Q2 2025 Yext Inc Earnings Call

Speaker Change: Good day, and welcome to the Yekst Inc. 2nd quarter, fiscal 2025, by natural result call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Operator: or Results Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

Nils Erdmann: I would now like to turn the conference over to Nils Erdmann. Please go ahead.

Speaker Change: I would now like to turn the conference over to Nils Erdmann, please go ahead.

Michael Walrath: Thank you, operator, and good afternoon, everyone. Welcome to Yext's second quarter of fiscal 2025 earnings conference call. With me today, our CEO and Chair of the Board, Mike Walrath, and CFO Darryl Bond.

Nils Erdmann: Thank you operator and good afternoon everyone. Welcome to Jack's second quarter fiscal 2025 earnings conference call. With me today are CEO and chair of the board, Mike Walrath and CFO Darryl Bond.

Michael Walrath: During this call, we will make forward statements, including statements related to our future financial performance, statements regarding the expected effects of our acquisition and integration of Hearsay Systems, expectations regarding the growth of our business, our outlook for the third quarter and full fiscal year 2025, our strategy and estimates of financial and operating metrics, capital expenditures, and other indications of future opportunities, as further described in our second quarter shareholder letter. These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, our ability to integrate Hearsay Systems' business with ours, our management performance, and general economic and business conditions.

Speaker Change: During this call, we will make forward statements, including statements related to our future financial performance, statements regarding the expected effects of our acquisition and integration of hearsay systems.

Speaker Change: Expectations regarding the growth of our business.

Speaker Change: Our outlook to the third quarter and full fiscal year 2025, our strategy and estimates of financial and operating metrics, capital expenditures and other indications of future opportunities as for the described in our second quarter shareholder letter.

Speaker Change: These four looking statements are subject to certain risks of certainties and assumptions, including those related to the ex-growth, the evolution of our industry, our product development and success, our ability to integrate to your safety systems business with ours, our management performance, and general economic and business conditions.

Michael Walrath: These forward-looking statements represent our beliefs and assumptions only as of the date made, and we undertake no obligation to revise or update any statements to reflect changes that occur after this call. Further information on factors and other risks that could cause actual results to materially differ from these forward-looking statements is included in our records filed with the SEC, including in the section titled "Special Note Regarding Forward-Looking Statements and Risk Factors."

Speaker Change: These four-looking statements represent our beliefs and assumptions only as of the date made and we undertake no obligation to revise or update any statements to reflect changes that occur after this call.

Speaker Change: Further information on factors and other risks that cause actual results to materially differ from these full-looking statements is included in our reports, filed with the SEC, including in the section titled Special Note regarding full-looking statements and risk factors.

Michael Walrath: Our most recently filed quarterly report on Form 10-Q for the three and six months ended July 31st, 2024, excuse me, 2025, our earnings release and our shareholder letter that were issued this afternoon. During the call, we also refer to certain metrics, including non-GAAP financial measures. Reconciliations with the most comparable historical GAAP measures are available in the shareholder letter, which is available at investors.gext.com. We also provide definitions of these metrics in the shareholder letter.

Speaker Change: and our most recently filed quarterly report on board 10Q for the three N6 months and did July 31, 2025. Excuse me, 2020-4. Our earnings release and our shareholder letter that we're issued this afternoon.

Speaker Change: We also refer to certain metrics including non-gap financial measures, reconciliations with the most comparable historical gap measures are available in the shareholder letter, which is available at investors.dext.com. We also provide definitions of these metrics in the shareholder letter.

Michael Walrath: With that, I will now turn the call over to Mike.

Michael Walrath: Hi, everyone. Thanks for joining us today. Hopefully, by now, you've had a chance to read our press release as well as our second quarter letter to shareholders, which was posted to our website after the close of the market.

Speaker Change: with that I will now turn the call over the mic.

Speaker Change: Thanks for joining us today. Hopefully by now you've had a chance to read our press release as well as our second quarter letter to shareholders, which was posted on it to our website after the close of the market. We'd like to jump right into your questions. We can go ahead and do that now.

