What Happened:
Shares of online reputation and search platform Yext (NYSE:YEXT) jumped 14.1% in the pre-market session after the company reported second-quarter earnings results. Revenue missed slightly, but EPS managed to beat. Moving on, Yext provided optimistic full-year revenue guidance, which blew past analysts' expectations. Full-year EBITDA guidance also exceeded expectations. Overall, this was a solid quarter.
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What is the market telling us:
Yext’s shares are somewhat volatile and over the last year have had 15 moves greater than 5%. But moves this big are very rare even for Yext and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 24.2% on the news that the company reported fourth-quarter results with revenue exceeding expectations by a narrow margin, though EPS came in well ahead of Wall Street's estimates.
Yext produced $14.8 million of adjusted EBITDA (vs estimates of $12.6 million), partly thanks to a huge year-on-year increase in its gross margin, which expanded from 74% to 78.6% thanks to the company's shift to a professional services strategy. This encouraging gross margin expansion trumped its underwhelming full-year revenue guidance, which was below expectations. A reason for the lower revenue guidance was the loss of a large customer during the quarter, but the market doesn't seem to care. Overall, it was a decent quarter for Yext.
Yext is down 8.5% since the beginning of the year, and at $5.33 per share it is trading 41.3% below its 52-week high of $9.08 from September 2023. Investors who bought $1,000 worth of Yext’s shares 5 years ago would now be looking at an investment worth $316.69.
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