Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward Looking Statements," the following discussion and analysis contains forward looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part I, Item 1A in this Annual Report on Form 10-K.
Overview
Yext empowers businesses to manage their knowledge so they can deliver relevant, actionable answers to consumer questions as well as consistent, accurate and engaging experiences to customers throughout the digital ecosystem. Our digital presence platform (also known as the Answers Platform) lets businesses structure and organize information about their brands in our knowledge graph, Yext Content (also known as the Knowledge Graph), which is then delivered across first-and third-party websites and applications through our network of over 200 service and application providers, which we refer to as our Publisher Network. These publishers include, among others, Amazon Alexa, Apple, Bing, Facebook, Google, and Yelp. Our platform powers all of our key products, including Listings, Reviews, Pages and Search, each with robust analytics capabilities for businesses to easily track performance across customer experiences. It is our mission to empower businesses to easily manage every aspect of their digital presence to make meaningful connections with their customers across every digital touchpoint.
We sell our platform throughout the world to customers of all sizes, including our enterprise, mid-size, and third-party reseller customers. In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.
Revenue is a function of the number of customers, the number of licenses or capacity purchased by each customer, the package to which each customer subscribes, the price of the package and renewal rates. We offer subscriptions in a discrete range of packages, with pricing based on specified feature sets and the number of licenses managed by the customer as well as on a capacity-basis.
In August 2024, we acquired Hearsay Social, Inc., a digital client engagement platform for financial services ("Hearsay"). See Note 4 "Business Combination" to our consolidated financial statements for additional information.
Fiscal Year
Our fiscal year ends on January 31st. References to fiscal 2025, for example, are to the fiscal year ended January 31, 2025.
Macroeconomic Conditions
Our results of operations have been and may continue to be influenced by general macroeconomic conditions, including, but not limited to, the impact of foreign currency fluctuations, interest rates, inflation, recession risks, and geopolitical events and shifts. Fluctuations in foreign exchange rates and rising inflation have had, and may continue to have an adverse impact on our financial condition and operating results in future periods. The extent to which such disruptions will continue in future periods remains uncertain, which has had and may continue to have an adverse impact on our financial condition and operating results in future periods. We continue to be committed to our business, the strength of our platform, our ability to continue to execute on our strategy, and our efforts to support our customers.
Near-term revenues are relatively predictable as a result of our subscription-based business model. However, if the macroeconomic uncertainty continues or further increases, we may continue to experience a negative impact on existing and potential customers that may reduce, suspend or delay technology spending, request to renegotiate contracts to obtain concessions such as, extended billing and payment terms; shorten the duration of contracts; or elect not to renew their subscriptions which could materially adversely impact our business, financial condition and results of operations in future periods. Therefore, changes in our contracting activity in the near term may not be fully reflected in our results of operations and overall financial performance until future periods.
Recent Developments
On June 4, 2024, we committed to a restructuring plan in response to evolving business needs to reduce operating expenses and position Yext for profitable future growth (the “Plan”). The Plan reduced the size of our workforce by approximately 12 percent of our full-time employees as compared to our headcount as of January 31, 2024. We incurred approximately $5 million in costs in connection with the Plan during our second quarter of fiscal year 2025, consisting primarily of severance payments, payments in lieu of notice, employee benefits and related costs.
Following approval by our Board of Directors, on June 10, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) for the acquisition of Hearsay Social, Inc. (“Hearsay”). Pursuant to the Merger Agreement, Hearsay became a wholly owned subsidiary of Yext upon closing of the transaction on August 1, 2024. The acquisition of Hearsay is intended to produce an end-to-end digital presence platform, combining Yext’s cutting-edge digital presence management capabilities with Hearsay’s compliant engagement solutions across social media, websites, text, and voice. We acquired Hearsay for approximately $125 million
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in cash, as adjusted for customary adjustments set forth in the Merger Agreement and the assumption of Hearsay employee equity awards. We also offered participation rights to key employees and former founders of Hearsay in a bonus pool of $20 million that can be settled in cash or our common stock and shall be subject to 100% vesting on the first anniversary of closing, generally subject to continued employment. In addition, subject to the terms of the Merger Agreement, we may also be required to pay additional contingent consideration of up to $75 million to Hearsay based on the achievement of certain milestones (the “Earnout”). The Earnout shall be payable based on achievement of certain annual recurring revenue targets. The targets shall be measured at the end of the first and second anniversaries of closing. The Earnout may be settled in cash or our common stock at our election. See Note 4 "Business Combination" to our consolidated financial statements for additional information.
On February 7, 2025, we completed an acquisition of KabanaSoft, LLC, doing business as Places Scout (“Places Scout”), for a purchase price of $20.3 million in cash, subject to customary adjustments as set forth in the Unit Purchase Agreement. The acquisition strengthens Yext’s ability to provide best-in-class competitive intelligence, benchmarking, and AI-powered insights. In addition, subject to the terms of the Unit Purchase Agreement, we agreed to grant approximately $10.0 million of incentive equity, based on current trading prices of Yext’s common stock, to certain key employees of Places Scout.
See Part I Item 1A “Risk Factors” for further discussion of the possible impact of the current macroeconomic conditions on our business.
Key Metrics
We monitor the following key operational and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Annual Recurring Revenue ("ARR")
Annual recurring revenue, or ARR, for Direct customers is defined as the annualized recurring amount of all contracts in our enterprise, mid-size and small business customer base as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. Contracts include portions of professional services contracts that are recurring in nature.
ARR for Third-party Reseller customers is defined as the annualized recurring amount of all contracts with Third-party Reseller customers as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. The calculation includes the annualized contractual minimum commitment and amounts related to usage above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature. See Part I Item 1A “Risk Factors" for further discussion of Third-party reseller customers.
Total ARR is defined as the annualized recurring amount of all contracts executed as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription, and where relevant, includes the annualized contractual minimum commitment and amounts related to usage above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature.
We calculate usage by annualizing monthly amounts in excess of contractual minimum commitments in the current month.
ARR is independent of historical revenue, unearned revenue, remaining performance obligations or any other accounting principles generally accepted in the United States of America, ("GAAP"), financial measure over any period. It should be considered in addition to, not as a substitute for, nor superior to or in isolation from, these measures and other measures prepared in accordance with GAAP. We believe ARR-based metrics provides insight into the performance of our recurring revenue business model while mitigating fluctuations in billing and contract terms.
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The following table provides our ARR for the periods presented:
January 31, Variance
(1) ARR as of January 31, 2025 is inclusive of Hearsay's results.
Change in ARR Methodology
From time to time, we may refine our methodology of calculating our key performance metrics to better reflect our business. For example, beginning in the fourth quarter of fiscal year 2025, we refined our ARR methodology to include usage to align with management’s internal assessment of customers. Prior to that quarter, we had excluded what we previously referred to as overage. While this change may introduce additional volatility, we believe it provides a more comprehensive view of ARR that better aligns with the way we evaluate and manage our business. The amounts presented in the immediately preceding table have been restated to reflect our ARR presented on this current definition for periods previously disclosed that did not include overage.
To accompany the transition to this new presentation, the following table presents our ARR for the periods presented as calculated using our prior definition of ARR, which excluded usage:
January 31, Variance
(1) ARR as of January 31, 2025 is inclusive of Hearsay's results.
Dollar-Based Net Retention Rate
We believe that our ability to retain our customers and expand the ARR they generate for us over time is an important component of our growth strategy and reflects the long term value of our customer relationships. We assess our performance in this area using a metric we refer to as our dollar-based net retention rate, which compares the ARR from a set of subscription customers across comparable periods.
This metric is calculated first by determining the ARR generated 12 months prior to the end of the current period for a cohort of customers who had active contracts at that time. We then calculate ARR from the same cohort of customers at the end of the current period, which includes customer expansion, contraction and churn. The current period ARR is then divided by the prior period ARR to arrive at our dollar-based net retention rate. Any ARR obtained through merger and acquisition transactions does not affect the dollar-based net retention rate until one year from the date on which the transaction closed. The cohorts of customers that we present dollar-based net retention rate for include direct, third-party reseller, and total customers. Direct customers include enterprise, mid-size and small business customers.
The following table provides our dollar-based net retention rate for the periods presented:
January 31,
Direct Customers 92% 91%
Third-Party Reseller Customers 95% 93%
Total Customers 93% 92%
Change in Dollar-Based Net Retention Rate Methodology
From time to time, we may refine our methodology of calculating our key performance metrics to better reflect our business. For example, beginning in the fourth quarter of fiscal year 2025, we refined our ARR calculation methodology to include usage. This update resulted in a corresponding change in our dollar-based net retention rate, which is based on ARR. While this change may
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introduce additional variability due to changes in customer usage, it provides a more comprehensive view of our dollar-based net retention rate. The amounts presented in the immediately preceding table have been restated to reflect our dollar-based net retention rate presented as measured on our current definition of ARR for periods previously disclosed that did not include overage.
To accompany the transition to this new presentation, the following table presents our dollar-based net retention rate for the periods presented as calculated using our prior definition of ARR, which excluded usage:
January 31,
Direct Customers 92% 91%
Third-Party Reseller Customers 92% 95%
Total Customers 92% 92%
Customer Count
Customer count is defined as the total number of customers with contracts executed as of the last day of the reporting period and a unique administrative account identifier on our platform. Generally, we assign unique administrative accounts to each separate and distinct entity (such as a company or government institution) or a business unit of a large corporation, that has its own separate contract with us to access our platform. Historically, we believed that customer count provided insight into our ability to grow our enterprise and mid-size customer base. As such, customer count excluded third-party reseller customers and small business customers as well as customers only receiving free trials. From time to time, some customers previously characterized as small business customers transitioned to mid-size customers, and customer count included these changes resulting from any recharacterization.
