Yext Inc

Previous wording

On June 4, 2024, we committed to a restructuring plan in response to evolving business needs to reduce operating expenses and position Yext for profitable future growth (the “Plan”). The Plan will reduce the size of our workforce by approximately 12 percent of our full-time employees as compared to our headcount as of January 31, 2024. We estimate that we will incur restructuring charges of approximately $5 million in connection with the Plan, consisting primarily of severance payments, payments in lieu of notice, employee benefits and related costs. We expect to incur the majority of these expenses in the second quarter of fiscal year 2025. Potential position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the second quarter of fiscal year 2025 in certain cases. The charges that we expect to incur are subject to a number of assumptions, including legal requirements in various jurisdictions, and actual expenses may differ materially from these estimates.

Current wording

On June 4, 2024, we committed to a restructuring plan in response to evolving business needs to reduce operating expenses and position Yext for profitable future growth (the “Plan”). The Plan reduced the size of our workforce by approximately 12 percent of our full-time employees as compared to our headcount as of January 31, 2024. We incurred approximately $5 million in costs in connection with the Plan during our second quarter of fiscal year 2025, consisting primarily of severance payments, payments in lieu of notice, employee benefits and related costs. Although the majority of costs were incurred during our second quarter of fiscal year 2025, we may incur additional costs as position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the second quarter of fiscal year 2025 in certain cases.

Previous wording

Following approval by our Board of Directors, on June 10, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) for the acquisition of Hearsay Social, Inc. (“Hearsay”) pursuant to which we will acquire Hearsay for a purchase price of $125 million in cash, subject to customary adjustments (the “Closing Consideration”). Total cash subject to the Closing Consideration will be reduced by Hearsay employee equity awards assumed by us. We will also offer participation rights to key employees and former founders of Hearsay in a bonus pool of $20 million that can be settled in cash or our common stock and shall be subject to 100% vesting on the first anniversary of closing, generally subject to continued employment subject to customary exceptions for cause or good reason termination. In addition, subject to the terms of the Merger Agreement, we may also be required to pay additional contingent consideration of up to $75 million to Hearsay based on the achievement of certain milestones (the “Earnout Consideration”) payable based on achievement of certain annual recurring revenue targets. The targets shall be measured at the end of the first and second anniversaries of closing. The Earnout Consideration may be settled in cash or Yext common stock (based on then current market price) at our election. The closing of the merger with Hearsay is expected in the second half of our fiscal year ended January 31, 2025 subject to the satisfaction of certain customary closing conditions including regulatory approvals.

Current wording

Following approval by our Board of Directors, on June 10, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) for the acquisition of Hearsay Social, Inc. (“Hearsay”). Pursuant to the Merger Agreement, Hearsay became a wholly owned subsidiary of Yext upon closing of the transaction on August 1, 2024. We acquired Hearsay for approximately $125 million in cash, as adjusted for customary adjustments set forth in the Merger Agreement and the assumption of Hearsay employee equity awards. We also offered participation rights to key employees and former founders of Hearsay in a bonus pool of $20 million that can be settled in cash or our common stock and shall be subject to 100% vesting on the first anniversary of closing, generally subject to continued employment. In addition, subject to the terms of the Merger Agreement, we may also be required to pay additional contingent consideration of up to $75 million to Hearsay based on the achievement of certain milestones (the “Earnout Consideration”). The Earnout Consideration shall be payable based on achievement of certain annual recurring revenue targets. The targets shall be measured at the end of the first and second anniversaries of closing. The Earnout Consideration may be settled in cash or our common stock at our election.

Previous wording

Customer count is defined as the total number of customers with contracts executed as of the last day of the reporting period and a unique administrative account identifier on our platform. Generally, we assign unique administrative accounts to each separate and distinct entity (such as a company or government institution) or a business unit of a large corporation, that has its own separate contract with us to access our platform. We believe that customer count provides insight into our ability to grow our enterprise and mid-size customer base. As such, customer count excludes third-party reseller customers and small business customers as well as customers only receiving free trials. From time to time, some customers previously characterized as small business customers may transition to mid-size customers, and customer count includes these changes resulting from any recharacterization. As of April 30, 2024, customer count was over 2,990.

Current wording

Customer count is defined as the total number of customers with contracts executed as of the last day of the reporting period and a unique administrative account identifier on our platform. Generally, we assign unique administrative accounts to each separate and distinct entity (such as a company or government institution) or a business unit of a large corporation, that has its own separate contract with us to access our platform. We believe that customer count provides insight into our ability to grow our enterprise and mid-size customer base. As such, customer count excludes third-party reseller customers and small business customers as well as customers only receiving free trials. From time to time, some customers previously characterized as small business customers may transition to mid-size customers, and customer count includes these changes resulting from any recharacterization. As of July 31, 2024, customer count was approximately 2,970.

