Yext (NYSE:YEXT) Misses Q4 Revenue Estimates, Stock Drops 15.6%

Full Report / March 08, 2022
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Online reputation and search platform Yext (NYSE:YEXT) missed analyst expectations in Q4 FY2022 quarter, with revenue up 9.47% year on year to $100.9 million. Guidance for the next quarter also missed analyst expectations with revenues guided to $96.8 million at the midpoint, or 6.73% below analyst estimates. Yext made a GAAP loss of $23.1 million, down on its loss of $18.3 million, in the same quarter last year.

Yext (YEXT) Q4 FY2022 Highlights:

  • Revenue: $100.9 million vs analyst estimates of $101 million (small miss)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.08
  • Revenue guidance for Q1 2023 is $96.8 million at the midpoint, below analyst estimates of $103.7 million
  • Management's revenue guidance for upcoming financial year 2023 is $405.3 million at the midpoint, missing analyst estimates by 8.86% and predicting 3.76% growth (vs 10.1% in FY2022)
  • Free cash flow of $28 million, up from negative free cash flow of $11.5 million in previous quarter
  • Customers: 2,700, same as in previous quarter
  • Gross Margin (GAAP): 75.6%, down from 76.5% 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.

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 unremarkable over the last year, growing from quarterly revenue of $92.1 million, to $100.9 million.

Yext Total Revenue

Yext's quarterly revenue was only up 9.47% year on year. We can see that revenue increased by $1.4 million in Q4, which was roughly the same as in Q3 2022.

Guidance for the next quarter indicates Yext is expecting revenue to grow 5.22% year on year to $96.8 million, slowing down from the 7.78% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $405.3 million at the midpoint, growing 3.76% compared to 10.1% increase in FY2022.

Customer Growth

You can see below that Yext reported 2,700 customers at the end of the quarter, flat on last quarter. That is slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Yext Customers


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 is left after paying for servers, licenses, technical support and other necessary running expenses was at 75.6% in Q4.

Yext Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.75 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a good gross margin that allows companies like Yext to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Cash Is King

If you follow StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Yext's free cash flow came in at $28 million in Q4, turning positive year on year.

Yext Free Cash Flow

Yext has generated $8.43 million in free cash flow over the last twelve months, a 2.15% of revenues. This FCF margin is a result of Yext asset lite business model, and provides it with some cash to invest in the business.

Key Takeaways from Yext's Q4 Results

With a market capitalization of $778.2 million Yext is among smaller companies, but its more than $261.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

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, it was unfortunate to see that Yext's revenue guidance for the full year miss analyst's expectations and it indicates quite a significant slowdown in growth. Overall, this quarter's results could have been better. The company is down 15.6% on the results and currently trades at $5 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 think Yext is a solid business. Its revenue growth has been very weak, but at least that growth rate is expected to increase in the short term. But on a positive note, its very efficient customer acquisition hints at the potential for strong profitability, and its strong gross margins suggest it can operate profitably and sustainably.

Yext's price to sales ratio based on the next twelve months is 1.7x, suggesting that the market is expecting more steady growth, relative to the hottest tech stocks. There are definitely things to like about Yext and looking at the tech landscape right now, it seems that the company trades at a pretty interesting price point.

The Wall St analysts covering the company had a one year price target of $14.6 per share right before these results, implying that they saw upside in buying Yext even in the short term.

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