We no longer consider customer count to be a key performance measure of our business. As such, we are presenting customer count as of the end of January 31, 2025 as a key metric, but we do not expect to refer to it regularly in the future. As of January 31, 2025, customer count was approximately 2,920.
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Components of Results of Operations
Revenue
We derive our revenue primarily from subscription and associated support to our platform. Our contracts are typically one year in length, but may be up to three years or longer in length. Revenue is a function of the number of customers, the number of licenses or capacity purchased by each customer, the package to which each customer subscribes, the price of the package and renewal rates. Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to customers. At the beginning of each subscription term we invoice our customers, typically in annual installments, but also monthly, quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue. Unearned revenue is subsequently recognized as revenue when transfer of control to a customer has occurred.
Cost of Revenue
Cost of revenue consists primarily of employee-related costs, including personnel-related costs, which mainly consist of salaries and wages, and stock-based compensation expense. Cost of revenue also includes fees associated with our Publisher Network application provider arrangements, the nature of which may be unpaid, fixed, or variable, and are unpaid with many of our larger providers, as well as the costs associated with our data centers. In addition, cost of revenue includes depreciation expense, which includes amounts allocated based on employee headcount, as well as amounts related to certain capitalized software development costs incurred in connection with additional functionality to our platform. Cost of revenue also includes amortization expense, which includes amounts related to intangible assets arising from acquisitions and lease expenses associated with our office spaces, which are allocated based on employee headcount. In addition, cost of revenue includes software expense, which relates to licenses, professional services, and other costs associated with software for use in the operations of our business, which is also allocated based on employee headcount.
Operating Expenses
Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages and costs of obtaining revenue contracts. Sales and marketing expenses also include lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount. In addition, sales and marketing expenses include amortization expense, which includes amounts related to intangible assets arising from acquisitions, as well as costs related to advertising and conferences and brand awareness events.
Research and development expenses. Research and development expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages. Capitalized software development costs related to additional functionality to our platform are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and depreciated to cost of revenue over the term of their useful life. Research and development expenses also include data centers costs associated with pre-production costs for testing and quality assurance, as well as lease expenses associated with our office spaces, and software expense, each of which are allocated based on employee headcount.
General and administrative expenses. General and administrative expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense for our finance and accounting, human resources, information technology and legal support departments. Personnel-related costs mainly consist of salaries and wages. General and administrative expenses also include lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount. In addition, general and administrative expenses include other professional related costs, which include acquisition-related costs, as well as fair value adjustments related to contingent consideration.
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Results of Operations
In this section, we discuss the results of our operations for the fiscal year ended January 31, 2025 compared to the fiscal year ended January 31, 2024. For a discussion of our results of operations for the fiscal year ended January 31, 2024 compared to the fiscal year ended January 31, 2023, see Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.
The following table sets forth selected consolidated statement of operations data for each of the periods indicated:
(in thousands) Fiscal year ended January 31,
Operating expenses:
Loss from operations before income taxes (28,058) (338)
Benefit from (provision for) income taxes 110 (2,292)
(1) See Note 10 "Stock-Based Compensation" to the consolidated financial statements for amounts included.
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The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:
Fiscal year ended January 31,
Cost of revenue 23 22
Operating expenses:
Sales and marketing 42 44
Research and development 18 18
General and administrative 25 18
Total operating expenses 85 80
Loss from operations (8) (2)
Interest income 1 2
Interest expense — —
Other expense, net — —
Loss from operations before income taxes (7) —
Benefit from (provision for) income taxes — (1)
Net loss (7) % (1) %
Note: Numbers rounded for presentation purposes and may not sum.
Fiscal Year Ended January 31, 2025 Compared to Fiscal Year Ended January 31, 2024
Revenue
Fiscal year ended January 31, Variance
Total revenue was $421.0 million for the fiscal year ended January 31, 2025, compared to $404.3 million for the fiscal year ended January 31, 2024, an increase of $16.6 million or 4%. The increase was entirely driven by the inclusion of Hearsay’s revenue as a result of the acquisition which did not exist in the comparative period. The increase was negatively affected by the resulting absence of revenue from the attrition of a large customer that did not renew their contract as of January 31, 2024. Revenue recognized from subscriptions and associated support to our platform was 93% and 92%, while revenue recognized from professional services was 7% and 8%, for the fiscal years ended January 31, 2025 and 2024, respectively.
Revenue for the fiscal year ended January 31, 2025 included a positive impact from foreign currency exchange rates of approximately $1.5 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than U.S. Dollars (“USD”) into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.
The following table summarizes our revenue by sales channel for the periods presented:
Fiscal year ended January 31, Variance
(in thousands)
Revenue attributable to direct customers was $347.0 million for the fiscal year ended January 31, 2025, compared to $327.1 million for the fiscal year ended January 31, 2024, an increase of $19.9 million or 6%.The increase was entirely driven by the inclusion of Hearsay’s revenue as a result of the acquisition which did not exist in the comparative period. The increase was negatively
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affected by the resulting absence of revenue from the attrition of a large customer that did not renew their contract as of January 31, 2024. Revenue attributable to third-party reseller customers was $74.0 million for the fiscal year ended January 31, 2025, compared to $77.2 million for the fiscal year ended January 31, 2024, a decrease of $3.2 million or 4% primarily due to customer attrition.
Cost of Revenue and Gross Margin
Cost of revenue was $96.4 million for the fiscal year ended January 31, 2025, compared to $87.5 million for the fiscal year ended January 31, 2024, an increase of $8.9 million, or 10%. The increase was primarily driven by the acquisition of Hearsay, which resulted in a $4.0 million increase in amortization expense related to acquired intangible assets, as well as a $1.3 million increase related to royalties and integration fees. In addition, data center costs increased $2.4 million, and professional related costs increased $1.6 million. These increases were offset by a $2.0 million decrease in depreciation expense, as certain assets have fully depreciated.
Gross margin was 77.1% for the fiscal year ended January 31, 2025, compared to 78.4% for the fiscal year ended January 31, 2024 as reflected in the discussion above.
Operating Expenses
Fiscal year ended January 31, Variance
Sales and marketing expense was $174.8 million for the fiscal year ended January 31, 2025, compared to $178.8 million for the fiscal year ended January 31, 2024, a decrease of $4.1 million, or 2%. The decrease was primarily driven by a $1.9 million decrease in personnel-related costs, reflecting lower headcount, a $1.4 million decrease in depreciation expense as certain assets have fully depreciated, a $1.3 million decrease in employee travel and a $1.2 million decrease in lease expense. In addition, there were smaller decreases in conferences and events of $0.6 million and software expense of $0.5 million. These decreases were offset by a $3.1 million increase in amortization expense related to acquired intangible assets from the Hearsay acquisition.
Research and development expense was $77.2 million for the fiscal year ended January 31, 2025, compared to $72.0 million for the fiscal year ended January 31, 2024, an increase of $5.2 million, or 7%. The increase was primarily driven by a $7.6 million increase in personnel-related costs, reflecting higher headcount. This increase was offset by decreases in stock-based compensation expense of $1.1 million, depreciation expense of $0.6 million, as certain assets have fully depreciated, and a $0.5 million decrease in professional related costs, among others.
General and administrative expense was $105.1 million for the fiscal year ended January 31, 2025, compared to $72.2 million for the fiscal year ended January 31, 2024, an increase of $32.9 million or 46%. The increase was primarily driven by the acquisition of Hearsay, which resulted in $8.8 million of costs being incurred related to the portion of the incentive pool payable to founders and early employees, as well as $5.5 million related to changes in the fair value of contingent consideration. The increase was further driven by employee-related costs, as stock-based compensation expense increased $7.5 million, mainly due to PSUs granted in fiscal year 2024, and personnel-related costs increased $3.1 million, largely due to retention amounts related to Hearsay employees. In addition, professional related costs increased $7.3 million, primarily due to professional services related to the Hearsay acquisition.
Net Loss
Net loss was $27.9 million and $2.6 million for the fiscal years ended January 31, 2025 and 2024, respectively.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe that certain non-GAAP financial measures are useful in evaluating our operating performance and our business.
Non-GAAP net income (loss) is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net income (loss) as our GAAP net income (loss) as adjusted to exclude the effects of stock-based compensation expense, acquisition-related costs, amortization of acquired intangibles, and the related income tax effect of these adjustments. Acquisition-related costs include transaction and related costs, subsequent fair value movements in contingent consideration, and compensation arrangements. We believe non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations. We also believe non-GAAP net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, acquisition-related costs, and amortization of acquired intangibles, which may vary for reasons unrelated to overall operating performance.
In addition, beginning in fiscal 2025, we are utilizing a projected tax rate of 25% in our computation of the non-GAAP income tax provision. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes
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resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
We use non-GAAP net income (loss) in conjunction with traditional GAAP net income (loss) as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, and to evaluate the effectiveness of our business strategies.