Previous wording

Total revenue was $96.0 million for the three months ended April 30, 2024, compared to $99.5 million for the three months ended April 30, 2023, a decrease of $3.5 million or 3%, primarily driven by the attrition of a large customer that occurred during the three months ended January 31, 2024. This decrease was partially offset by the impact of foreign currency exchange rates as discussed below. During the three months ended April 30, 2024 and 2023, revenue recognized from subscription and associated support to our platform was 93%, while revenue recognized from professional services was 7%, compared to 91% and 9%, respectively.

Current wording

Total revenue was $97.9 million for the three months ended July 31, 2024, compared to $102.6 million for the three months ended July 31, 2023, a decrease of $4.7 million or 5%, primarily driven by the attrition of a large customer that occurred during the three months ended January 31, 2024. During the three months ended July 31, 2024 and 2023, revenue recognized from subscription and associated support to our platform was 93%, while revenue recognized from professional services was 7%, compared to 92% and 8%, respectively.

Previous wording

Revenue attributable to direct customers was $77.4 million for the three months ended April 30, 2024, compared to $80.0 million for the three months ended April 30, 2023. The decrease of $2.6 million, or 3%, was primarily driven by the attrition of a large customer that occurred during the three months ended January 31, 2024. Revenue attributable to third-party reseller customers was $18.6 million for the three months ended April 30, 2024, compared to $19.4 million for the three months ended April 30, 2023, a decrease of $0.9 million or 4%, primarily due to customer attrition.

Current wording

Revenue attributable to direct customers was $79.3 million for the three months ended July 31, 2024, compared to $82.8 million for the three months ended July 31, 2023. The decrease of $3.6 million, or 4%, was primarily driven by the attrition of a large customer that occurred during the three months ended January 31, 2024. Revenue attributable to third-party reseller customers was $18.6 million for the three months ended July 31, 2024, compared to $19.8 million for the three months ended July 31, 2023, a decrease of $1.1 million or 6%, primarily due to customer attrition.

Previous wording

Gross margin was 77.6% for the three months ended April 30, 2024, compared to 78.5% for the three months ended April 30, 2023 as reflected in the discussion above.

Current wording

Gross margin was 77.2% for the three months ended July 31, 2024, compared to 78.2% for the three months ended July 31, 2023 as reflected in the discussion above.

Previous wording

Research and development expense was $17.1 million for the three months ended April 30, 2024, compared to $16.8 million for the three months ended April 30, 2023, an increase of $0.3 million or 2%. The increase was primarily driven by a $0.8 million increase in personnel-related costs, reflecting higher headcount. This increase was partially offset by a $0.3 million decrease in professional related costs as well as smaller decreases in depreciation expense, among others.

Current wording

Research and development expense was $18.6 million for the three months ended July 31, 2024, compared to $18.9 million for the three months ended July 31, 2023, a decrease of $0.3 million or 2%. The decrease was primarily driven by depreciation expense which decreased $0.2 million and stock-based compensation expense which decreased $0.2 million, reflecting lower headcount. In addition, there were smaller decreases in software expense and professional related costs, among others. These decreases were partially offset by a $0.8 million increase in personnel-related costs, mainly due to severance recognized from restructuring.

Previous wording

Revenue for the three months ended April 30, 2024, included a positive impact from foreign currency exchange rates of approximately $0.3 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than U.S. Dollars (“USD”) into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.

Current wording

Revenue for the six months ended July 31, 2024, included a positive impact from foreign currency exchange rates of approximately $0.4 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than USD into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.

Previous wording

Cost of revenue was $21.5 million for the three months ended April 30, 2024, compared to $21.4 million for the three months ended April 30, 2023, an increase of $0.2 million or 1%. The increase was primarily driven by personnel-related costs which increased $0.6 million, reflecting higher headcount. In addition, professional related costs increased $0.4 million and data center costs increased $0.3 million. These increases were partially offset by depreciation expense, which decreased $1.0 million as certain assets have fully depreciated.

Current wording

Cost of revenue was $43.8 million for the six months ended July 31, 2024, compared to $43.7 million for the six months ended July 31, 2023, an increase of $0.1 million or less than 1%. The increase was primarily driven by a $1.0 million increase in personnel-related costs, mainly due to severance recognized from restructuring. In addition, professional related costs increased $0.4 million and data center costs increased $0.4 million. These increases were partially offset by a $1.7 million decrease in depreciation expense as certain assets have fully depreciated.

Previous wording

Non-GAAP net income (loss) is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net income (loss) as our GAAP net income (loss) as adjusted to exclude the effects of stock-based compensation expense and the related income tax effect of the foregoing adjustments. We believe non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations. We also believe non-GAAP net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, which may vary for reasons unrelated to overall operating performance.

