Yext (NYSE:YEXT) Posts Better-Than-Expected Sales In Q4 But Full Year Guidance Underwhelms

Petr Huřťák /
2023/03/07 4:11 pm EST

Online reputation and search platform Yext (NYSE:YEXT) reported results ahead of analyst expectations in the Q4 FY2023 quarter, with revenue flat year on year at $101.9 million. However, guidance for the next quarter was less impressive, coming in at $98.5 million at the midpoint, being 2.79% below analyst estimates. Yext made a GAAP loss of $7.8 million, improving on its loss of $23.1 million, in the same quarter last year.

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Yext (YEXT) Q4 FY2023 Highlights:

  • Revenue: $101.9 million vs analyst estimates of $100.4 million (1.53% beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of $0.03 ($0.02 beat)
  • Revenue guidance for Q1 2024 is $98.5 million at the midpoint, below analyst estimates of $101.3 million
  • Management's revenue guidance for upcoming financial year 2024 is $404 million at the midpoint, missing analyst estimates by 2.88% and predicting 0.79% growth (vs 2.73% in FY2023)
  • Free cash flow of $35.2 million, up from negative free cash flow of $10.8 million in previous quarter
  • Customers: 2,960, up from 2,900 in previous quarter
  • Gross Margin (GAAP): 74%, down from 75.7% same quarter last year

"We're proud of our performance in the fourth quarter, and we demonstrated continued operating efficiency and our second consecutive quarter of non-GAAP profitability," said Michael Walrath, CEO and Chair of the Board.

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 two years, growing from quarterly revenue of $92.2 million in Q4 FY2021, to $101.9 million.

Yext Total Revenue

Yext's quarterly revenue was only up 0.96% year on year, which might disappoint some shareholders. On top of that, revenue increased $2.62 million quarter on quarter, a strong improvement on the $1.59 million decrease in Q3 2023, and a sign of acceleration of growth, which is very nice to see indeed.

Yext is guiding for revenue to decline next quarter 0.31% year on year to $98.5 million, a further deceleration on the 7.4% year-over-year decrease in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $404 million at the midpoint, growing 0.79% compared to 2.63% increase in FY2023.

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Customer Growth

You can see below that Yext reported 2,960 customers at the end of the quarter, an increase of 60 on last quarter. That is a little better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Yext Customers

Key Takeaways from Yext's Q4 Results

With a market capitalization of $1.05 billion Yext is among smaller companies, but its more than $190.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed by Yext’s very strong acceleration in customer growth this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, it was unfortunate to see that Yext's revenue guidance for the full year missed analysts' expectations and the revenue guidance for next year indicates quite a significant slowdown in growth. Overall, it seems to us that this was a complicated quarter for Yext. The company is down 3.78% on the results and currently trades at $8.15 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.