Adjusted EBITDA is a non-GAAP financial measure that we believe offers a useful view of overall operations used to assess the performance of core business operations and for planning purposes. We define Adjusted EBITDA as GAAP net income (loss) before (1) interest income (expense), net, (2) (provision for) benefit from income taxes, (3) depreciation and amortization, (4) other income (expense), net, (5) stock-based compensation expense, and (6) acquisition-related costs. The most directly comparable GAAP financial measure to Adjusted EBITDA is GAAP net income (loss). Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to GAAP net income (loss) as a measure of operating performance.
The definitions of our non-GAAP financial measures may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish this or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.
Our non-GAAP financial measures may be limited in their usefulness because they do not present the full economic effect of the expenses mentioned above. We compensate for these limitations by providing a reconciliation of our non-GAAP financial measures to the most closely related GAAP financial measures. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net income (loss) and Adjusted EBITDA in conjunction with GAAP net income (loss).
Recent Changes in Non-GAAP Metrics
Beginning with the three months ended July 31, 2024, we revised our definitions of Non-GAAP net income (loss) and Adjusted EBITDA to adjust for the effects of certain acquisition-related costs prompted by our recent acquisition of Hearsay. We believe these changes provide investors with a view of continuing core operations without the effects of unusual activity specific to acquisition-related accounting. These adjustments do not omit or adjust for the inclusion of ongoing operations of acquisitions.
We have recast our results on the same basis for the prior comparative periods presented, although the effects in those periods remain unchanged notwithstanding as no such acquisition-related activity had occurred. The following table reconciles our GAAP net loss to non-GAAP net income (loss):
Fiscal year ended January 31,
Plus: Stock-based compensation expense 51,780 44,961
Plus: Acquisition-related costs 29,176 —
Plus: Amortization of acquired intangibles 7,097 —
Less: Tax adjustment(1) (15,109) —
(1) Beginning in fiscal 2025, we are utilizing a projected tax rate of 25% in our computation of the non-GAAP income tax provision. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
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The following table reconciles our GAAP net loss to Adjusted EBITDA:
Fiscal year ended January 31,
Interest (income) expense, net (5,135) (6,624)
(Benefit from) provision for income taxes (110) 2,292
Other expense (income), net 745 761
Acquisition-related costs 29,176 —
Constant Currency
We provide revenue, including year-over-year growth rates, adjusted to remove the impact of foreign currency rate fluctuations, which we refer to as constant currency. We believe providing revenue on a constant currency basis helps our investors to better understand our underlying performance, given the current macroeconomic environment. We calculate constant currency by using the current period results for entities reporting in currencies other than USD, which are then converted into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our revenue on a constant currency basis should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP. We provide a reconciliation of revenue on a constant currency basis to the most closely related GAAP financial measure. We encourage investors and others to review our financial information in its entirety and to view revenue on a constant currency basis in conjunction with revenue on a GAAP basis.
The following table provides a reconciliation of revenue on a GAAP basis to revenue on a constant currency basis:
Fiscal year ended January 31,
Effects of foreign currency rate fluctuations (1,453)
Revenue on a constant currency basis (Non-GAAP) $ 419,504 4 %
Free Cash Flow
We also provide free cash flow, which is a non-GAAP measure defined as net cash provided by (used in) operating activities, less cash used for purchases of capital expenditures, inclusive of capitalized software development costs. Free cash flow margin is calculated as free cash flow divided by total revenue. We believe this is meaningful to investors because it is a measure of liquidity that provides useful information in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business.
The following table provides a reconciliation of GAAP Cash flow provided by (used in) operating activities to free cash flow:
Fiscal year ended January 31,
Net cash provided by operating activities $ 50,211 $ 46,157
Operating cash flow margin 12 % 11 %
Free cash flow margin 11 % 11 %
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Liquidity and Capital Resources
As of January 31, 2025, our principal sources of liquidity were cash and cash equivalents of $123.1 million. We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections and lease payments, significant marketing events and related expenses, acquisitions, and other factors.
Our future capital requirements will depend on many factors, including those set forth under "Risk Factors". We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. In addition, we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.
Credit Arrangements
On March 11, 2020, we entered into a credit agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors. On December 22, 2022, we entered into a second amendment (“Amendment No. 2”) to the Credit Agreement, dated March 11, 2020, and on July 26, 2024, we entered into a third amendment ("Amendment No. 3") to the Credit Agreement, collectively referred to as the Credit Facility. No significant debt issuance costs were incurred in association with Amendment No.2 and Amendment No.3.
Amendment No. 2 amended the Credit Facility to, among other things (i) extend the maturity date of the Credit Facility to December 22, 2025, (ii) amend the interest rate provisions to replace LIBOR with SOFR as the interest rate benchmark, and (iii) amend the recurring revenue growth rate financial covenant.
Amendment No. 3 amended the Credit Facility to, among other things (i) amend the interest rate applicable to loans under the Credit Facility, and (ii) replace the consolidated quick ratio and recurring revenue growth rate financial covenants with consolidated total leverage ratio and minimum liquidity financial covenants.
The Credit Facility provides for a senior secured revolving loan facility of up to $50.0 million that matures on December 22, 2025, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.
As amended, the revolving loans bear interest, at our election, at an annual rate based on SOFR or a base rate. Loans based on SOFR shall bear interest at a rate between SOFR plus 1.75% and SOFR plus 2.25%, depending on our consolidated total leverage ratio and subject to a SOFR floor of 1.00%. Loans based on the base rate shall bear interest at a rate between the base rate minus 1.25% and the base rate minus 0.75%, depending on our consolidated total leverage ratio. We are also obligated to pay a commitment fee on the unused portion of the facility at a rate of 0.25% per annum.
The obligations under the Credit Facility are secured by a lien on substantially all of our tangible and intangible property and by a pledge of all of our equity interests of material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.
The Credit Facility contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain minimum liquidity of $35.0 million at all times and a consolidated total leverage ratio of no greater than 3.00 to 1.00, tested on a quarterly basis.
As of January 31, 2025, we were in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $36.6 million available and $13.4 million in letters of credit allocated as security in connection with office space.
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Share Repurchase Program
In March 2022, our Board of Directors authorized a $100.0 million share repurchase program of our common stock. In September 2023, our Board of Directors authorized an additional $50.0 million to the share repurchase program. During the fiscal year ended January 31, 2025, 2,687,528 shares were purchased and as of January 31, 2025 approximately $31.9 million remains available for future purchases, exclusive of commissions paid on the repurchase of shares.
In March 2025, the Board of Directors authorized an additional $50.0 million to the share repurchase program.
Cash Flows
In this section, we discuss our cash flows for the fiscal years ended January 31, 2025 and 2024. For a discussion of our cash flows for the fiscal year ended January 31, 2023, see Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Liquidity and Capital Resources" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.
The following table summarizes our cash flows:
Fiscal year ended January 31,
Net cash provided by operating activities $ 50,211 $ 46,157
Net cash used in investing activities $ (91,492) $ (2,728)
Net cash used in financing activities $ (28,541) $ (23,254)
Operating Activities
Net cash provided by operating activities of $50.2 million for the fiscal year ended January 31, 2025 reflected our net loss of $27.9 million, adjusted by non-cash charges including stock-based compensation expense of $51.8 million, depreciation and amortization expense of $18.5 million, including $7.1 million related to the amortization of acquired intangibles, as well as $8.7 million related to the amortization of operating lease right-of-use assets and $5.5 million related to adjustments to contingent consideration. In addition, there were positive adjustments resulting from changes in accounts payable, accrued expenses and other current liabilities of $17.0 million and costs to obtain revenue contracts of $10.0 million. These increases were offset by changes in unearned revenue of $20.5 million, operating lease liabilities of $11.1 million, and accounts receivable of $1.1 million, mainly due to timing of billing and cash collections during the period.
Net cash provided by operating activities of $46.2 million for the fiscal year ended January 31, 2024 reflected our net loss of $2.6 million, adjusted by non-cash charges including stock-based compensation expense of $45.0 million, depreciation and amortization expense of $15.8 million and amortization of operating lease right-of-use assets of $8.8 million. In addition, there were positive adjustments resulting from changes in costs to obtain revenue contracts of $8.8 million, prepaid expenses and other current assets of $0.8 million and accounts receivable of $0.5 million, mainly due to timing of billing and cash collections during the period. These increases were offset by changes in operating lease liabilities of $11.7 million, unearned revenue of $11.3 million and accounts payable, accrued expenses and other current liabilities of $10.2 million.
Investing Activities
Net cash used in investing activities of $91.5 million for the fiscal year ended January 31, 2025 reflected cash outflows of $89.4 million related to cash paid, net of cash acquired, in the acquisition of Hearsay, as well as capital expenditures of $2.1 million.
Net cash used in investing activities of $2.7 million for the fiscal year ended January 31, 2024 reflected capital expenditures.
Financing Activities
Net cash used in financing activities of $28.5 million for the fiscal year ended January 31, 2025 was primarily related to cash outflows of $17.9 million associated with repurchases of common stock as part of our share repurchase program, as well as $10.8 million associated with payments for taxes related to the net share settlement of stock-based compensation awards and $3.5 million related to deferred payments for acquisitions. This was offset by net proceeds from employee stock purchase plan withholdings of $3.3 million.
