Yext, Inc.

Our Framework for Value Creation

We believe that standard metrics—revenue growth, GAAP earnings, Adjusted EBITDA—only capture part of what matters. Three things compound shareholder value at Yext: reducing dilution from stock-based compensation (“SBC”), reducing total share count, and growing free cash flow.

We have made progress on all three. First, total shares outstanding are down 24% from where they were at the beginning of FY23; and during this period, our aggregate repurchases were 53.3 million shares, representing 239% of all shares issued. Second, the equity we now issue to management is increasingly tied to performance hurdles set well above current trading levels. Third and finally, our free cash flow has grown from $11.7 million in FY23 to $53.3 million in FY26 through efficiency improvements and operating leverage. Keep in mind that our free cash flow in FY26 included the impact of a one time $20 million incentive pool from the Hearsay acquisition. In FY27, we would expect the free cash flow conversion rate to improve year over year.

But reported cash flow has a well-known weakness: it does not capture the dilution shareholders absorb from SBC. The dollar value of SBC as a percentage of revenue, which we believe is how dilution is most often discussed, can also be a misleading proxy. An undeniable measure of dilution for shareholders is the number of net new shares issued. To keep total outstanding shares from accreting, we can either reduce SBC or use operating cash flow to repurchase shares, or do both in combination. Operating cash flow that does not net out the cost of those repurchases overstates the cash genuinely available to shareholders.

One of our primary guiding economic principles is straightforward: corporate cash generation is only meaningful if it successfully defends shareholders against the dilution of their economic interests through new share issuance. This philosophy is built directly into the architecture of our incentive programs. By tying the vast majority of management's equity compensation in FY27 to rigorous operational benchmarks and share price thresholds far above current trading levels, we have structurally restricted automatic share issuance. The practical result is an absolute alignment of interests: meaningful dilution can only occur in scenarios where our shareholders have already realized significant equity appreciation.

Our focus on generating cash and repurchasing shares to reduce dilution does not mean we are de-emphasizing growth. Quite the opposite. The single most powerful lever for growing any per share measure of profitability or cash flow is top-line growth, because our margin structure and operating leverage mean revenue flows efficiently to cash. We reject the assumption—common during the recent period of zero or near-zero U.S. interest rates and the cheap-capital era of software—that growth must come at the expense of profitability. That assumption was an artifact of conditions that no longer exist.

We intend to grow our business meaningfully, and we expect that growth to accelerate our operating cash flow faster than revenue. Cash generation gives us optionality. We can invest in R&D and go-to-market initiatives that compound long-term growth. We can prudently take on debt to make value-accretive acquisitions. We can offset dilution from equity compensation. We can repurchase shares beyond what is needed to offset that dilution. We can pay down debt. We can accumulate a cash reserve. We will continue to allocate across these uses with discipline.