Michael Walrath: We'd like to jump right into your questions. We can go ahead and do that now.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Speaker Change: We'll now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone.

Speaker Change: If you are using a speaker phone, please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then too. At this time we will pause momentarily to assemble our roster.

Thomas White: And our first question today comes from Tom White with DA David. Please go ahead.

Speaker Change: And our first question today comes from Tom White with DA David. Please go ahead.

Thomas White: Great. Thanks for taking my questions to if I could.

Thomas White: I guess just first off on the updated revenue guide, is that all hearsay contribution, or is there a change to kind of any change to the outlook in the core business? And I guess if the only change is related to hearsay, my arithmetic says the new guide implies maybe a full year revenue number for hearsay of maybe around 51 million. I think you said it did 60 million in revenues last year. Can you just maybe help me square those two things?

Tom White: Great thanks for taking my questions. Too if I could, I guess just for stuff on the updated revenue guide. Is that all here say contribution or is there a...

Speaker Change: A change to any change of the outlook in the core business.

Speaker Change: and I guess if the only change is related to your say, my arithmetic says the new guide.

Speaker Change: implies maybe a full year revenue number of for here save of maybe around 51 million. I think you said it did 60 million in revenues last year, can you just maybe help me square those two things and then I got a follow up next.

Thomas White: And then I got to follow up. Thanks.

Darryl Bond: Yeah, hey, Thomas Darryl. Yeah, since we closed the Hearsay acquisition on August 1st, the Q3 and full year guide includes two full quarters of Hearsay revenue. You know, previously we had said the hearsay ARR was around 60 million, so you can kind of, you know, infer what the revenue is based off that.

Darryl: Yeah, hey Thomas Darryl. Yeah, since we closed the years they acquisition on August 1st.

Speaker Change: The Q3 and Full Year Guide include two full quarters of hearsay revenue. Previously we had said that hearsay AR was around 60 millions, so you can kind of infer what the revenue is based off that.

Darryl Bond: I'm not sure, you know, sort of how you got to your numbers, but, you know, when we look at the, the sort of balance of the year, you know, adding in the hearsay business for the second half, you know, we've talked about the top line synergies that we, you know, believe are available and we're starting the joint go-to-market motions to, can you take, celebrate both the legacy hearsay business and our business? So, you know, all of that is contemplated in the guide.

Speaker Change: I'm not sure how you got to your numbers but when we look at the sort of balance of the year, you know, adding in the hearsay.

Speaker Change: Business for the second half, we've talked about the top line synergies that we believe are available and we're starting the joint go-to-market motions to can you take celebrate both the legacy hearsay business and our business so all of that is contemplated in the guide.

Thomas White: Okay, that's helpful.

Thomas White: And then maybe just a higher level one, Mike. You know, the last couple quarters you've talked a bit about, kind of this broader theme of consolidation, you know, of software vendors when kind of the broader market slows and how that's, you know, driven by customers. I'm just hoping you could maybe just talk a little bit about what you're seeing or sort of where we are and kind of that general cycle right now. Do you think any signs of things are kind of loosening up a bit, or if not, you know, what's your sort of appetite for potentially looking to add other products to the portfolio if this consolidation kind of theme continues?

Speaker Change: Okay, that's helpful. And then maybe just a higher level one, the last couple quarters you've talked a bit about.

Speaker Change: Kind of this broader theme of consolidation, you know, of software vendors, when kind of the...

Speaker Change: the broader market slows and how that's driven by customers. I hope you could maybe just talk a little bit about what you're seeing.

Darryl Bond: Erdmann, Darryl Bond, Darryl Bond, Darryl Bond, Darryl Bond, what you're sort of appetite for potentially looking to add other products to the portfolio if this consolidation kind of theme continues to fix.

Michael Walrath: Thanks.

Michael Walrath: Yeah, no, thanks for the question, Tom. So, you know, this has kind of been our thesis, and I think we're seeing, you know, what we would expect to see in this environment. So I've been spending a lot of time with our customers and particularly our joint customers with Hearsay over the last, particularly the last five weeks since we've closed that acquisition, and we're hearing the same themes over and over again. They have too much vertical software. It's creating workload on their teams, you know, which are smaller than they have been. It's really all the same themes.