Net cash used in financing activities of $23.3 million for the fiscal year ended January 31, 2024 was primarily related to $23.1 million in cash outflows associated with repurchases of common stock as part of our share repurchase program, as well as payments for taxes related to the net share settlement of stock-based compensation awards of $13.0 million and payments of deferred financing costs of $0.5 million. This was offset by proceeds from exercise of stock options of $9.4 million and net proceeds from employee stock purchase plan withholdings of $3.9 million.
Contractual Obligations
See Note 15 "Commitments and Contingencies" to the consolidated financial statements for our discussion on contractual obligations.
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Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
See Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements for further discussion on our accounting policies. Our most critical accounting policies and estimates, based on the degree of judgment and complexity, are discussed below.
Revenue Recognition
We derive our revenue primarily from our subscriptions and associated support to our platform. Our subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts. Our subscription and associated support performance obligation is distinct because a customer's use of our platform is fully functional upon access, does not require any additional development, modification or customization, and is often sold separately. In certain instances, we enter into a contract that includes a promise to provide certain technical or customized professional services, in addition to a promise to provide its subscription and associated support. Our professional services performance obligation is distinct as it does not significantly change or enhance the functionality of our platform.
In instances when a contract includes more than one performance obligation, we must allocate the transaction price to the performance obligations on a relative standalone selling price basis ("SSP"). SSP represents the price at which a company would sell a promised product or service separately to a customer. We determine the SSP based on a series of complex factors. Our selling prices associated with our subscription and associated support are considered highly variable based on discounting practices, customer geography, customer size, and other such factors. In contrast, our selling prices associated with our professional services are more observable, predictable and consistent. Accordingly, we use the residual method to determine SSP.
The recognition of revenue is determined through application of the five-step model in accordance with ASC 606. Revenue is recognized upon transfer of control of services to our customers, including third-party reseller customers, in an amount that reflects the consideration we expect to receive in exchange for those services. In transactions with resellers, we contract only with the reseller, in which pricing and length of subscription and support services are agreed upon. The reseller negotiates the price charged and length of subscription and support service directly with its customer. We do not pay separate fees to third-party reseller customers in association with these transactions, and do not have direct interactions with the reseller’s customer.
Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to our customers. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue or revenue. See Note 2 "Summary of Significant Accounting Policies" and Note 3 "Revenue" to our consolidated financial statements for further discussion on our revenue recognition.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the financial reporting and tax basis of our assets and liabilities. We classify all deferred tax assets and liabilities as non-current on the consolidated balance sheet. The effect of a change in tax rates on deferred tax assets and liabilities is recognized within the provision for income taxes on the consolidated statement of operations and comprehensive loss in the period that includes the enactment date.
We reduce deferred tax assets, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of our deferred tax assets. In making such a determination, we consider all available positive and negative evidence, including results of operations, future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. We recognize interest and penalties related to uncertain tax positions within the provision for income taxes on our consolidated statement of operations and comprehensive loss.
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Business Combinations
We account for business combinations using the acquisition method of accounting, which requires identifiable assets acquired and liabilities assumed in the acquiree, to be measured at their fair values, as of the acquisition date. Any excess of the consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. The determination of fair value requires management to make significant estimates, particularly with respect to intangible assets. These estimates can include, but are not limited to:
•future expected cash flows from revenue contracts and acquired developed technologies and trademarks;
•historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
•royalty rates applied to acquired developed technology platforms and other intangible assets;
•assumptions about the period of time and intended use of acquired intangible assets;
•discount rates;
•uncertain tax positions and tax-related valuation allowances; and
•fair value of assumed equity awards.
These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
If the initial accounting for a business combination is not complete following the acquisition date, we report provisional amounts for the known assets, liabilities, equity interests, or items of consideration for which the accounting is incomplete at the end of the financial reporting period. Provisional accounting is inherently subjective and judgmental. The objective of the measurement period is to provide a reasonable period of time to obtain the information necessary to complete all aspects of business combination accounting with a high level of confidence. During the measurement period, which may be up to one year from the acquisition date, adjustments to the reported provisional amounts may be recorded for which the accounting was incomplete, with the corresponding offset to goodwill. Should the accounting for a business combination be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements, disclosing them as provisional, and any material measurement period adjustments are identified as such. Additional assets acquired or liabilities assumed in an acquisition that were not recognized at the acquisition date might be identified during the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, no further adjustments are made.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies-Recent Accounting Pronouncements" to the consolidated financial statements for our discussion about adopted and pending recent accounting pronouncements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may affect our financial position due to adverse changes in financial market prices and rates. We are exposed to market risks related to foreign currency exchange rates, inflation and interest rates.
Foreign Currency Risk
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the functional currency, are translated from foreign currencies into U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates for the period for revenue, costs and expenses. We record translation gains and losses in accumulated other comprehensive (loss) income as a component of stockholders' equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange losses in other expense, net. Based on the size of our international operations and the amount of our expenses denominated in foreign currencies, we would not expect a 10% change in the value of the U.S. dollar from rates on January 31, 2025 to have a material effect on our financial position or results of operations. These exposures may change over time as business practices evolve and economic conditions change, including recent foreign currency impacts due to the macroeconomic environment.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations, other than its impact on the general economy which includes labor costs. Nonetheless, if our costs, in particular personnel-related costs, continue to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Interest Rate Risk
As of January 31, 2025, we had cash and cash equivalents of $123.1 million. The primary objective of our investments is the preservation of capital to fulfill liquidity needs. We do not enter into investments for trading or speculative purposes.
We do not believe our cash equivalents have significant risk of default or illiquidity. While we believe our cash equivalents do not contain excessive risk, we cannot assure you that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits and are exposed to counterparty risk. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.
Financial Institution Risk
While we seek to minimize our exposure to third-party losses of our cash and cash equivalents, we hold our balances in a number of large financial institutions. Notwithstanding, those institutions are subject to risk of failure and our balances may be uninsured in certain cases.
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Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
PAGE
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 60
Consolidated Balance Sheets 64
Consolidated Statements of Operations and Comprehensive Loss 65
Consolidated Statements of Stockholders' Equity 66
Consolidated Statements of Cash Flows 67
Notes to Consolidated Financial Statements 69
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Yext, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Yext, Inc. (the Company) as of January 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Revenue Recognition
Accounting for the Hearsay Social, Inc. Acquisition
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/s/ Ernst & Young, LLP
We have served as the Company’s auditors since 2014.
New York, New York
March 13, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Yext, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Yext, Inc.’s internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Yext, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2025, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Hearsay Social, Inc., which is included in the January 31, 2025 consolidated financial statements of the Company as of January 31, 2025 and constituted 9% of Yext’s total assets, excluding the preliminary value of goodwill and other intangible assets as of January 31, 2025, and 8% of Yext’s total revenue for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Hearsay Social, Inc.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2025, and the related notes and our report dated March 13, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young, LLP
New York, New York
March 13, 2025
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YEXT, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
Current assets:
Restricted cash, current 9,671 —
Prepaid expenses and other current assets 18,094 14,849
Costs to obtain revenue contracts, current 21,961 26,680
Restricted cash, non-current 5,850 —
Costs to obtain revenue contracts, non-current 11,145 16,710
Liabilities and stockholders’ equity
Current liabilities:
Contingent consideration, current 26,944 —
Operating lease liabilities, non-current 76,809 89,562
Contingent consideration, non-current 18,056 —
Commitments and contingencies (Note 15)
Stockholders’ equity:
Accumulated other comprehensive loss (5,969) (4,183)
Total liabilities and stockholders’ equity $ 610,078 $ 508,810
See the accompanying notes to the consolidated financial statements.
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YEXT, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
Fiscal year ended January 31,
Operating expenses:
Benefit from (provision for) income taxes 110 (2,292) (2,080)
Other comprehensive (loss) income:
Foreign currency translation adjustment $ (1,792) $ (568) $ (3,421)
Unrealized gain (loss) on marketable securities, net 6 2 (9)
See the accompanying notes to the consolidated financial statements.
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YEXT, INC.
Consolidated Statements of Stockholders' Equity
(In thousands)
Accumulated
Shares Amount Capital Loss Deficit Stock Equity
Other comprehensive loss — — — (3,430) — — (3,430)
Issuance of restricted stock 75 — — — — — —
Other comprehensive loss — — — (566) — — (566)
Issuance of restricted stock 138 — — — — — —
Other comprehensive loss — — — (1,786) — — (1,786)
See the accompanying notes to the consolidated financial statements.
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YEXT, INC.
Consolidated Statements of Cash Flows
(In thousands)
Fiscal year ended January 31,
Operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of operating lease right-of-use assets 8,729 8,804 8,799
Adjustments to contingent consideration 5,500 — —
Prepaid expenses and other current assets (397) 755 (2,303)
Investing activities:
Cash paid in acquisition, net of cash acquired (89,407) — —
Financing activities:
Payments of deferred financing costs (853) (452) (509)
Deferred acquisition payments (3,542) — —
Proceeds, net from employee stock purchase plan withholdings 3,297 3,894 3,153
Supplemental disclosure of cash flow data:
Cash paid on interest $ 9 $ — $ 41
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Supplemental reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:
Fiscal year ended January 31,
Restricted cash, current and non-current 15,521 — —
See the accompanying notes to the consolidated financial statements.
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YEXT, INC.
