Online reputation and search platform Yext (NYSE:YEXT) reported results in line with analyst expectations in Q3 FY2023 quarter, with revenue flat year on year at $99.2 million. However, guidance for the next quarter was less impressive, coming in at $100.5 million at the midpoint, being 0.92% below analyst estimates. Yext made a GAAP loss of $12.3 million, improving on its loss of $24.9 million, in the same quarter last year.
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Yext (YEXT) Q3 FY2023 Highlights:
- Revenue: $99.2 million vs analyst estimates of $99.6 million (small miss)
- EPS (non-GAAP): $0.02 vs analyst estimates of -$0.01 ($0.03 beat)
- Revenue guidance for Q4 2023 is $100.5 million at the midpoint, below analyst estimates of $101.4 million
- Free cash flow was negative $12.3 million, compared to negative free cash flow of $25.1 million in previous quarter
- Customers: 2,900, up from 2,870 in previous quarter
- Gross Margin (GAAP): 74.1%, in line with same quarter last year
"I'm pleased with our results for the third quarter, which highlight our continued focus on execution and profitability," said Michael Walrath, CEO and Chair of the Board at Yext.
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.
As you can see below, Yext's revenue growth has been unimpressive over the last two years, growing from quarterly revenue of $89 million in Q3 FY2021, to $99.2 million.
But this quarter Yext's revenue was down 0.25% year on year, which might be a disappointment to some shareholders.
Yext is guiding for revenue to decline next quarter 0.42% year on year to $100.5 million, a further deceleration on the 9.47% 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 5.26% over the next twelve months.
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You can see below that Yext reported 2,900 customers at the end of the quarter, an increase of 30 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.
Key Takeaways from Yext's Q3 Results
With a market capitalization of $649.2 million Yext is among smaller companies, but its more than $162.2 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.
It was nice that Yext improved their gross margin, even if just slightly. That feature of these results really stood out as a positive. On the other hand, revenue has declined and the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for Yext. The company is flat on the results and currently trades at $5.33 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.