Yext, Inc. Q3 FY2024 earnings call

• Q3 was the most profitable non-GAAP EPS quarter ever, with revenue $101.2M, adjusted EBITDA $13.5M, non-GAAP EPS $0.09.
• Selling environment challenging with deals slipping/downsizing, softness in Q3 bookings and budget pressures on renewals. Expect singular large churn in Q4 due to a customer's budgetary issues.
• For FY24, adjusted EBITDA expected over $51M, up over 200% y-o-y; gross margins up 350 basis points, sales & marketing expense down 7%, R&D up over 13% in Q3.
• Sales productivity improving with bookings per rep improving, renewed marketing engine, strong pipeline. Reseller channel showing early ARR stabilization, evaluating usage-based pricing strategies.
• Focus on core products, AI/large language models, competitive wins in various verticals, cross-platform motion, and search/AI content generation investments.

In Q3 2024, Yext generated revenue of $101.2 million. Annual recurring revenue (ARR) was $396.8 million at the end of Q3, up 2% year-over-year. Direct customers accounted for 82% of total ARR, with direct ARR at $326.6 million (up 3% year-over-year). Third-party resellers represented 18% of total ARR, with ARR of $70.2 million (down 3% year-over-year). Q3 gross profit was $79.8 million, gross margin 78.9% vs 75.3% in the year-ago quarter. Operating expenses in Q3 were $69.9 million, 69% of revenue vs 73% in the year-ago quarter. Cash and cash equivalents were $182 million at end of Q3, down from $201 million at end of Q2.

• Q4 2024 guidance: Revenue $100M-$100.5M, adjusted EBITDA $12M-$13M, non-GAAP EPS $0.07-$0.08.
• FY24 guidance: Revenue $403.2M-$403.7M, adjusted EBITDA $51.7M-$52.7M, non-GAAP EPS $0.31-$0.32.
• FY25 outlook to be shared in Q4 earnings call in March, confident in high single-digit ARR growth next year.

• Challenging selling environment with deals slipping/downsizing and budget pressures on renewals.
• Singular large churn in Q4 due to a customer's extreme budgetary pressures, unprofitable to hold.
• General economic and business conditions could cause actual results to differ from forward-looking statements.

Q: Thoughts on growth vs profitability trade-off next fiscal year?

A: Mike Walrath says they've shown ability to adjust levers for efficiency in tough environments and increase capacity if market improves.

Q: Impact of Marc Ferrentino's departure on organizational structure/strategy?

A: Mike Walrath says role was unnecessary, strategy focuses on listening to customers and delivering value.

Q: ARR growth potential and leading indicators?

A: Mike Walrath mentions improving sales productivity, pipeline growth, productivity across geographies/verticals.

Q: Isolated customer churn details and learnings?

A: Mike Walrath says customer had 80% budget reduction, unprofitable to hold, no specific learning other than customers sometimes cut value for budget.

Q: Category challenges and reseller usage-based pricing?

A: Mike Walrath says no specific category pressure, reseller channel evaluating usage-based models to meet customer needs.

Q: Churn customer timing and AI application in end market?

A: Darryl Bond says customer churns Dec 31, Mike Walrath talks about AI deployment risks in customer-facing scenarios.

Q: Go-to-market deals slipping and logo trends?

A: Mike Walrath explains budget pressures causing deals to slip late in cycle, no other singular large churns, NRR pressured but larger customers have stronger retention.