Notes to Consolidated Financial Statements
1. Organization and Description of Business
Description of Business
Yext, Inc. ("Yext" or the "Company") empowers businesses to manage their knowledge so they can deliver relevant, actionable answers to consumer questions as well as consistent, accurate and engaging experiences to customers throughout the digital ecosystem. The Company's digital presence platform (also known as the Answers Platform) lets businesses structure and organize information about their brands in the Company's knowledge graph, Yext Content (also known as the Knowledge Graph), which is then delivered across first- and third-party websites and applications through its network of over 200 service and application providers, which the Company refers to as its Publisher Network. The Company's platform powers all of the Company's key products, including Listings, Reviews, Pages, and Search, each with robust analytics capabilities for businesses to easily track performance across customer experiences.
In August 2024, the Company acquired Hearsay Social, Inc., a digital client engagement platform for financial services ("Hearsay"). See Note 4 "Business Combination" for additional information.
Fiscal Year
The Company's fiscal year ends on January 31st. References to fiscal 2025, for example, are to the fiscal year ended January 31, 2025.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding financial reporting. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
There were no prior period amounts that have been reclassified to conform to the current period presentation.
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting, which requires identifiable assets acquired and liabilities assumed in the acquiree, to be measured at their fair values, as of the acquisition date. Any excess of the fair value of consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill.
The determination of fair value requires management to make significant estimates, particularly with respect to intangible assets. These estimates are inherently uncertain and subject to change as additional information is obtained during the measurement period, which lasts for up to one year from the acquisition date. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations and comprehensive loss. See Note 4 "Business Combination" for details.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of those financial statements and the reported amounts of revenue and expense during the reporting period. These estimates include, but are not limited to, the standalone selling prices of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain revenue contracts, income taxes including tax-related valuation allowances, the valuation and assumptions underlying stock-based compensation, the fair value of acquired assets and assumed liabilities from business combinations, contingent consideration, as well as the fair value of acquiree exchanged stock-based compensation awards, and useful lives and recoverability of intangible assets. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.
Segment Information
The Company is the provider of the platform and operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker ("CODM"). The CODM of the Company is the Chief Executive Officer. The CODM evaluates the Company's financial information, resources and performance on a consolidated basis. Since the Company operates as one operating segment, all required financial segment information can be found in the consolidated financial statements.
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Revenue Recognition
The Company derives its revenue primarily from its subscriptions and associated support to the Company's platform. The Company's subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts.
The Company accounts for revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers". The Company recognizes revenue upon transfer of control of services to its customers in an amount that reflects the consideration it expects to receive in exchange for those services. The recognition of revenue is determined through application of the following five-step model:
•Identification of the contract(s) with customers;
•Identification of the performance obligation(s) in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligation(s) in the contract; and
•Recognition of revenue when or as the performance obligation(s) are satisfied
The Company identifies the performance obligations in a contract with a customer and determines whether they are distinct or distinct within the context of the contract. When there is more than one distinct performance obligation in a contract, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. The Company estimates the amount of consideration expected to be received in exchange for transferring services if the consideration promised in a contract includes a variable amount.
Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date the Company's platform is made available to customers. Contracts are typically one year in length, but may be up to three years or longer in length. At the beginning of each subscription term the Company invoices its customers, typically in annual installments but also monthly, quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and in unearned revenue or revenue. The Company reports revenue net of sales tax and other taxes collected from customers to be remitted to government authorities.
Costs Capitalized to Obtain Revenue Contracts
The Company capitalizes costs of obtaining revenue contracts that are incremental and recoverable. Incremental costs primarily include sales commissions for new and renewal revenue contracts, certain related incentives, and associated payroll tax and fringe benefit costs. Capitalized amounts are recoverable through future revenue streams under all customer contracts.
Costs capitalized to obtain new revenue contracts are amortized on a straight-line basis over three years, which reflects the average benefit period, and may be longer than the initial contract period. The Company determined the average benefit period having considered both qualitative and quantitative factors, including the estimated life of capitalized software development costs resulting from additional functionality to the Company's platform and estimated customer life, among other such factors. The Company amortizes costs capitalized for contract renewals over the renewal term, reflecting the average benefit period for such renewals, which is typically one year. Amortization of costs capitalized to obtain revenue contracts is included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss.
The Company periodically evaluates whether there have been any changes in its business, market conditions, or other events which would indicate that its amortization period should be changed, or if there are potential indicators of impairment.
During the fiscal years ended January 31, 2025 and 2024, the Company capitalized $20.9 million and $27.7 million of costs to obtain revenue contracts respectively, and amortized $31.2 million, $36.4 million and $38.6 million to sales and marketing expense as of January 31, 2025, 2024, and 2023, respectively. Costs capitalized to obtain revenue contracts on the Company's consolidated balance sheet totaled $33.1 million and $43.4 million at January 31, 2025 and 2024, respectively. There were no impairments of costs capitalized to obtain revenue contracts for the fiscal years ended January 31, 2025, 2024 and 2023, respectively.
Cost of Revenue
Cost of revenue is generally expensed as incurred, including personnel-related costs, costs associated with the Company’s Publisher Network application providers, and data center costs. Capitalized software development costs incurred in connection with additional functionality to the Company's platform are recognized in cost of revenue as depreciation expense in accordance with the “capitalized software development costs” section of this Note. Cost of revenue also includes amortization expense, which includes amounts related to intangible assets arising from acquisitions, as well as lease expenses, software expense, and depreciation expense, each of which are allocated based on employee headcount.
Stock-Based Compensation
Stock-based compensation for all employee stock-based awards, including restricted stock units, restricted stock, performance-based restricted stock units, and options to purchase common stock, is measured at fair value on the date of grant and recognized over the service period.
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The fair value of restricted stock units and restricted stock are estimated on the date of grant based on the fair value of the Company’s common stock. The fair value of performance-based restricted stock units are estimated on the date of grant using a Monte Carlo simulation model. The fair value of employee stock options is estimated on the date of grant using a Black-Scholes option-pricing model.
Stock-based compensation expense is generally recognized over the requisite service periods of awards, which is typically one to four years for restricted stock units, restricted stock and performance-based restricted stock units, and four years for options. The estimated forfeiture rate applied is based on historical forfeiture rates. The estimated number of stock-based awards that will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from the Company’s current estimates, such amounts will be recorded as a cumulative adjustment in the period actual results are realized or estimates are revised.
Stock-based compensation expense associated with the Company's Employee Stock Purchase Plan (“ESPP”) is measured at fair-value using a Black-Scholes option-pricing model at commencement of each offering period and recognized over that offering period.
The Company measures stock-based compensation associated with stock-based awards issued to non-employees at the grant date, based on the estimated fair value of the award, and recognizes expense on a straight-line basis over the requisite service period. The Company does not apply a forfeiture rate assumption to value such awards, given the nature of the services provided.
Liability classified awards are remeasured at fair value at each reporting date until the award is settled.
Advertising and Other Promotional Costs
Advertising and other promotional costs are expensed as incurred. Advertising expenses were $3.7 million, $3.9 million and $3.5 million for the fiscal years ended January 31, 2025, 2024 and 2023, respectively and are included within sales and marketing expense in the consolidated statement of operations and comprehensive loss.
Research and Development
Research and development costs are generally expensed as incurred, including personnel-related costs. Research and development expenses also include data centers costs associated with pre-production costs for testing and quality assurance, as well as lease expenses and software expense, each of which are allocated based on employee headcount. Research and development costs exclude capitalized software development costs.
Capitalized Software Development Costs
The Company capitalizes certain software development costs included as software in progress or computer software within property and equipment, net. These costs are incurred in connection with additional functionality to its platform, as well as internal-use projects during the application development stage and include elements of stock-based compensation. Computer software is recognized on a straight-line basis over an estimated useful life of 2 to 3 years. Capitalized software development costs incurred in connection with additional functionality to the Company's platform are recognized as depreciation expense in cost of revenue within the consolidated statement of operations and comprehensive loss. Capitalized software development costs incurred in internal-use projects are recognized as depreciation expense and are allocated based on employee headcount. Capitalized software development costs, net were $2.1 million as of both January 31, 2025 and 2024, respectively, and primarily related to costs incurred in connection with additional functionality to its platform. Depreciation expense associated with capitalized software development costs was $1.8 million, $3.2 million and $4.9 million during the fiscal years ended January 31, 2025, 2024 and 2023, respectively.
Software costs that meet the cloud computing arrangements criteria are capitalized in accordance with ASC 350 “Intangibles—Goodwill and Other” and are recognized on a straight-line basis over the term of the arrangement, plus reasonably certain renewals. Capitalized costs included in prepaid expenses and other current assets were $0.3 million and $0.5 million as of January 31, 2025 and 2024 respectively, and $0.5 million, $1.0 million, and $2.5 million were amortized during the fiscal years ended January 31, 2025, 2024, and 2023, respectively. Software costs that do not meet the capitalization criteria, including costs incurred in the maintenance and minor upgrade and enhancement of software without additional functionality, are expensed as incurred.
The Company evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the financial reporting and tax basis of the Company’s assets and liabilities. The Company classifies all deferred tax assets and liabilities as non-current on the consolidated balance sheet. The effect of a change in tax rates on deferred tax assets and liabilities is recognized within the provision for income taxes on the consolidated statement of operations and comprehensive loss in the period that includes the enactment date.
