Yext (NYSE:YEXT) Misses Q3 Revenue Estimates, Stock Drops

Full Report / December 05, 2023

Online reputation and search platform Yext (NYSE:YEXT) fell short of 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.

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

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.

For example, a new car dealership can easily share information such as addresses, phone numbers, and product details to a broad audience by uploading these details on Yext. The information is synchronized across a network of third-party apps and websites such as Google Maps, Facebook, and various local directories. This helps improve the brand's visibility to online shoppers in search engines.

Yext is also using the data it gathers about a company’s products and offerings to power a search technology that its customers can embed on their website, and that allows website visitors to search and find answers to questions more efficiently.

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.

Competitors include Moz, Uberall, Algolia and Elastic Search (NYSE:ESTC).

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.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Yext's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 78.2% in Q3.

Yext Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.78 left to spend on developing new products, sales and marketing, and general administrative overhead. Trending up over the last year, Yext's impressive gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

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

With a market capitalization of $876.4 million, Yext is among smaller companies, but its $182.2 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

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.

Is Now The Time?

Yext may have had a bad quarter, but investors should also consider its valuation and business qualities when assessing the investment opportunity.

We cheer for everyone who's making the lives of others easier through technology, but in case of Yext, we'll be cheering from the sidelines. Its revenue growth has been very weak over the last two years, and analysts expect growth to deteriorate from here. And while its strong gross margins suggest it can operate profitably and sustainably, unfortunately its customer acquisition is less efficient than many comparable companies.

Yext's price to sales ratio based on the next 12 months is 2.1x, suggesting that the market does have lower expectations of the business, relative to the high growth tech stocks. While we have no doubt one can find things to like about the company, and the price is not completely unreasonable, we think that at the moment there might be better opportunities in the market.

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