Darryl Bond: Yeah, thanks for the question, Tom, it's so, you know, this has kind of been our thesis, and I think we're seeing...

Speaker Change: You know, what we would expect to see in this environment, so I've been spending a lot of time with our customers and particularly our joint customers with hearsay over the last.

Speaker Change: Particularly last five weeks since we've closed that acquisition and we're hearing the same themes over and over again.

Speaker Change: They have too much vertical software, it's creating.

Speaker Change: Workload on their teams, you know, which are smaller than they have been. It's really all the same themes, so too much software, too many platforms, data.

Michael Walrath: So too much software, too many platforms, data, inact again, consistencies, the inability to run analytics across, you know, these vertical siloed technologies. You know, this is why consolidation makes so much sense, and so it's also one of the reasons why we've seen such a strong positive reaction from our shared customers. With hearsay on the two companies coming together because the promise of being able to deliver better analytics, a better data platform, more, you know, more efficient workflows and all of, you know, I talk a lot in the letter about, you know, how important all of those things are going to be in a generative AI experience world.

Speaker Change: In consistency, the inability to run analytics across, you know.

Speaker Change: These vertical siloed technologies, you know, this is why consolidation makes so much sense. And so, it's also one of the reasons why we've seen such a strong positive reaction from our shared customers. We hear, say, on the two companies coming together, because the promise of...

Speaker Change: being able to deliver better analytics, a better data platform, more efficient workflows. And all of the, you know, I talked a lot in the letter about, you know, how important all of those things are going to be in a, in a, in a, in a, in a, in a, in a, experience world.

Michael Walrath: So none of that has changed.

Michael Walrath: I think if anything what we've seen from customers is that with the amount of uncertainty that there is in the world, elections, interest rates, recessions, geopolitical risk, you know, that a lot of our customers are seeing this is a great time to think about their tech stack, think about their investment and really figure out how to get the most value from it. And so, from our standpoint, we're fortunate in that sense that we, I think, we're going to participate in a lot of those conversations because we already have a much broader platform than any of our individual competitors.

Speaker Change: So none of that has changed. I think if anything, what we've seen from customers is that with the amount of uncertainty that there is in the world's elections, interest rates, recession, geopolitical risk.

Speaker Change: You know, a lot of our customers are seeing this as a great time to think about their tech stack, think about their investment and really figure out how to get the most value from it.

Speaker Change: And so, from our standpoint, we're fortunate in that sense that we, I think we're going to participate in a lot of those conversations because we already have a much broader platform than any of our individual competitors. And we're really just getting started with the organic innovation piece of this.

Michael Walrath: And we're really just getting started with the organic innovation piece of this. Certainly, we will continue to ask our customers where we should go next. I think this is a big part of the innovation reboot that we've been going through here is having the customers drive us to what's the next most important product, which had a lot to do with the strategic rationale behind a deal like here say. So I think these, personally, I love these conversations. I think we get into problem solving with customers, we get into where the pocket is going, and that's going to help us build a roadmap of organic growth and in organic growth opportunities.

Speaker Change: Certainly, we will continue to ask our customers where we should go next. I think there's a big part of that.

Speaker Change: Innovation reboot that we've been going through here is having the customers drive us to what's the next most important product which had a lot to do with the strategic crash and all behind the deal like here's that.

Speaker Change: Um...

Speaker Change: I think these, personally, I love these conversations, I think we get into problems solving with customers. We get into where the, where the, where the puck is going and that's going to help us build a roadmap of organic growth and inorganic growth opportunities.

Michael Walrath: One of the things I did in the letter is really layout how we think of that as a long term value driving made framework both from a investing in organic growth, expanding in organically where those opportunities exist and then obviously the third pillar of that is the ability to buy back our shares and create a positive anti-delusion effect.

Speaker Change: I want to think that I've been the letter, is really layout how we think of that as a long-term value driving.