The Company reduces deferred tax assets, if necessary, by a valuation allowance if it is more likely than not that the Company will not realize some or all of the deferred tax assets. In making such a determination, the Company considers all available positive and negative evidence, including results of recent operations, future reversals of existing taxable temporary differences, projected
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future taxable income and tax-planning strategies. See Note 13 "Income Taxes" to the Company's consolidated financial statements for additional information on the composition of these valuation allowances.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company recognizes interest and penalties related to uncertain tax positions within the provision for income taxes on the consolidated statement of operations and comprehensive loss.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Unvested restricted stock, restricted stock units and performance-based restricted stock units are excluded from the denominator of basic net loss per share. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares plus the common equivalent shares for the period, including any dilutive effect from such shares. See Note 16 "Net Loss Per Share Attributable to Common Stockholders" for further discussion.
Foreign Currency
The functional currency of the Company’s non-U.S. subsidiaries is generally the local currency. The Company translates the financial statements of its non-U.S. subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average exchange rates for revenue, costs and expenses. The Company records translation gains and losses in accumulated other comprehensive loss as a component of stockholders’ equity. Foreign currency transaction gains and losses are included within other expense, net in the consolidated statements of operations and comprehensive loss.
Concentration of Credit Risk
Certain financial instruments that could be exposed to a concentration of credit risk include cash and cash equivalents and accounts receivable. The Company deposits its cash with financial institutions, and such deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Collateral is not required for accounts receivable. At January 31, 2025 and 2024, no single customer accounted for more than 10% of the Company's accounts receivable. No single customer accounted for more than 10% of the Company's total revenue for the fiscal years ended January 31, 2025, 2024 and 2023, respectively.
Cash and Cash Equivalents
Cash consists of cash on deposit with banks that is stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with original maturities of less than three months from the date of purchase to be cash equivalents.
Restricted cash as of January 31, 2025, consists of $15.5 million of funds held in escrow in connection with the acquisition of Hearsay for certain post-closing indemnification obligations.
Marketable Securities
The Company's investments in marketable securities may consist of debt securities, including U.S. treasury securities, corporate bonds, and commercial paper. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. The Company considers all of its investments in marketable securities, irrespective of the maturity date, as available for use in current operations, and therefore classifies these securities within current assets on the consolidated balance sheets. All marketable securities are carried at estimated fair value. Credit losses related to marketable securities are recorded, net in the consolidated statements of operations and comprehensive loss through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. As of January 31, 2025, 2024, and 2023 no credit losses related to marketable securities were recorded by the Company. Any remaining unrealized gains or losses for marketable securities are included in accumulated other comprehensive income (loss), as a component of stockholders’ equity.
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Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are carried at the original invoiced amount less an allowance for doubtful accounts based on the probability of future collection. The Company estimates its allowance for doubtful accounts based on historical loss patterns, the number of days that billings are past due, current market conditions, and reasonable and supportable forecasts of future economic conditions, in accordance with ASC 326 "Financial Instruments-Credit Losses." Accounts receivable are written off when deemed uncollectible and collection of the receivable is no longer being actively pursued.The following table summarizes the allowance for doubtful accounts activity:
(in thousands) Fair Value
Allowance for doubtful accounts as of January 31, 2023 $ 868
Deductions - write offs (743)
Allowance for doubtful accounts as of January 31, 2024 1,013
Additions related to Hearsay beginning balance at August 1, 2024 94
Deductions - write offs (758)
Allowance for doubtful accounts as of January 31, 2025 $ 2,014
Property and Equipment, Net
Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Furniture and fixtures have an estimated useful life of five years. Office equipment has an estimated useful life of three years. Computer software, which includes capitalized software development costs, has an estimated useful life of two to three years. Leasehold improvements and assets held under operating leases are depreciated over the shorter of the term of the lease or their useful life. Upon retirement or sale of assets, the cost and related accumulated depreciation or amortization are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statement of operations and comprehensive loss. Repairs and maintenance costs are expensed as incurred.
Leases
The Company accounts for leases in accordance with ASC Topic 842, "Leases." Lease expense is recognized as a single lease cost on a straight-line basis over the lease term. The lease term consists of non-cancelable periods, and may include options to extend or terminate the lease term, when it is reasonably certain such options will be exercised.
The Company enters into contracts in the normal course of business and assesses whether any such contracts contain a lease. The Company determines if an arrangement is a lease at inception if it conveys the right to control the identified asset for a period of time in exchange for consideration. The Company classifies leases as operating or financing in nature, and records the associated lease liability and right-of-use asset on its balance sheet. The lease liability represents the present value of future lease payments, net of lease incentives, discounted using an incremental borrowing rate, which is a management estimate based on the information available at the commencement date of a lease arrangement. With respect to operating lease arrangements, the Company accounts for lease components, and non-lease components that are fixed, as a single lease component. Non-lease components that are variable are expensed as incurred in the statement of operations and comprehensive loss. The Company recognizes costs associated with lease arrangements having an initial term of 12 months or less ("short-term leases") on a straight-line basis over the lease term; such short-term leases are not recorded on the balance sheet.
Goodwill and Intangible Assets
Goodwill represents the excess of cost over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350, “Intangibles-Goodwill and Other.” The Company’s goodwill is evaluated at the entity level as it is determined there is one reporting unit. The Company performs its annual impairment test on November 1st of each year, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company considers the following potential indicators of impairment: significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of acquired assets or the strategy of the Company’s overall business, significant negative industry or economic trends and a significant decline in the value of the Company’s enterprise value for a sustained period.
A qualitative assessment is performed to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount. A quantitative assessment is performed if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent that the reporting unit’s carrying value exceeds its fair value.
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Intangible assets are amortized over their estimated useful lives. The Company assesses the impairment of long-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company has not recorded impairment charges on intangible assets for the periods presented in these consolidated financial statements.
Deferred Financing Costs
Financing costs incurred with securing a revolving line of credit are deferred and amortized to interest expense over the term of the agreement. Financing costs associated with revolving credit arrangements are deferred, regardless of whether a balance is outstanding. The Company includes deferred financing costs in prepaid and other current assets or other long term assets on the consolidated balance sheet.
Legal and Other Contingencies
From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, breach of contract claims and other asserted and unasserted claims. The Company investigates these claims as they arise and accrues estimates for resolution of legal and other contingencies when losses are probable and estimable.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The Company adopted this accounting standard on January 31, 2025. While the adoption has no impact on our financial statements, it has resulted in incremental disclosures within the footnotes to the consolidated financial statements. See Note 17 "Segment Information" for additional information.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning in fiscal 2026, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2023-09.
In November 2024, the FASB issued 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The updated standard is effective for the Company's annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029. Early adoption is permitted. ASU 2024-03 is required to be applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.
3. Revenue
Geographic Region
The Company disaggregates its revenue from contracts with customers by geographic region, as it believes this best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors. Revenue by geographic region is determined based on the region of the Company's contracting entity, which may be different than the region of its customers. The following table presents the Company's revenue by geographic region:
Fiscal year ended January 31,
North America revenue is attributable to the United States. International revenue is predominantly attributable to European countries, but also includes Japan.
The Company's revenue attributable to the United States represented 80%, 79%, and 80% for the fiscal years ended January 31, 2025, 2024 and 2023, respectively. Revenue attributable to the United Kingdom, which serves as the Company's main contracting entity for Europe, represented 19%, 20% and 18% of total revenue for the fiscal years ended January 31, 2025, 2024 and 2023, respectively. No other individual country represented more than 10% of total revenue during the fiscal years ended January 31, 2025, 2024 and 2023.
Significant Judgments
Significant judgments and estimates may be required to determine the appropriate application of accounting related to revenue, including whether performance obligations are distinct and assessments regarding the transaction price.
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Performance Obligations
The Company has identified that it has two distinct performance obligations. The Company predominantly recognizes revenue through its performance obligation of a subscription and associated support to the Company's platform. The performance obligation is distinct because a customer's use of the Company's platform is fully functional upon access, does not require any additional development, modification or customization, and is often sold separately. In certain instances, the Company enters into a contract with a customer that includes a promise to provide certain technical or customized professional services, in addition to a promise to provide its subscription and associated support. The Company's professional services performance obligation is distinct as it does not significantly change or enhance the functionality of the Company's platform.
In those instances when a contract includes more than one performance obligation, the Company must allocate the transaction price to the performance obligations on a relative standalone selling price basis ("SSP"). SSP represents the price at which a company would sell a promised product or service separately to a customer.
The Company determines the SSP based on a series of complex factors. The Company's selling prices associated with its subscription and associated support are considered highly variable based on discounting practices, customer geography, customer size, and other such factors. In contrast, the Company's selling prices associated with its professional services are more observable, predictable and consistent. Accordingly, the Company uses the residual method, under which the total transaction price and observable SSP of the professional services performance obligation is used to arrive at the estimated SSP of the subscription and associated support performance obligation.
The Company's revenue is predominantly related to its subscription and associated support to the Company's platform. Professional services revenue accounted for approximately 7%, 8% and 9% of the Company's total revenue for the fiscal years ended January 31, 2025, 2024 and 2023, respectively.
Contract Assets
The Company records a contract asset when revenue is recognized prior to being billed. Contract assets were $1.7 million as of January 31, 2025 and not significant as January 31, 2024. Contract assets are included in prepaid expenses and other current assets on the consolidated balance sheet.
Contract Liabilities
A contract liability is an obligation to transfer goods or services for which consideration has been received or is due to a customer. The Company's contract liabilities consist primarily of unearned revenue and, to a lesser extent, customer deposits.
