Yext (NYSE:YEXT) Exceeds Q2 Expectations

Petr Huřťák /
2022/09/07 4:24 pm EDT
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Online reputation and search platform Yext (NYSE:YEXT) announced better-than-expected results in the Q2 FY2023 quarter, with revenue up 2.79% year on year to $100.8 million. However, guidance for the next quarter was less impressive, coming in at $99.5 million at the midpoint, being 0.9% below analyst estimates. Yext made a GAAP loss of $19.9 million, improving on its loss of $27.5 million, in the same quarter last year.

Is now the time to buy Yext? Access our full analysis of the earnings results here, it's free.

Yext (YEXT) Q2 FY2023 Highlights:

  • Revenue: $100.8 million vs analyst estimates of $99.6 million (1.22% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.05
  • Revenue guidance for Q3 2023 is $99.5 million at the midpoint, below analyst estimates of $100.4 million
  • The company reconfirmed revenue guidance for the full year, at $400.4 million at the midpoint
  • Free cash flow was negative $27.3 million, down from positive free cash flow of $16.2 million in previous quarter
  • Customers: 2,870, up from 2,830 in previous quarter
  • Gross Margin (GAAP): 73.1%, in line with same quarter last year

Founded in 2006 by Howard Lerman, Yext (NYSE:YEXT) offers software as a service that helps their clients manage and monitor their online listings and customer reviews across all relevant databases, from Google Maps to Alexa or Siri.

As the number of places that keep business listings (such as addresses, opening hours and contact details) increases, the task of keeping all listings up-to-date becomes more difficult and that drives demand for centralized solutions that update all touchpoints.

Sales Growth

As you can see below, Yext's revenue growth has been unimpressive over the last year, growing from quarterly revenue of $98.1 million, to $100.8 million.

Yext Total Revenue

Yext's quarterly revenue was only up 2.79% year on year, which would likely disappoint some shareholders. But at least revenue increased $2.06 million quarter on quarter, a strong improvement on the $2.13 million decrease in Q1 2023, and a sign of acceleration of growth, which is very nice to see indeed.

Yext is guiding for revenue to decline next quarter 0.02% year on year to $99.5 million, a further deceleration on the 11.7% year-over-year decrease in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 3.48% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Yext reported 2,870 customers at the end of the quarter, an increase of 40 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Yext Customers

Key Takeaways from Yext's Q2 Results

With a market capitalization of $514.1 million Yext is among smaller companies, but its more than $187.9 million in cash and positive free cash flow over the last twelve months give us confidence that Yext has the resources it needs to pursue a high growth business strategy.

Yext topped analysts’ revenue expectations this quarter, even if just narrowly. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see the slowdown in customer growth and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is flat on the results and currently trades at $4.32 per share.

Yext may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.