing budget constraints. The company also anticipates potential regulatory challenges as interest in generative AI applications grows.
Bullish Highlights
Yext reported competitive wins and upsells in various sectors, with a strong demand in the direct business driving revenue growth. The company has improved its gross margin to 78.9% and reduced operating expenses to 69% of revenue, demonstrating enhanced profitability. With a robust pipeline and strong retention trends in its larger customer base, Yext remains confident in its core business and market opportunities.
Misses
Revenue for the quarter was slightly below the guidance range, primarily due to foreign exchange rate fluctuations. The company also missed its own expectations in Q3 bookings, attributing this to the challenging selling environment and shifting buyer expectations.
Q&A Highlights
During the earnings call, Yext addressed the impact of budgetary pressures on deal closures and renewals. The company emphasized that the loss of a large customer was not a reflection of product dissatisfaction but rather a result of external financial constraints. Yext also discussed the changing dynamics of buyer expectations, which often lead to reduced deal sizes and slipped deals late in the cycle.
In conclusion, Yext's third-quarter earnings reflect a resilient yet cautious stance in the face of market headwinds. The company's efforts to improve sales productivity and operating efficiency, coupled with a focus on innovation and customer satisfaction, are central to its strategy for overcoming current challenges and achieving growth in the forthcoming fiscal year.
InvestingPro Insights
Yext, Inc. has shown resilience in its fiscal third-quarter 2024 earnings, reporting a modest revenue increase and a non-GAAP EPS of $0.09. Here are some insights from InvestingPro that can provide a deeper understanding of the company's financial health and market performance:
InvestingPro Data indicates that Yext's market cap stands at $666.27 million, with a high gross profit margin over the last twelve months as of Q3 2024 at 77.22%. Despite these strong margins, the company has a negative P/E ratio of -56.39, reflecting challenges in achieving profitability. Revenue growth remains modest at 1.31% over the same period.
Two InvestingPro Tips that are particularly relevant to Yext's current situation are:
1. The company holds more cash than debt on its balance sheet, which is a positive sign of financial stability.
2. Analysts predict that the company will be profitable this year, indicating potential for future growth despite recent stock price declines.
It's noteworthy that Yext's stock has recently taken a significant hit, trading near its 52-week low, which could present a buying opportunity for investors who are confident in the company's turnaround strategy. Additionally, with management aggressively buying back shares, this could be an indication of their belief in the company's intrinsic value.
For those looking for more comprehensive analysis, there are 11 additional InvestingPro Tips available for Yext at https://www.investing.com/pro/YEXT. These tips can provide investors with further insights into the company's performance and potential investment opportunities.
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