Summary
Yext's fiscal 2021 second quarter revenue rose 22% to $88.1 million from $72.4 million in the prior-year quarter. Gross profit increased 24% to $66.1 million, and gross margin improved to 75.0% from 73.4%. The company still reported a GAAP operating loss of $24.2 million, but that loss narrowed from $30.3 million a year earlier. Operating margin improved to negative 27.5% from negative 41.9%. Net loss narrowed to $25.1 million from $29.3 million, and diluted net loss per share was $0.21.
Operating metrics expanded. Customer count rose 27% year over year to nearly 2,200 as of July 31, 2020. Annual recurring revenue increased 22% to $338 million from $277 million a year earlier. Structured facts in the Knowledge Graph rose 71% to more than 385 million, and the company said more than one-third of that increase came from a large U.S. cable company. Remaining performance obligations were $294.4 million, up 13.7% from $259.0 million, with $274 million expected to be recognized over the next 24 months. Unearned revenue was $147.2 million, up 19.9% from $122.7 million a year earlier.
On a six-month basis, revenue rose 22.9% to $173.4 million from $141.1 million. Gross profit rose 23.6% to $130.2 million. The operating loss widened to $53.4 million from $49.6 million. The net loss widened to $54.3 million from $48.3 million. Net cash used in operating activities was $16.3 million, down from $10.6 million. Capital expenditures rose to $40.1 million from $4.4 million.
Cash flow and capital spending reflected the company's office build-out. Net cash used in operating activities was $15.6 million for the quarter, down from negative $11.4 million in the prior-year quarter. Capital expenditures were $18.8 million, up from $3.6 million a year earlier. The MD&A says the spending was mainly for the new corporate headquarters in New York, NY and offices in Rosslyn, VA and Tokyo, Japan. Management expects capital expenditures tied to new office space to continue to affect investing cash flows for the fiscal year ending January 31, 2021.
Management also issued guidance for the third quarter of fiscal 2021. The company projected a non-GAAP net loss per share of $0.09 to $0.07, assuming 120.4 million weighted-average basic shares outstanding. Yext did not provide full-year fiscal 2021 guidance because of uncertainty around the COVID-19 pandemic.
The MD&A identifies COVID-19 as the main operating risk. The pandemic has disrupted Yext's operations and customer demand, especially in retail and food services. Some customers have asked for concessions such as extended billing and payment terms, shorter contract durations, or reduced spending. Management warned that these pressures could hurt sales efforts and revenue growth rates. The company also pointed to the timing of billings, collections, lease payments, capital expenditures, and marketing events as reasons cash flows may vary. Yext responded with a 90-day free trial for Yext Answers, expanded the product into French, German, Italian, and Spanish, announced an Adobe partnership, and promoted David Rudnitsky and Patrick Blair to Chief Revenue Officer.
The quarter showed solid top-line growth and better gross margin, but GAAP profitability remains negative. Non-GAAP net loss was $7.9 million, compared with $12.7 million a year earlier, and non-GAAP net loss per share was $0.07, compared with $0.11. The difference between GAAP and non-GAAP results remains wide, mostly because of stock-based compensation.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $88.1M | $85.4M | +3.2% | $72.4M | +21.7% |
| Gross profit | $66.1M | $64.2M | +3.0% | $53.1M | +24.4% |
| Gross margin | 75.0% | 75.2% | -0.2 pp | 73.4% | +1.7 pp |
| Research & development | $14.8M | $14.4M | +2.9% | $12.7M | +16.6% |
| Sales & marketing | $56.0M | $58.5M | -4.2% | $52.4M | +7.0% |
| General & administrative | $19.5M | $20.5M | -4.8% | $18.3M | +6.2% |
| Total operating expenses | $90.3M | $93.4M | -3.3% | $83.4M | +8.3% |
| Operating income (loss) | -$24.2M | -$29.2M | +17.0% | -$30.3M | +20.0% |
| Operating margin | -27.5% | -34.2% | +6.7 pp | -41.9% | +14.3 pp |
| Net income (loss) | -$25.1M | -$29.2M | +14.1% | -$29.3M | +14.3% |
| Net margin | -28.5% | -34.2% | +5.7 pp | -40.5% | +11.9 pp |
Risks
The filing states the COVID-19 pandemic has disrupted operations, required all offices to close and employees to work remotely, and canceled in-person events including ONWARD20. MD&A says some customers, particularly in retail and food services, have reduced, suspended or delayed technology spending, requested extended billing and payment terms, shortened contracts or elected not to renew, which may continue to negatively affect sales efforts and revenue growth rates.