Speaker Change: made framework both from a investing in organic growth, expanding in organically where those opportunities exist, and then obviously the third pillar of that is the ability to buy back our shares.

Speaker Change: Create a positive anti-dolution effect to our shareholders.

Thomas White: Thank you very much; I'll get back in the queue.

Speaker Change: Great. Thank you very much. I'll get back in the queue.

Rohit Kulkarni: Our next question comes from Rohit Kulkarni with Ross, Capitol Partners.

Rohit Kulkarni: Please go ahead. Hey, thank you.

Speaker Change: Our next question comes from Rohit Kokarni with Ross Capital Partners. Please go ahead.

Rohit Kulkarni: A couple of questions. One is on how do you think upsell into hearsay or hearsay upsell into Yext co customer base. How do you feel where is the greatest lowest hanging fruit in the next 6, 9, 12 months.

Rohit Kokarni: Thank you, couple questions, one is on the...

Rohit Kokarni: How do you think upsells into hearsay or hearsay, upsell into?

Rohit Kokarni: YXCoCustomer Base. How do you feel where the greatest load is hanging through it in the next 6-9-12 months.

Rohit Kulkarni: And I think you mentioned earlier that excluding the loss of large customer, I think organic ARR growth could get to meet some real digits by end of this year and I think real digits in first of next year. Just wondering what are your latest thoughts on that organic growth based on and then perhaps you could update based on hearsay and then I have a couple of those generic questions.

Speaker Change: and I think you mentioned earlier that...

Speaker Change: Excluding the loss of large customer, I think organic ARR growth could let to mention the years by M of the Furrens.

Speaker Change: I think it will be in close to the next few weeks. Just wondering what are your latest thoughts on that organic growth based on, and then perhaps you could update on this on here, and then I have a couple of those genuine questions.

Michael Walrath: Sure. So thanks for the questions, Rohit. So on the first question, I think that there are several opportunities where we have joint relationships with customers who are customers of both Yext and Hearsay. There's an opportunity to create more value, as I mentioned, by unifying the data platform, the analytics, the workflows over time. And that's something our customers are really excited about. Probably the most actionable opportunities for us are the ones are the opportunities where we may, Yext may have a customer that Hearsay doesn't work with our vice versa. And this consolidation theme remains a tail, you know, becomes a tailwind in those, in those discussions because the customers can, can, can look at ways to, you know, can be saved money.

Speaker Change: Sure. So thanks for the questions, right? So, on the first question, I think that...

Speaker Change: and there are several opportunities.

Speaker Change: Where we have joint relationships.

Speaker Change: with customers who are customers of both gext and hearsay. There's an opportunity to create more value, as I mentioned by unifying the data platform, analytics, the workflows over time. That's something our customers are really excited about.

Speaker Change: Probably the most actionable opportunities for us, or the opportunities where we may yet may have a customer that hearsay doesn't work with or vice-inversa.

Speaker Change: and this consolidation theme remains a tell, you know, becomes a tell when in those discussions because the customers can.

Speaker Change: Um...

Michael Walrath: It can be saved expense operating expense. I mean, one of the things I think people overlook a lot of is when we, you know, and we've done it at Yext too, and we over by software. It's not only the cost of the software, and when we have all the, you know, when we have too much, too many pieces of vertical software in the business, there's an operational load on that, on that diversity of software as well where, you know, are the people running these systems are moving back and forth between different systems throughout the day, and that's just inefficient.

Speaker Change: Can look at ways to, you know, can be saved money, it can be saved, expense operating expense. I mean, one of the things I think people overlook a lot of is when we...

Speaker Change: And we've done it at Yax too, and we over buy software. It's not only the cost of the software, and when we have too much, too many pieces of vertical software in the business, there's an operational load on that.

Speaker Change: and the University of software as well, where the people running these systems are moving back and forth between different systems throughout the day and that's just inefficient. So those are where we see the opportunities and probably the most.

Michael Walrath: So those are where we see the opportunities and probably the most.