As of January 31, 2025 and 2024, unearned revenue, current was $229.1 million and $212.2 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's consolidated balance sheet was $0.6 million and $0.7 million, respectively. Unearned revenue represents amounts billed, or payments received, in advance of revenue recognition for which the Company has an unconditional obligation to transfer goods or services associated with a non-cancelable contract. Unearned revenue is subsequently recognized as revenue when transfer of control to a customer has occurred. The unearned revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, and invoice duration, timing and size. The portion of unearned revenue expected to be recognized during the succeeding twelve-month period is classified as unearned revenue, current, and the remaining portion is classified within other long term liabilities in the Company’s consolidated balance sheet.
Revenue recognized of $208.7 million during the fiscal year ended January 31, 2025 was included in unearned revenue, current as of January 31, 2024.
Customer deposits represent payments received in advance in instances where a revenue contract is cancelable in nature, and therefore the Company does not have an unconditional obligation to transfer control to a customer. Customer deposits was $0.2 million as of both, January 31, 2025 and 2024, and was included in accounts payable, accrued expenses and other current liabilities on the Company's consolidated balance sheet, respectively.
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, and contract terms. As of January 31, 2025, the Company had $490.1 million of remaining performance obligations, of which $441.7 million is expected to be recognized as revenue over the next twenty-four months, with the remaining balance expected to be recognized thereafter. As of January 31, 2024, the Company had $465.1 million of remaining performance obligations.
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4. Business Combination
Hearsay Acquisition
On August 1, 2024 (the "Acquisition Date"), Yext completed its acquisition of Hearsay pursuant to an Agreement and Plan of Merger dated June 10, 2024 (such acquisition, the "Acquisition"). At the effective time of the Acquisition, each outstanding share of Hearsay stock was canceled and converted to a right to receive cash consideration, and Hearsay became a wholly owned subsidiary of Yext. The Acquisition is intended to produce an end-to-end digital presence platform, combining Yext’s digital presence management capabilities with Hearsay's compliant engagement solutions across social media, websites, text, and voice.
The Acquisition Date fair value of consideration transferred for Hearsay consisted of the following:
(in thousands)
Cash consideration and liabilities incurred $ 132,462
Contingent consideration 39,500
Fair value of outstanding employee awards assumed 7,825
Other transaction related payments(1) 640
Total consideration transferred $ 180,427
(1) Inclusive of post-closing adjustments of less than $0.1 million.
Cash consideration and liabilities incurred of $132.5 million includes the base purchase price of $125.0 million and customary adjustments set forth in the merger agreement. The cash consideration includes $17.2 million of payments held in escrow as partial security for certain indemnification obligations of the former holders of Hearsay equity. Amounts held in escrow were reflected on the Company's consolidated balance sheet at the Acquisition Date within restricted cash (current and non-current) as the funds are owned by the Company until settlement. In connection with the amounts held in escrow, the Company recognized a corresponding liability on its consolidated balance sheet at the Acquisition Date at its present value of $16.6 million to reflect the amounts payable to former Hearsay equity holders following the resolution of contingencies surrounding the amounts held in escrow. The liability will be accreted to its contractual value over the estimated escrow period with changes in the liability being recorded within interest expense on the Company's consolidated statements of operations and comprehensive loss. For the fiscal year ended January 31, 2025, interest expense was immaterial, and $2.0 million was released from amounts held in escrow following the completion of the post-closing process. As of January 31, 2025, $9.7 million of the remaining escrow is estimated to be released during the fiscal year ended January 31, 2026, with the remaining amount thereafter.
The preliminary purchase price also includes $39.5 million of contingent consideration related to an earnout arrangement whereby the Company may be required to pay up to $75.0 million to the former holders of Hearsay's outstanding equity interests, subject to the achievement of certain Annual Recurring Revenue ("ARR") milestones over a two-year period which will end in September 2026. The portion of the earnout arrangement included within contingent consideration excludes amounts attributable to employees of Hearsay that held unvested awards as of the Acquisition Date, for which earnout payments are subjected to future service. Accordingly, these amounts represent compensation expense in the post-Acquisition period. Payment of the earnout can be settled in cash or shares at the Company's election. The Company preliminarily estimated the fair value of the contingent consideration as of the Acquisition Date. This estimate incorporates projected ARR values inclusive of revenue synergies and growth rates, as well as other key inputs. The key inputs as of the Acquisition Date are outlined below:
Volatility 15.0%
Revenue beta 0.35
Expected timing of payment FY 2026 - FY 2027
See Note 6 "Fair Value of Financial Instruments" for additional details on the fair value of contingent consideration.
The Company also issued approximately 2.1 million replacement equity awards with a fair value of $11.8 million, of which (i) $7.8 million was allocated to consideration transferred for pre-Acquisition services, inclusive of employer related payroll taxes, and (ii) $4.2 million was allocated to the post-Acquisition period and expensed over the remaining requisite service period associated with the awards. The value attributed to consideration transferred was based on the fair value of Hearsay options prior to the exchange. Approximately 1.5 million equity awards that were granted also vested on the Acquisition Date, and $0.6 million was recognized in the post-Acquisition period immediately to reflect the excess of the fair value of the replacement awards over the fair value of the Hearsay options. These awards were subsequently net settled, which represents an event that is separate from the Acquisition.
In addition, the Company recognized other transaction related payments of $0.6 million in the estimated consideration which are comprised primarily of post-closing adjustments, including estimated working capital.
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The Company is also required to make additional payments related to a $20.0 million incentive pool that can be settled in cash or shares at the Company's election, shortly after the first anniversary of the Acquisition Date. Approximately $8.8 million of this pool is to be paid to Hearsay founders and early employees, and is not contingent on future service being provided. This amount was recognized immediately in the post-Acquisition period in operating expenses, within general and administrative expenses on the Company's consolidated statements of operations and comprehensive loss. The remaining amount of the incentive pool is allocated to employees generally subject to continued employment of one-year from the Acquisition Date. In addition, a transaction bonus of $1.5 million is payable to individuals determined by Hearsay and deemed to be compensation expense attributable to the post-Acquisition period. Amounts attributable to the remaining incentive pool and transaction bonus will be expensed in the post-Acquisition period over the requisite service period.
Acquisition-related costs totaled $11.2 million for the fiscal year ended January 31, 2025. These costs were expensed as incurred and include $8.8 million related to the portion of the incentive pool attributable to Hearsay founders and early employees, as well as professional fees. Acquisition-related costs are presented within general and administrative expense in the Company's consolidated statement of operations and comprehensive loss.
The Company's financial results for the fiscal year ended January 31, 2025 reflect inclusion of the business operations of Hearsay from the Acquisition Date, which contributed $33.2 million of revenue. Due to the continued integration of the combined business, it was impractical to determine the impact on earnings.
The following table summarizes the preliminary purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Acquisition Date:
(amounts in thousands)
Assets acquired:
Cash and cash equivalents $ 26,362
Accounts receivable, net 5,619
Prepaid expenses and other current assets 2,454
Property and equipment, net 399
Operating lease right-of-use assets 414
Other long term assets (1) 5,942
Liabilities assumed:
Accounts payable, accrued expenses, and other current liabilities (5,127)
Operating lease liabilities, current (74)
Unearned revenue, current (37,672)
Operating lease liabilities, non-current (340)
Other long term liabilities (1)(2) (11,179)
Identifiable intangible assets acquired 101,200
Net assets acquired $ 87,998
(1) Other long term assets includes a $5.9 million indemnification asset, with the underlying indemnified liability of $6.2 million recorded within
other long term liabilities.
(2) Included within other long term liabilities is a deferred tax liability of approximately $3.4 million.
(3) Inclusive of post-closing adjustments of less than $0.1 million.
The Company determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgement related to estimates. The preliminary fair value estimates and assumptions regarding certain tangible assets acquired and liabilities assumed, and the valuation of intangible assets acquired, income taxes and contingent consideration are subject to change as additional information is obtained during the measurement period. During the fiscal year ended January 31, 2025, the Company refined its estimates pertaining to the valuation of intangibles which resulted in an increase of $9.9 million in intangible assets and $1.7 million in deferred tax liabilities. Additionally, the Company increased the useful life of the customer relationships asset from 12 years to 13 years. See Note 7 "Goodwill and Intangible Assets" for additional information.
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Pursuant to the terms of the merger agreement, the Company was indemnified by the sellers for the pre-Acquisition contingent liability assumed in the Acquisition associated with the Canadian Good and Services Tax (“GST”) and Harmonized sales tax (“HST”) related to certain historical foreign sales transactions. The indemnification of the indirect tax liability is capped at $5.9 million and an escrow fund was established in the same amount. At the Acquisition Date, the associated indirect tax liability was recorded at the estimated fair value of $6.2 million within other long term liabilities, and the Company recorded an indemnification asset up to the amount of the escrow fund balance of $5.9 million. In October 2024, initial filings to settle this matter with the Canada Revenue Agency were initiated and an initial payment of $1.9 million was made. As of January 31, 2025, the remaining indirect tax liability was $4.5 million.
Goodwill represents the excess of the purchase consideration over the fair value of the underlying net identifiable assets and is attributable primarily to expected synergies and the assembled workforce of Hearsay. Goodwill is not deductible for income tax purposes.
