Yext Inc
For the period ended Jan 31, 2025. Filed Mar 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 13, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
Reports of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Yext, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Yext, Inc. (the Company) as of January 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Revenue Recognition | |
| Description of the Matter | The Company recorded consolidated revenue of $421 million for the year ended January 31, 2025, and $230 million of unearned revenue as of January 31, 2025. As described in Note 2 to the consolidated financial statements, the Company primarily earns revenue from subscriptions and associated support to the platform. The Company’s revenue contracts include contractual terms and conditions that can impact the amount allocated to each of its performance obligations and the timing of revenue recognition. Auditing the timing and measurement of the Company's revenue recognition was especially challenging due to the volume of executed contracts and the assessment of the unique terms. This involved assessing the contractual terms and conditions of both new and modified contracts to determine the contract period and identifying all performance obligations. |
|---|
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over the accounting for revenue. For example, we tested controls over the Company’s processes to evaluate contractual terms and conditions and determine the timing and amount of revenue to be recognized related to the performance obligations identified as services are transferred to the customer. This included testing relevant controls over the IT systems that are important to the initiation, processing and recording of revenue transactions.We performed audit procedures that included, among others, reading a sample of revenue contracts to evaluate the contractual terms and conditions, identify performance obligations, and assess the measurement and timing of revenue recognized and unearned revenue recorded as of year-end. We tested the revenue recognized and unearned revenue as of year-end through tests of details and analytical procedures, including the recalculation of balances on a disaggregated basis. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements. |
|---|---|
| Accounting for the Hearsay Social, Inc. Acquisition | |
| Description of the Matter | On August 1, 2024, the Company completed the acquisition of Hearsay Social, Inc. (“Hearsay”) for total purchase consideration of $180.4 million, including contingent consideration of $39.5 million. This transaction was accounted for as a business combination as outlined in Note 4 using the acquisition method of accounting which requires, among other things, the identifiable assets acquired and liabilities assumed in the acquiree, to be measured at their fair values, as of the acquisition date. Any excess of the fair value of consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. Auditing the Company’s accounting for its acquisition of Hearsay was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of the acquired customer relationships intangible asset, which was valued and recorded at $76.2 million, as well as the contingent consideration liability, which was valued and recorded at $39.5 million as part of the total purchase consideration of $180.4 million. The significant assumptions used in the valuation of the customer relationships intangible asset included a discount rate and certain assumptions that form the basis of the forecasted results including revenue and annual revenue growth rates, EBITDA margin, customer attrition rates, and certain contributory asset charges. The Company used the Multi-Period Excess-Earnings Method to measure the customer relationships intangible asset with the assistance of a third-party valuation specialist. The significant assumptions used in the valuation of the contingent consideration liability included a discount rate and projected Annual Recurring Revenue (“ARR”) values. The Company used the Monte Carlo model to measure the fair value of the contingent consideration liability with the assistance of a third-party valuation specialist. These significant assumptions are forward looking and could be affected by future economic and market conditions. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s accounting for the Hearsay acquisition. For example, we tested controls over management’s review of the valuation of the customer relationships intangible asset and contingent consideration liability, including management’s review of the valuation models applied and significant underlying assumptions. We also tested management’s internal controls to validate that the data used in the valuation models was complete and accurate.To test the estimated fair value of the acquired customer relationships intangible asset and contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company’s valuation methodology used, evaluating the significant assumptions discussed above, and testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used by the Company in the valuation. We involved our valuation specialists to assist in evaluating the methodology used to estimate the fair value of the acquired customer relationships intangible asset as well as the contingent consideration liability, and to test certain significant assumptions including discount rates, among others. We tested significant assumptions through a combination of procedures, as applicable for each assumption. For the acquired customer relationships intangible asset, we tested the forecasted revenue, annual revenue growth rates, and EBITDA margin by comparing the selected rates to current and forecasted industry and economic trends, the historical results of the acquired business, and other guideline companies within the same industry. For the customer attrition rates within the acquired customer relationships intangible, we tested the completeness and accuracy of the underlying data used to calculate the basis for the customer attrition rate, and compared to guideline companies within the same industry. For certain contributory asset charges within the acquired customer relationships intangible, we developed independent assumptions utilizing market data to evaluate the reasonableness of the assumption used by management. For all significant assumptions within the acquired customer relationships intangible asset, we performed sensitivity analyses to evaluate the changes in fair value of the acquired customer relationship intangible asset that would result from changes in the significant assumptions. For the ARR values within the contingent consideration liability, we performed audit procedures that included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable, testing the completeness and accuracy of the underlying data used in the assumption, and comparing the significant assumptions to the Company’s historical trends and forecasts. We also performed sensitivity analyses to evaluate the changes in fair value of the contingent consideration liability that would result from changes in the significant assumptions. |
|---|
/s/Ernst & Young, LLP
We have served as the Company’s auditors since 2014.
New York, New York
March 13, 2025
To the Stockholders and the Board of Directors of Yext, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Yext, Inc.’s internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Yext, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2025, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Hearsay Social, Inc., which is included in the January 31, 2025 consolidated financial statements of the Company as of January 31, 2025 and constituted 9% of Yext’s total assets, excluding the preliminary value of goodwill and other intangible assets as of January 31, 2025, and 8% of Yext’s total revenue for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Hearsay Social, Inc.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2025, and the related notes and our report dated March 13, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young, LLP
New York, New York
March 13, 2025
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.