Yext (NYSE:YEXT) Misses Q3 Sales Targets, Stock Drops

Petr Huřťák /
2023/12/05 4:09 pm EST

Online reputation and search platform Yext (NYSE:YEXT) missed analysts' expectations in Q3 FY2024, with revenue up 1.9% year on year to $101.2 million. Next quarter's revenue guidance of $100.3 million also underwhelmed, coming in 1.9% below analysts' estimates. It made a non-GAAP profit of $0.09 per share, improving from its profit of $0.02 per share in the same quarter last year.

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Yext (YEXT) Q3 FY2024 Highlights:

  • Revenue: $101.2 million vs analyst estimates of $102.2 million (1% miss)
  • EPS (non-GAAP): $0.09 vs analyst estimates of $0.07 (32.4% beat)
  • Revenue Guidance for Q4 2024 is $100.3 million at the midpoint, below analyst estimates of $102.2 million
  • Free Cash Flow was -$2.33 million compared to -$7.03 million in the previous quarter
  • Gross Margin (GAAP): 78.2%, up from 74.2% in the same quarter last year

"Our record non-GAAP profitability and strong Q3 adjusted EBITDA illustrate our commitment to driving profitable growth, even in a challenging macroeconomic environment," said Yext CEO and Chair of the Board, Michael Walrath.

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.

Listing Management Software

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 two years, growing from $99.53 million in Q3 FY2022 to $101.2 million this quarter.

Yext Total Revenue

Yext's quarterly revenue was only up 1.9% year on year, which might disappoint some shareholders. On top of that, the company's revenue actually decreased by $1.43 million in Q3 compared to the $3.15 million increase in Q2 2024. Taking a closer look we can a similar revenue decline in the same quarter last year, which could suggest that the business has seasonal elements. Regardless, this situation is worth monitoring as management is guiding for a further revenue drop in the next quarter.

Next quarter's guidance suggests that Yext is expecting revenue to grow 1.6% year on year to $100.3 million, improving on the 1% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 2.9% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Yext burned through $2.33 million of cash in Q3 , increasing its cash burn by 78.4% year on year.

Yext Free Cash Flow

Yext has generated $52.39 million in free cash flow over the last 12 months, a solid 13% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Yext's Q3 Results

Sporting a market capitalization of $876.4 million, Yext is among smaller companies, but its more than $182.2 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

We struggled to find many strong positives in these results. Although its EPS and free cash flow beat analysts' estimates, its revenue missed Wall Street's estimates and its revenue guidance for next quarter underwhelmed. Overall, this was a mixed quarter for Yext. The company is down 8.7% on the results and currently trades at $6.4 per share.

Yext may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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