Intangible Assets
The following table sets forth the preliminary amounts, allocated to the intangible assets identified and their estimated useful lives as of the Acquisition Date:
Customer relationships $ 76,200 13 Sales and marketing
Technology 24,200 3 Cost of revenue
Trademark 800 3 Sales and marketing
The fair values of the identifiable intangible assets are based on management’s estimates as of the Acquisition Date. The fair value of the intangible assets was determined using the excess earnings method and the relief from royalty method, under the income approach. The Company applied judgment in estimating the fair value of customer relationships using the excess earnings method, which involved the use of significant assumptions with respect to revenue, EBITDA, attrition rate, research and development addback, technology royalty rate, and discount rate. The fair value of the developed technology and trademark was estimated using the relief from royalty method, which incorporates assumptions including royalty rates, annual obsolescence, tax rates, and discount rates.
Pro Forma Results
The unaudited pro forma financial information presented below was derived from historical financial records of Yext and Hearsay and presents the operating results for the periods presented as if the Acquisition occurred on February 1, 2023. The pro forma results include adjustments to record additional compensation expense, adjust commission expense, and adjust for the impact of purchase accounting adjustments including amortization and depreciation expense, and the related tax effects.
Accordingly, the following unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of fiscal year 2024, nor are they indicative of future results of operations:
(in thousands) Fiscal Year Ended January 31,
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5. Investments in Marketable Securities
The following tables summarize the Company's investments in marketable securities:
(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Total marketable securities $ 36,371 $ — $ — $ 36,371
(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
As of January 31, 2025 and 2024, the Company's marketable securities have a maturity of 90 days or less and are classified as cash and cash equivalents. During the fiscal years ended January 31, 2025, 2024 and 2023, the Company had no material reclassification adjustments from accumulated other comprehensive loss to net loss.
The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, and realized gains and losses on securities available for sale within interest income in the consolidated statements of operations and comprehensive loss.
The Company regularly reviews its debt securities and monitors the surrounding economic conditions to assess the risk of expected credit losses. As of January 31, 2025 and 2024, the unrealized losses and the related risk of expected credit losses were not significant.
6. Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive (loss) income when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions, and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 inputs are based on quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 inputs are based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.
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The Company's assets and liabilities measured at fair value on a recurring basis, by level, within the fair value hierarchy are as follows:
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Liabilities:
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
(1) As of January 31, 2025, contingent consideration includes $26.9 million classified as current and $18.1 million classified as non-current.
The Company’s cash equivalents and marketable securities for the periods presented were valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs and were classified as Level 1 or Level 2, accordingly.
As of January 31, 2025, the Company measured its contingent consideration associated with the Acquisition, on a recurring basis using significant unobservable inputs, classified as Level 3.
Contingent Consideration
The Company records contingent consideration resulting from a business combination at its fair value on the acquisition date. The Company generally determines the fair value of contingent consideration using the Real Options Method that employs a Monte Carlo simulation model. Each reporting period thereafter, these obligations are revalued and changes in their fair values are recorded within general and administrative expenses within the consolidated statements of operations and comprehensive loss. Changes in the fair value of the contingent consideration can result from changes in assumed discount periods and rates, and from changes pertaining to the estimated or actual achievement of the defined milestones. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the fair value and corresponding changes in fair value of the contingent consideration the Company records in any given period.
In connection with the Acquisition, the estimated fair value of the contingent consideration incorporates projected ARR values inclusive of revenue synergies and growth rates, as well as other key inputs. The key inputs as of January 31, 2025 are outlined below:
Volatility 14.5%
Revenue beta 0.26
Expected timing of payment FY 2026 - FY 2027
A rollforward of the fair value of the contingent consideration liability for the fiscal year ended January 31, 2025 is as follows:
(in thousands)
Change in fair value 5,500
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7. Goodwill and Intangible Assets
Goodwill
Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level, which is at or one level below the operating segment level. The Company operates as one operating segment, which represents its one reporting unit. The test for impairment is conducted annually each November 1st, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
On August 1, 2024, the Acquisition was completed, resulting in the following changes in the carrying amount of goodwill for the fiscal year ended January 31, 2025, inclusive of measurement period adjustments. See Note 4 "Business Combination" for additional information.
The following table presents a reconciliation of the beginning and ending balances of goodwill:
Goodwill acquired - Hearsay Social, Inc 100,530
Measurement period adjustments (8,101)
Effect of foreign currency translation on Goodwill acquired (125)
The Company determined that no events occurred or circumstances changed that would more likely than not reduce the fair value of the Company's reporting unit below its carrying amount during the reporting periods ended January 31, 2025, and 2024. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.
Intangible Assets
The Company’s intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from 3 to 15 years. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company has no indefinite-lived intangible assets.
The Company determined that no events occurred or circumstances changed during the reporting periods ended January 31, 2025 and 2024 that would indicate that its intangible assets with finite lives may not be recoverable. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.
Amortization expense was $7.1 million for the fiscal year ended January 31, 2025, and less than $0.1 million for each the fiscal years ended January 31, 2024 and 2023, respectively.
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The gross carrying amount and accumulated amortization of intangible assets other than goodwill are as follows:
(1) Recognized in connection with the Acquisition.
The estimated future aggregate amortization expense as of January 31, 2025 is as follows (in thousands):
Fiscal Year Ending January 31,
8. Property and Equipment, Net
Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property and equipment, net consisted of the following:
Construction in progress 27 249
Total property and equipment, net $ 39,689 $ 48,542
As of January 31, 2025 and 2024, the Company's property and equipment, net attributable to the United States was 91% and 90%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $11.4 million, $15.8 million and $17.6 million for the fiscal years ended January 31, 2025, 2024 and 2023, respectively.
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9. Accounts Payable, Accrued Expenses and Other Current Liabilities
Accounts payable, accrued expenses and other current liabilities consisted of the following:
Accrued Publisher Network fees 4,051 1,839
Accrued professional services and associated costs 3,131 2,307
Accrued employee stock purchase plan withholdings liability 1,565 1,958
(1) As of January 31, 2025, accrued employee compensation included $8.6 million related to the portion of the incentive pool and other retention arrangements where continuing service is required arising from the Acquisition.
(2) As of January 31, 2025, other current liabilities included $9.7 million payable to Hearsay owners in connection with escrow funds held by Yext related to indemnity claims in connection with the Acquisition.
(3) As of January 31, 2025, other current liabilities included $8.8 million related to the incentive pool allocated to founders and early employees in connection with the Acquisition.
10. Stock-Based Compensation
2008 Equity Incentive Plan
The Company's 2008 Equity Incentive Plan (the "2008 Plan"), as amended on March 10, 2016, allowed for the issuance of up to 25,912,531 shares of common stock. Awards granted under the 2008 Plan may be incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), restricted stock and restricted stock units. The 2008 Plan is administered by the Company's Board of Directors, which determines the terms of the options granted, the exercise price, the number of shares subject to option and the option vesting period. No ISO or NQSO is exercisable after 10 years from the date of grant, and option awards will typically vest over a four-year period.
The 2008 Plan was terminated in connection with the adoption of the Company's 2016 Equity Incentive Plan (the "2016 Plan") in December 2016, and since the 2008 Plan termination the Company has not granted and will not grant any additional awards under the 2008 Plan. However, the 2008 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.
2016 Equity Incentive Plan
In December 2016, the Company's Board of Directors adopted, and its stockholders approved, the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will increase on the first day of each fiscal year during the term of the 2016 Plan by the lesser of: (i) 10,000,000 shares, (ii) 4% of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company's Board of Directors may determine. On February 1, 2024, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 4,994,684 shares. In addition, the shares reserved for issuance under the 2016 Plan also include shares returned to the 2008 Plan as the result of expiration or termination of options or other awards. As of January 31, 2025, the number of shares available for future award under the 2016 Plan is 8,352,951.
Hearsay Social, Inc. 2019 Equity Incentive Plan
In connection with the Acquisition, the Company assumed the Hearsay Social, Inc. 2019 Equity Incentive Plan (the "Hearsay Plan"), including all outstanding restricted stock units ("RSUs") held by continuing Hearsay employees. These assumed awards were converted into approximately 2.1 million RSUs to receive shares of the Company’s common stock at the effective time of the Acquisition and are generally subject to their original terms and conditions under the Hearsay Plan. The Hearsay Plan allows for the issuance of up to approximately 6.0 million shares of the Company’s common stock. Under the Hearsay Plan, the Company may grant stock options with an exercise price that is no less than the fair market value on the date of grant, restricted stock, RSUs, and other stock-based awards to the Company’s employees. Equity awards granted under the Hearsay Plan following the Acquisition are expected to be on similar terms and consistent with similar grants made pursuant the Company’s 2016 Equity Incentive Plan. Awards canceled and forfeited and shares withheld to satisfy tax withholding obligations become further available for future issuance under the Hearsay Plan. As of January 31, 2025, the number of shares available for future award under the Hearsay Plan is 3,565,676.
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Stock-Based Compensation Expense
Stock-based compensation represents the cost related to stock-based awards granted in lieu of monetary payment. The Company measures stock-based compensation associated with stock-based awards issued to employees at the grant date, based on the estimated fair value of the award, and recognizes expense, net of estimated forfeitures, over the requisite service period of the applicable award generally using the straight-line method or accelerated attribution method.
The following table summarizes the Company's stock-based compensation expense for equity classified awards for the periods presented:
Fiscal year ended January 31,