Summary
Yext's third quarter of fiscal 2023 showed flat top-line performance and much better bottom-line results. Revenue was $99.28 million, flat year over year. The press release said revenue was consistent with the prior-year quarter, or up 4% on a constant currency basis, after absorbing an approximately $3.7 million negative impact from foreign currency exchange rates. Gross profit was $73.62 million, down 0.9% year over year. Gross margin was 74.2%, down 0.5 percentage points. The revenue result reflects a business that is not growing in reported dollars, although constant currency growth and customer additions suggest some underlying demand.
Profitability improved sharply. Operating loss narrowed to $12.13 million, a 50.2% improvement. Operating margin improved to negative 12.2%, up 12.2 percentage points. Net loss narrowed to $12.31 million, and diluted EPS narrowed to negative $0.10. On a non-GAAP basis, Yext reported net income of $2.5 million and non-GAAP net income per share of $0.02, compared with a non-GAAP net loss of $5.5 million and a non-GAAP net loss per share of $0.04 in the prior-year quarter. The gap between GAAP and non-GAAP results is mostly stock-based compensation. That gap narrowed from the prior-year quarter.
Cash generation was the weak point. Operating cash flow was negative $10.79 million, down 10.9% from the prior-year quarter. Year to date, operating cash flow was negative $18.09 million, down 148.7% from the prior-year period. Capital expenditures were $1.52 million in the quarter, down 14.2%, and $5.40 million year to date, down 56.2%. The company continued to buy back stock. As of October 31, 2022, it had repurchased 12,405,795 shares for a total cost of $69.1 million since the program began, leaving $30.9 million available under the $100.0 million authorization. The 10-Q said Yext was in compliance with all debt covenants, with $35.9 million available and $14.1 million in letters of credit allocated under its $50.0 million revolving loan facility.
Operating metrics were mixed. Customer count increased 6% year over year to approximately 2,900. Total ARR was $390 million as of October 31, 2022, up 1% from the prior-year period, or up 4% on a constant currency basis. ARR included an approximate $12.4 million negative impact from foreign currency exchange rates. Direct customer ARR rose 3% to $317.280 million, while third-party reseller ARR fell 8% to $72.258 million. Deferred revenue was $153.27 million, up 1.2%. Remaining performance obligations were $365.40 million, up 8.4%, with $313 million expected to be recognized over the next 24 months. The reseller decline and the foreign currency headwind explain why reported revenue stayed flat while constant currency revenue grew.
Guidance points to modest sequential improvement in the fourth quarter and a full-year outlook that carries the currency drag. For the fourth quarter of fiscal 2023, Yext guided to non-GAAP net income per share of $0.02 to $0.03, assuming 123.2 million weighted-average basic shares outstanding, and said the fourth-quarter revenue guidance does not assume any additional impact from foreign currency exchange rates. For the full fiscal year ending January 31, 2023, it projected non-GAAP net loss per share of $0.05 to $0.04, assuming 125.5 million weighted-average basic shares outstanding, and said the full-year revenue guidance includes an estimated negative impact of $8.7 million to reflect foreign currency exchange rate fluctuations since its initial full-year revenue guidance in March 2022.