Current wording

Non-GAAP net income (loss) is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net income (loss) as our GAAP net income (loss) as adjusted to exclude the effects of stock-based compensation expense, acquisition-related costs, amortization of acquired intangibles, and the related income tax effect of these adjustments. Acquisition-related costs include transaction costs, subsequent fair value movements in contingent consideration, and compensation arrangements. We believe non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations. We also believe non-GAAP net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, acquisition-related costs, and amortization of acquired intangibles, which may vary for reasons unrelated to overall operating performance.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure that we believe offers a useful view of overall operations used to assess the performance of core business operations and for planning purposes. We define Adjusted EBITDA as GAAP net income (loss) before (1) interest income (expense), net, (2) provision for income taxes, (3) depreciation and amortization, (4) other income (expense), net, and (5) stock-based compensation expense. The most directly comparable GAAP financial measure to Adjusted EBITDA is GAAP net income (loss). Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to GAAP net income (loss) as a measure of operating performance.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we believe offers a useful view of overall operations used to assess the performance of core business operations and for planning purposes. We define Adjusted EBITDA as GAAP net income (loss) before (1) interest income (expense), net, (2) benefit from (provision for) income taxes, (3) depreciation and amortization, (4) other income (expense), net, (5) stock-based compensation expense, and (6) acquisition-related costs. The most directly comparable GAAP financial measure to Adjusted EBITDA is GAAP net income (loss). Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to GAAP net income (loss) as a measure of operating performance.

Previous wording

Our non-GAAP financial measures may be limited in their usefulness because they do not present the full economic effect of the expenses mentioned above. We compensate for these limitations by providing a reconciliation of our non-GAAP financial measures to the most closely related GAAP financial measures. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net income (loss) and Adjusted EBITDA (loss) in conjunction with GAAP net income (loss).

Current wording

Our non-GAAP financial measures may be limited in their usefulness because they do not present the full economic effect of the expenses mentioned above. We compensate for these limitations by providing a reconciliation of our non-GAAP financial measures to the most closely related GAAP financial measures. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net income (loss) and Adjusted EBITDA in conjunction with GAAP net income (loss).

Previous wording

As of April 30, 2024, our principal sources of liquidity were cash and cash equivalents of $246.1 million. We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections and lease payments, significant marketing events and related expenses, and other factors.

Current wording

As of July 31, 2024, our principal sources of liquidity were cash and cash equivalents of $234.8 million. We believe our existing cash and cash equivalents, inclusive of our acquisition of Hearsay on August 1, 2024, will be sufficient to meet our projected operating requirements for at least the next 12 months. Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections and lease payments, significant marketing events and related expenses, and other factors.

Previous wording

On March 11, 2020, we entered into a credit agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors. On December 22, 2022, we entered into a second amendment (“Amendment No. 2”) to the Credit Agreement, dated March 11, 2020, collectively referred to as the Credit Facility. No significant debt issuance costs were incurred in association with the December 2022 Credit Facility.

Current wording

On March 11, 2020, we entered into a credit agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors. On December 22, 2022, we entered into a second amendment (“Amendment No. 2”) to the Credit Agreement, dated March 11, 2020, and on July 26, 2024, we entered into a third amendment ("Amendment No. 3") to the Credit Agreement, collectively referred to as the Credit Facility. No significant debt issuance costs were incurred in association with Amendment No.2 and Amendment No.3.

Previous wording

The Credit Facility provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

Current wording

The Credit Facility provides for a senior secured revolving loan facility of up to $50.0 million that matures on December 22, 2025, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

Previous wording

As amended, the revolving loans bear interest, at our election, at an annual rate based on SOFR or a base rate. Loans based on SOFR shall bear interest at a rate between SOFR plus 2.50% and SOFR plus 3.00%, depending on our average daily usage of the revolving loan facility and subject to a SOFR floor of 1.00%. Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on our average daily usage of the revolving loan facility. We are also obligated to pay a commitment fee on the unused portion of the facility at a rate of 0.25% per annum.

Current wording

As amended, the revolving loans bear interest, at our election, at an annual rate based on SOFR or a base rate. Loans based on SOFR shall bear interest at a rate between SOFR plus 1.75% and SOFR plus 2.25%, depending on our consolidated total leverage ratio and subject to a SOFR floor of 1.00%. Loans based on the base rate shall bear interest at a rate between the base rate minus 1.25% and the base rate minus 0.75%, depending on our consolidated total leverage ratio. We are also obligated to pay a commitment fee on the unused portion of the facility at a rate of 0.25% per annum.

Previous wording

The Credit Facility contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain the year-over-year growth rate of its recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.

Current wording

The Credit Facility contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain minimum liquidity of $35.0 million at all times and a consolidated total leverage ratio of no greater than 3.00 to 1.00, tested on a quarterly basis.