Customers have no obligation to renew subscriptions and may renew for fewer features, at renegotiated rates or for shorter contract lengths. The filing says COVID-19 has already led certain customers to reduce subscriptions, not renew, reduce contract length, request extended billing and payment terms or seek more favorable rates, and if renewals fall significantly revenue will decline.
The filing says enterprise sales cycles are long and unpredictable, and COVID-19 has disrupted customers' operations making sales cycles more complex. Delayed and more complex sales cycles could cause operating results and financial condition to suffer in a given period.
Third-party reseller customers comprise a significant portion of revenue and Yext does not control their efforts. Lower demand from certain reseller customers has resulted in them not renewing, purchasing fewer licenses, attempting to renegotiate contracts and requesting extended billing and payment terms, and such effects may not be fully reflected until future periods.
As of January 31, 2020, management identified a material weakness in internal control over financial reporting associated with processes to calculate, record and account for sales commissions, including reliance on certain outsourced IT service providers. Yext says it cannot estimate how long remediation will take and may never remediate it, which could harm reliability of financial reporting and investor confidence.
The filing notes that in July 2020 the European Court of Justice invalidated the EU-U.S. Privacy Shield framework while upholding Standard Contractual Clauses, creating uncertainty for cross-border data transfers. This could significantly adversely impact Yext's ability to process and transfer personal data outside the EU and increase compliance costs and legal risks.
Yext relies on more than 175 third-party Knowledge Network application providers, including Google, Apple, Facebook and Amazon. Loss of access, non-renewal or impairment of a relationship with one or a limited number of key providers could make the Knowledge Network less competitive and lead to loss of significant customers.
The filing says Yext depends on senior management including co-founders Howard Lerman and Brian Distelburger, and it notes announced changes to the leadership team for sales and research and development functions. The departure of key executives may disrupt strategic initiatives.
The market for Yext's features is competitive and rapidly evolving, and in October 2019 it launched Answers, its site search product, which competes with other search products. Competitors may have greater resources, lower prices or more established customer bases, which could adversely affect revenue growth or margins.
Operating cash flow for the six months ended July 31, 2020 was negative $16.3 million versus negative $10.6 million for the prior-year YTD period, a decrease of 53.5%. Capital expenditures for the current YTD period were $40.1 million, up 800.3% versus prior-year YTD, primarily for new corporate headquarters and office spaces, and MD&A says capex for new office space will continue to drive cash used in investing activities.
The filing says historical revenue growth rates are not indicative of future growth, noting 37% growth from FY2017 to FY2018, 34% from FY2018 to FY2019 and 31% from FY2019 to FY2020. Current quarter revenue grew 21.7% and current YTD revenue grew 22.9% versus prior-year periods, slower than those historical annual rates.
The March 2020 credit agreement replaced the prior facility and has restrictive covenants, is secured by all assets, and requires financial covenants. Loans bear interest based on LIBOR or a base rate, and the filing notes it is unclear whether LIBOR will continue after 2021, which could increase interest costs or change access to capital.
Revenue growth is substantially reliant on the sales force, and Yext has hired a significant number of direct sales personnel in recent quarters. If new sales personnel are unable to achieve desired productivity levels in a reasonable period, including due to COVID-19, Yext may not realize the expected benefits of this investment or increase revenue.
SaaS KPIs
All quarters →Customer Count
Remaining Performance Obligations (RPO)
Non-GAAP Gross Margin
Annual Recurring Revenue (ARR)
Unearned Revenue
Summary, forecast, risks and KPIs are extracted from Yext, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.