The main risks remain familiar. The 10-Q cites COVID-19 disruptions and warns that customers in highly impacted industries or geographies may reduce, suspend, or delay technology spending, renegotiate contracts, shorten contract duration, or choose not to renew. Third-party reseller attrition is already pressuring that channel, and foreign currency movements cut revenue and ARR. Yext also points to competition, sales execution, and the need to expand and scale its sales force. The credit agreement contains restrictive covenants. These risks matter because GAAP revenue was flat and operating cash flow was negative in the quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $99.3M | $100.9M | -1.6% | $99.5M | -0.3% |
| Gross profit | $73.6M | $73.8M | -0.2% | $74.3M | -0.9% |
| Gross margin | 74.2% | 73.2% | +1.0 pp | 74.6% | -0.5 pp |
| Research & development | $17.6M | $18.8M | -6.2% | $18.0M | -1.9% |
| Sales & marketing | $49.4M | $54.1M | -8.8% | $58.5M | -15.7% |
| General & administrative | $18.7M | $20.4M | -8.1% | $22.1M | -15.2% |
| Total operating expenses | $85.7M | $93.3M | -8.1% | $98.6M | -13.1% |
| Operating income (loss) | -$12.1M | -$19.5M | +37.9% | -$24.4M | +50.2% |
| Operating margin | -12.2% | -19.4% | +7.1 pp | -24.5% | +12.2 pp |
| Net income (loss) | -$12.3M | -$20.0M | +38.4% | -$24.9M | +50.6% |
| Net margin | -12.4% | -19.8% | +7.4 pp | -25.0% | +12.6 pp |
| Diluted EPS | -$0.10 | -$0.16 | +$0.06 | -$0.19 | +$0.09 |
Risks
Yext disclosed revenue growth slowed from 31% from FY2019 to FY2020, to 19% from FY2020 to FY2021, to 10% from FY2021 to FY2022, and to 3% for the nine months ended Oct 31, 2022 versus the prior-year period. It expects growth in the coming year to be slower, and Q3 revenue was flat at $99.28M compared with the prior-year quarter.
Adverse economic conditions, inflation, reduced technology spending, and Europe weakness may adversely impact demand. Q3 revenue included a negative FX impact of approximately $3.7M on a constant currency basis, while nine-month revenue included approximately $7.9M negative FX impact; Europe sales activities have been negatively impacted and Russia's invasion of Ukraine adds uncertainty.
Third-party reseller customers comprise a significant portion of revenue and Yext does not control their efforts. Reseller ARR decreased 8% to $72.3M at Oct 31, 2022 from $78.5M at Oct 31, 2021, and Q3 reseller revenue decreased 8% to $20.4M; resellers may not renew or may purchase fewer licenses.
Significant leadership turnover includes resignations of the CEO and CFO in March 2022, the President and CRO in June 2022, and the CRO's announced step down in Oct 2022, with a new CRO appointed. Management states these changes and related disruption have had and will continue to have near-term effects on business, growth, and profitability.
Revenue growth is substantially reliant on the sales force, and Yext has historically had difficulty recruiting and retaining sales personnel, a difficulty heightened during COVID-19. The company may change sales force size, and new sales personnel may not reach desired productivity in a reasonable period.
Yext sells to enterprises with complex operating environments, leading to long and unpredictable sales cycles. COVID-19 has made sales cycles more complex, and delayed or failed sales could harm quarterly results.
Competition is intense and evolving, including enterprise search following the Answers launch, where competitors may have greater experience and resources. Changes to pricing models, such as capacity-based pricing for Pages and Answers, may not be successful and could adversely affect revenue and margin.
Operating cash flow deteriorated: Q3 operating cash flow decreased 10.9% to -$10.79M versus the prior-year quarter, and nine-month operating cash flow decreased 148.7% to -$18.09M. Yext used $68.7M for share repurchases and had $162.3M in cash and cash equivalents at Oct 31, 2022.
The credit facility contains restrictive covenants limiting asset transfers, mergers, acquisitions, dividends, and additional indebtedness, and is secured by substantially all assets. It requires a consolidated quick ratio of at least 1.50 to 1.00 and may require revenue growth covenants when liquidity thresholds are not met; the LIBOR transition could increase interest costs.
Privacy, data protection, HIPAA, government contracting, anti-corruption, and export and import laws create compliance costs and liability. Sales to government entities and health care customers may require BAAs and adherence to complex procurement rules, with potential fines, debarment, and reputational harm.
Competition for software developers and sales talent is intense, especially in the New York area, and recent stock price decreases may reduce retention. Visa restrictions could impair hiring foreign nationals, and loss of key employees could disrupt strategy.
Yext previously identified a material weakness in internal control over financial reporting related to sales commissions and remediated it by FY2022. It may identify additional material weaknesses in the future, which could affect reporting reliability and investor confidence.
SaaS KPIs
All quarters →Customer Count
Remaining Performance Obligations (RPO)
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Annual Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Yext, Inc.'s SEC filings for Q3 FY2023 (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.