Previous wording

In March 2022, our Board of Directors authorized a $100.0 million share repurchase program of our common stock. In September 2023, our Board of Directors authorized an additional $50.0 million to the share repurchase program. During the three months ended April 30, 2024, no shares were purchased and as of April 30, 2024, $49.7 million remains available for future purchases.

Current wording

In March 2022, our Board of Directors authorized a $100.0 million share repurchase program of our common stock. In September 2023, our Board of Directors authorized an additional $50.0 million to the share repurchase program. During the six months ended July 31, 2024, 43,270 shares were purchased and as of July 31, 2024, approximately $49.8 million remains available for future purchases, exclusive of commissions paid on the repurchase of shares.

Previous wording

Net cash provided by operating activities of $26.7 million for the three months ended April 30, 2023 reflected our net loss of $0.4 million, adjusted by non-cash charges including stock-based compensation expense of $11.0 million, depreciation and amortization expense of $4.7 million, and amortization of operating lease right-of-use assets of $2.3 million. In addition, there were positive adjustments resulting from changes in accounts receivable of $50.6 million, mainly due to timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $3.3 million. These increases were partially offset by changes in unearned revenue of $27.3 million, as well as changes in accounts payable, accrued expenses and other current liabilities of $15.0 million, operating lease liabilities of $2.9 million, and prepaid expenses and other current assets of $1.7 million.

Current wording

Net cash provided by operating activities of $27.7 million for the six months ended July 31, 2024 reflected our net loss of $7.9 million, adjusted by non-cash charges including stock-based compensation expense of $24.4 million, depreciation and amortization expense of $5.8 million, and amortization of operating lease right-of-use assets of $4.3 million. In addition, there were positive adjustments resulting from changes in accounts receivable of $62.0 million, mainly due to the timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $7.6 million. These increases were partially offset by changes in unearned revenue of $56.4 million, as well as changes in accounts payable, accrued expenses and other current liabilities of $4.6 million, operating lease liabilities of $5.7 million, and prepaid expenses and other current assets of $3.2 million.

Previous wording

Net cash provided by operating activities of $38.3 million for the three months ended April 30, 2024 reflected our net loss of $3.8 million, adjusted by non-cash charges including stock-based compensation expense of $12.1 million, depreciation and amortization expense of $3.0 million, and amortization of operating lease right-of-use assets of $2.1 million. In addition, there were positive adjustments resulting from changes in accounts receivable of $54.3 million, mainly due to the timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $4.3 million. These increases were partially offset by changes in unearned revenue of $26.7 million, as well as changes in accounts payable, accrued expenses and other current liabilities of $4.0 million, and operating lease liabilities of $2.8 million.

Current wording

Net cash provided by operating activities of $19.7 million for the six months ended July 31, 2023 reflected our net loss of $3.8 million, adjusted by non-cash charges including stock-based compensation expense of $22.6 million, depreciation and amortization expense of $9.1 million, and amortization of operating lease right-of-use assets of $4.6 million. In addition, there were positive adjustments resulting from changes in accounts receivable of $54.9 million, mainly due to timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $6.6 million. These increases were partially offset by changes in unearned revenue of $55.3 million, as well as changes in accounts payable, accrued expenses and other current liabilities of $14.2 million, and operating lease liabilities of $5.8 million.

Previous wording

Net cash used in investing activities of $0.6 million for the three months ended April 30, 2024 reflected capital expenditures.

Current wording

Net cash used in investing activities of $1.2 million for the six months ended July 31, 2024 reflected capital expenditures.

Previous wording

Net cash used in investing activities of $0.9 million for the three months ended April 30, 2023 reflected capital expenditures.

Current wording

Net cash used in investing activities of $1.6 million for the six months ended July 31, 2023 reflected capital expenditures.

Previous wording

Net cash used in financing activities of $1.2 million for the three months ended April 30, 2024 was primarily related to $2.0 million in cash outflows associated with payments for taxes related to the net share settlement of stock-based compensation awards. This was partially offset by net proceeds from employee stock purchase plan withholdings of $0.9 million.

Current wording

Net cash used in financing activities of $2.0 million for the six months ended July 31, 2024 was primarily related to $3.8 million in cash outflows associated with payments for taxes related to the net share settlement of stock-based compensation awards. This was partially offset by net proceeds from employee stock purchase plan withholdings of $1.8 million.

Previous wording

Net cash provided by financing activities of $0.3 million for the three months ended April 30, 2023 reflected proceeds from exercise of stock options of $7.3 million as well as net proceeds from employee stock purchase plan withholdings of $0.9 million. These increases were partially offset by $4.6 million in cash outflows associated with repurchases of common stock as part of our share repurchase program, as well as payments for taxes related to the net share settlement of stock-based compensation awards of $3.2 million.

Current wording

in cash outflows associated with repurchases of common stock as part of our share repurchase program, as well as payments for taxes