Michael Walrath: The best thing about the Hearsay acquisitions so far is how quickly the conversations with customers have turned from being a Yext conversation or a Hearsay conversation or really about a partnership discussion. And so it's really remarkable. In one of the things meeting with customers I've seen is how, you know, there is in a, you know, these businesses are merging together very quickly. And it's almost, you know, almost immediately indistinguishable: is this a Yext opportunity or a hearsay opportunity to say, how do we create value for the customer opportunity? So that's really encouraging.

Speaker Change: The best thing about the hearsay acquisition so far is how quickly the conversations with customers have turned from being a YX conversation or a hearsay conversation or really about a partnership discussion.

Speaker Change: and so it's...

Speaker Change: It's really remarkable and one of the things meeting with customers I've seen is how, you know, there isn't a, you know, these businesses are merging together very quickly and it's almost, you know, almost immediately indistinguishable is this a YX opportunity or a hearsay opportunity to say how do we create value for the customer opportunity so that's really encouraging.

Michael Walrath: I think your second question was on organic ARR growth. And, you know, one of the things that we talk about in the letter is that we're seeing a lot of stability overall in the ARR picture. And we're also accounting for a lot of risk. And, you know, I think we all entered this year. And I've talked a lot of other software CEOs about this. Entered this year thinking that this year was going to be an improvement in the environment. We haven't seen evidence of that. And as we look at the risk factors in the second half of the year that I've laid out a couple of times already.

Speaker Change: I think your second question was on.

Speaker Change: Organic ARR growth and you know one of the things that we talk about in the letter is that we're seeing a lot of stability overall in the ARR picture.

Speaker Change: We're also accounting for a lot of risk and we all entered this year.

Speaker Change: And I've talked a lot of other software CEOs about this, entered this year thinking that this year was going to be an improvement in the environment.

Speaker Change: We haven't seen evidence of that, and as we look at the risk factors in the second half of the year that I've laid out a couple times already. We're just going to take a cautious approach on how we talk about expected error. Our growth, so what I would say is we, you know,

Michael Walrath: We're just going to take a cautious approach on how we talk about expected ARR growth. So, you know, what I would say is we, you know, in total, we expect stable to modest growth in the ARR this year. And maybe we'll be pleasantly surprised by an environment that helps us. But we're just going to be overall conservative in how we look at that.

Speaker Change: in total we expect stable to modest growth in the hair are this year and maybe we'll be pleasantly surprised by an environment that helps us but we're just going to be overall conservative and how we look at that.

Rohit Kulkarni: Okay, great. I guess I like the commentary around GNI and the fact that I'll take the last half-full interpretation, but where you say that the wave is coming. So perhaps talk about how, how are you thinking from your conversations with decision makers and enterprises around kind of puts and takes as to when or how. Jenny, I related tools that you provide would start to move the needle and would start to essentially be the driver and more and more deals and bookings.

Speaker Change: Okay, I guess I like the...

Jenny: The commentary around Jenny I and the fact that I will take the class half in the interpretation that very say that.

Speaker Change: is coming. So, perhaps talk about what are you thinking from your conversations with decision makers and enterprises around.

Speaker Change: can afford some takes as to...

Speaker Change: Venerhau, Jania related to...

Speaker Change: II, that you provide, you would start to move the needles.

Speaker Change: and Woodstock 2 essentially.

Michael Walrath: And what, Peter, do you feel that's a reason to make? Yeah, so, you know, as you as you know, I've been a little bit of a curmudgeon on this topic. And, you know, I think that's probably because I've been around too long and seen a few of these cycles before. And, you know, we get really excited. And then, you know, we sort of entered this phase, which I think where we're living now, which is we're asking ourselves, you know, as an industry is, you know, is this real? Beyond obviously it's driving a ton of value for anyone producing hardware to support the AI infrastructure build out.

Speaker Change: Be the driver in more and more deals and bookings, and over what we review field, that's the reason we listen to the mix.

Speaker Change: Yeah, so, you know, as you know, I've been a little bit of a curmudgeon on this topic.

