Yext (NYSE:YEXT) Q2 Sales Beat Estimates But Stock Drops

Radek Strnad /
2021/09/02 4:20 pm EDT
Add to Watchlist

Online reputation and search platform Yext (NYSE:YEXT) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 11.4% year on year to $98.1 million. Yext made a GAAP loss of $27.5 million, down on its loss of $25.1 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 FY2022 Highlights:

  • Revenue: $98.1 million vs analyst estimates of $95 million (3.23% beat)
  • EPS (non-GAAP): -$60 vs analyst estimates of -$0.07
  • Revenue guidance for Q3 2022 is $98 million at the midpoint, above analyst estimates of $97.2 million
  • The company reconfirmed revenue guidance for the full year, at $387 million at the midpoint
  • Free cash flow was negative $35.7 million, down from positive free cash flow of $27.6 million in previous quarter
  • Customers: 2,600, up from 2,500 in previous quarter
  • Gross Margin (GAAP): 72.8%, down from 76.2% previous quarter

"We had a solid second quarter, driven by new customers and upsells," said Howard Lerman, Founder and CEO of Yext.

Founded in 2006, 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 one, centralized solution.

Sales Growth

As you can see below, Yext's revenue growth has been solid over the last year, growing from quarterly revenue of $88 million, to $98.1 million.

Yext Total Revenue

This quarter, Yext's quarterly revenue was once again up 11.4% year on year. On top of that, revenue increased $6.13 million quarter on quarter, a strong improvement on the $202 thousand decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 12.5% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better than Yext. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Yext reported 2,600 customers at the end of the quarter, an increase of 100 on last quarter. That's in line with the customer growth we have seen over the last couple of quarters, suggesting that the company can maintain its current sales momentum.

Yext Customers

Key Takeaways from Yext's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Yext’s balance sheet, but we note that with a market capitalization of $1.74 billion and more than $240.4 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see Yext outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin and the revenue growth was quite weak. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is down -8.48% on the results and currently trades at $12.75 per share.

Should you invest in Yext 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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