Yext, Inc.

Customer Mix Strategy

Q5: The sub-$50K ARR customer cohort declined 22% year over year. Is this cohort in permanent runoff, or is there a viable path to serving these customers profitably?

A5: The decline is a deliberate, managed result of redirecting our go-to-market resources toward larger, more durable enterprise relationships where our platform creates the most value. We no longer dedicate resources to mitigating churn within our current SMB customer base, and the $10.1 million of net churn in the sub-$50K cohort over the past twelve months reflects the exit of customers who were a poor fit for our enterprise product. The ≥$50K cohort now represents 92% of total ARR, with gross retention improving to 90% and net retention of 98% at the end of Q2. That said, we are not abandoning smaller businesses. Advancements in AI are fundamentally changing the unit economics of serving this market, and we continue to experiment with new offerings with AI-enabled cost structures. We recently released a working prototype of Corvo AI, a re-imagination of the UI for our core competitive intelligence, Listings, Reviews, and ultimately our entire portfolio of marketing agents, delivered in a conversational platform that a busy business owner can access through a mobile first experience and increasingly via SMS - allowing action through natural language. If these initiatives are successful, they will provide a scalable approach to efficiently serve this cohort without distracting us from our enterprise focus.

Q6: Net Retention Rate (NRR) among the ≥$50K ARR customer cohort improved to 98%, up from 97% in Q1 and 96% a year ago. What drove the improvement, and is it sustainable?

A6: The improvement came from both components of the metric: we kept more of the revenue we started the year with, and expansion within the base widened. Gross retention for the ≥$50K cohort improved to 90% from 89% a year ago, showing stability in our core enterprise base. Combined with new customer additions, we experienced net ARR growth of $6.6 million in the cohort over the past twelve months. The recovery has been gradual but consistent, moving from sustained negative organic growth throughout fiscal 2026, to roughly 1% growth in Q1, to 2% growth this quarter, and we expect our FY27 Q3 results to reflect continued positive momentum. We are reaching the point where the impact of compounding will start to become meaningful.