Speaker Change: And I think that's probably because I've been around too long and seen a few of these cycles before, and we get really excited. And then we sort of entered this phase, which I think we're living now, which is we're asking ourselves, you know, as an industry.

Speaker Change: is this real beyond, obviously it's driving a ton of value for anyone producing hardware to support the AI infrastructure built out and it's driving a lot of workloads.

Michael Walrath: And then it's driving a lot of workloads. But it's really, you know, as I think has been broadly commented, it's not driving a lot of, it's not certainly not driving the wave of bookings that I think we were hoping AI would drive. And so, you know, this reminds me of mobile and social and, you know, even the Internet in the late 90s when I was just kind of cutting my teeth. Where it was, you know, it was happening right now and then, you know, it then it wasn't happening right right now and then it took a long time.

Speaker Change: But it's really, you know, as I think has been broadly commented, it's not driving a lot of, it's not certainly not driving the wave of the bookings that I think we were hoping, AI would drive. And so, you know, this reminds me of mobile and social and, you know, even the internet at the late 90s.

Speaker Change: and I was just kind of cutting my teeth.

Speaker Change: It was happening right now and then it took a long time, but it turns out when it didn't happen and it happened a lot bigger than even we could have expected. So I draw on those experiences and what I see is I see.

Michael Walrath: But it turns out when it did happen, it happened a lot bigger than even we could have expected. And so, so I draw on those experiences, and what I see is I see. I just don't think in a couple of years that we're going to, you know, two, three, four, or five years, and it's hard to put a timeframe on it that we're going to be talking about, you know, AI so much as we're going to be talking about the value that's being generated through the platform. And so foundational to that, you know, we talk a lot inside the extra about, you know, your AI strategy is your data strategy.

Speaker Change: I just don't think in a couple of years that we're gonna, you know, two, three, four, five years, and it's hard to put a time frame on it that we're gonna be talking about, you know, AI so much as we're gonna be talking about the value that's being generated through the platform and so foundational to that.

Speaker Change: You know, we talk a lot inside the X to about, you know, your AI strategy is your data strategy.

Michael Walrath: And so the more fragmentation that we see across the consumer experience, the more important it's going to be that you have a cohesive content and data strategy and that the applications that you're using to deliver that data to those consumer experiences, in particular, you know, it has to be organized. It has to be authoritative. It has to be actionable. And when that happens, we expect this to become an extraordinary tailwind. Now, you know, some of the risk factors to what I would call time-based risk factors are the, you know, the compliance level for engaging through LLMs and various other forms of AI with the consumer is going to be a very high bar, particularly inside large enterprises like financial services institutions and healthcare.

Speaker Change: and so the more fragmentation that we see across the consumer experience.

Speaker Change: The more important it's going to be that you have a cohesive content and data strategy and that the applications that you're using to deliver that data to those consumer experiences.

Speaker Change: In particular, you know, it has to be organized, it has to be authoritative, it has to be actionable. And when that happens...

Speaker Change: We expect this becomes an extraordinary talent. Now, you know, some of the risk factors, what I would call time-based risk factors are

Speaker Change: the compliance.

Speaker Change: Bravo!

Speaker Change: for engaging through LLMs in various other forms of AI. With the consumer is going to be a very high bar, particularly inside large enterprises like financial services and institutions in healthcare. And so that, that, you know, is a...

Michael Walrath: And so that, you know, the promise of the technology will, any ability of the technology will outrun the comfort level that large enterprises are going to have with using it. So, now the flip side of that coin to try to give you a thorough answer to the question is, we're already seeing it benefit inside the platform. So when we talk about things like listings recommendations, like automated and generated review response, we're beginning to see customers dip their toe in the water of using these technologies in a very safe and very constrained way. And not everyone is a regulated industry.

Speaker Change: You know, the promise of the technology will any, and the ability of the technology will outrun the comfort level that large enterprises are going to have with using it. Now, the flip side of that coin to try to give you a thorough answer to the question is,

Speaker Change: We're already seeing it benefit inside the platform, so we talk about things like listings, recommendations, like automated and generator review response.

