Yext's (NYSE:YEXT) Posts Q2 Sales In Line With Estimates But Stock Drops 10.7%

Radek Strnad /
2023/09/06 4:12 pm EDT

Online reputation and search platform Yext (NYSE:YEXT) reported results in line with analysts' expectations in Q2 FY2024, with revenue up 1.71% year on year to $102.6 million. The company also expects next quarter's revenue to be around $102 million, slightly below analysts' estimates. Turning to EPS, Yext made a non-GAAP profit of $0.06 per share, improving from its loss of $0.03 per share in the same quarter last year.

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Yext (YEXT) Q2 FY2024 Highlights:

  • Revenue: $102.6 million vs analyst estimates of $102 million (small beat)
  • EPS (non-GAAP): $0.06, in line with¬†analysts' expectations
  • Revenue Guidance for Q3 2024 is $102 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed its revenue guidance for the full year of $406 million at the midpoint
  • Free Cash Flow was -$7.66 million, down from $25.8 million in the previous quarter
  • Customers: 2,980, up from 2,970 in the previous quarter
  • Gross Margin (GAAP): 78.2%, up from 73.2% in the same quarter last year

"Our sharpened focus on positioning the business for durable and profitable growth enabled us to execute well in the second quarter against our financial and operating objectives," 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.

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 $98.1 million in Q2 FY2022 to $102.6 million this quarter.

Yext Total Revenue

Yext's quarterly revenue was only up 1.71% year on year, which might disappoint some shareholders. However, its revenue increased $3.15 million quarter on quarter, a strong improvement from the $2.45 million decrease in Q1 2024. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that Yext is expecting revenue to grow 2.74% year on year to $102 million, improving on the 0.25% year-on-year decline it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 2.86% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

Yext reported 2,980 customers at the end of the quarter, an increase of 10 from the previous quarter. That's in line with the customer growth we observed last quarter but a bit below what we've typically seen over the last year, suggesting that sales momentum may be slowing a little.

Yext Customers

Key Takeaways from Yext's Q2 Results

Sporting a market capitalization of $1.13 billion, Yext is among smaller companies, but its more than $200.5 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. Yext's revenue guidance for next quarter missed analysts' expectations and investors were likely hoping for a better outlook. On the bright side, the company increased its share repurchase program by $50 million. Overall, this was a mediocre quarter. The company is down 10.7% on the results and currently trades at $8.1 per share.

So should you invest in Yext 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.

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 50% 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 in this report.