Speaker Change: We're beginning to see customers dip their toe in the water of using these technologies in a very safe and very constrained way and not everyone is a regulated industry.

Michael Walrath: So, you know, hopefully that doesn't sound too contradictory.

Michael Walrath: This is going to take a while. When it happens, it'll be bigger than people think. And the way we're going to deliver, you know, as an industry, the way we're going to deliver a lot of this innovation is through software platforms that have the right componentry around data, workflow, analytics, learning, and things like that.

Speaker Change: Um, you know, yeah, hopefully that doesn't sound too contradictory, this is going to take a while when it happens it'll be bigger than people think.

Speaker Change: And the way we're going to deliver, you know, as an industry, the way we're going to deliver a lot of this innovation is through software platforms that have the right component tree around data, workflow, analytics, learning and things like that.

Rohit Kulkarni: Okay, fantastic answer, Mike.

Rohit Kulkarni: I'll go back in the tube. Okay, thanks, right?

Speaker Change: The End of Episode 2

Speaker Change: Okay, I'll come back to Michael, go back in the queue.

Ryan McDonald: Our next question comes from Ryan McDonald with Needham. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from Ryan McDonald's with Needham. Please go ahead.

Ryan McDonald: All right, thanks for taking my questions.

Ryan McDonald: Maybe the first one is now that you've got hearsay closed, you're starting the integration work. How quickly can you start to maybe recognize some of those revenue synergies, or what are some of the processes or steps you're taking to be able to, you know, start to better go after the not shared customers and maybe some of your key verticals. And can you just remind us how hearsay sales cycles compared to sort of core yaks. Thanks.

Ryan McDonald: Hi, thanks for taking my questions. My first one is now that you've got here say closed and you're starting the integration work. But quickly, can you start to maybe recognize some of those revenue synergies or what are some of the processes or steps you're taking to be able to...

Speaker Change: You know, start to better go after the not shared customers and maybe some of your key verticals and can you just remind us how hear say sales cycles compare to sort of core x specs?

Michael Walrath: Yeah, so we think there's a, you know, it's kind of a layer cake of opportunity there. On the revenue side of things, I think we see a sales process and a customer support process that's very similar between yaks and here say. I think the deal cycles are very similar. It's a lot of the same buyers and same buying centers, or at least similar within the organization.

Speaker Change: Yeah, so we think there's kind of a layer cake of opportunity there on the revenue side of things. We see a sales process and a customer support process.

Speaker Change: is a very similar between the X and here I said, I think the deal cycles are very similar. It's a lot of the same buyers and same buying centers, or at least similar.

Michael Walrath: And so, as I mentioned before, I think we really do, we do see an opportunity where anywhere where there is the X customers, not a hearsay customer will have a, you know, I think an opportunity to have a discussion there around the benefits of a unified platform and data layer. And we also, you know, as you know, we've been probably the biggest investment we've made from a product standpoint over the last 12 months is in a non-financial services social, selling social management and analytics platform, which I think we're, you know, talking about, you know, getting to GA within days in the letter.

Speaker Change: with the organization and so as I mentioned before I think we really do see an opportunity where anywhere where there is the X customers, not a X customer, we'll have a, you know, I think.

Speaker Change: An opportunity to have a discussion there around the benefits of a unified platform and data layer.

Speaker Change: And we also, you know, as you know, we've been probably the biggest investment we've made from a product standpoint over the last 12 months is in a non-financial services, social management and analytics platform.

Michael Walrath: So that's coming. We're really excited about it. We've had a large customer beta going there, and we think that it's going to be a really nice addition to the portfolio.

Speaker Change: which I think we're talking about getting to GA within days in the letter. So that's coming. We're really excited about it. We've had a large customer beta going there and we think that it's going to be a really nice addition to the portfolio.

Michael Walrath: But as we integrate the products, there are going to be many opportunities to take hearsay functionality and extend it beyond the financial services vertical and also potentially bring X core products to those core kind of, sorry, hearsay financial services team. So all of that, you know, I think we need a little bit of time to work through organizationally how we're going to manage this, and obviously there's a whole product roadmap element to this too. And we're going to, we're going to approach that patiently because, fortunately, you know, we have the time that we need to figure that out.

Speaker Change: As we integrate the products, there are going to be many opportunities too.

Speaker Change: Take Here's State Functionality and Extended Beyond the Financial Services Vertical.

Speaker Change: and also potentially bring X to core products to those core financial services team.

Speaker Change: All of that, you know, I think we need a little bit of time to work through organizationally how we're going to manage this and obviously there's a whole product roadmap element to this too and we're going to approach that patiently because fortunately.

Speaker Change: We have the time that we need to figure that out.

Darryl Bond: There's obviously the other side of it as well, which is the cost energy element, and there are clearly going to be opportunities for us to bring the teams together and drive both revenue upside and cost energy, which is part of what you see us kind of alluding to in the outlook with a consolidated low single or low 20s margin by the end of the year, but improving upon that next year.

Speaker Change: There's obviously the other side of it as well, which is the cost energy element and there are clearly going to be opportunities for us to

Speaker Change: Bring the teams together and drive both revenue upside and cost energy, which is part of what you see as kind of alluding to in the outlook with a consolidated low single low 20s margin by the end of the year, but improving upon that next year.

Ryan McDonald: I appreciate the color there.

Darryl Bond: I wanted to ask on the adjusted EBITDA margin. So is it right to assume, as you talk about the low 20s consolidated, adjusted EBITDA margin exiting the year, that at that point, you're still a bit dilutive to EBITDA margin now, and that much of the potential expansion or growth upon that in fiscal 26 is primarily synergy driven, or is there incremental leverage you're kind of seeing in the core business as well. Thanks.

Speaker Change: Yeah, I appreciate the color there. I mean, I wanted to ask on that on the adjusted EBITDA margin. So is it right to assume, as you talk about the low 20s consolidated, adjusted EBITDA margin exiting the year that

Speaker Change: At that point, you're still a bit dilutive to even the margin now, and that much of the potential expansion or growth upon that in 20 fiscal 26 is primarily synergy driven, or is there incremental leverage you're kind of seeing in the core business as well?

Darryl Bond: Yeah, hey, Ryan, Darryl, I think the first part of that is right; the consolidated margin that we guided to include both businesses, and the hearsay portion component is a little bit dilutive to overall margins. I think as we get into next fiscal year, we'll continue to sort of run the business in an efficient way, and since we're integrating the businesses and putting things together, it's hard to say, do the efficiencies come from the legacy X business or the legacy Hearsay business, because to us, it's really just one business at this point. We're going to look at how we are allocating capital, how we are making decisions with respect to investments and deficiency that are going to throw off the best return?

Speaker Change: I think the first part of that is right that consolidated margin that we guided to.

Speaker Change: Includes both businesses and the hearsay board component is a little bit dilutive to overall margins. I think it's beginning to next this year. We'll continue to run the business.

Speaker Change: in an efficient way. It's since we're integrating the businesses and putting things together. It's hard to say, you know, do the efficiencies come from, you know, the legacy of the legacy. Here's a business because, to us, it's really just one business at this point.

Speaker Change: And we're going to look at how are we allocating capital, how are we making decisions with respect to investment and deficiency that are going to throw off the best return. So we don't actually think about it as two different pieces. It's really just one overall set of operations.

Michael Walrath: So we don't necessarily think about it as two different pieces. It's really just one overall set of operations. Yeah, that's right.

Michael Walrath: I would just reinforce that point that Darryl just made, which is when we look at our capabilities as a combined company, we're going to look at all the opportunities within the portfolio to deliver innovation, to deliver growth opportunity, and also to unify teams. It's been fantastic to see the teams come together. I think we're seeing, and it's been part of a lot of acquisitions. I think what we're seeing is we're seeing the teams really immediately coming together. There's cultural alignment, and it's really gratifying to see how well the teams are working together and just the energy and the level of effort across the whole organization.

Speaker Change: Yeah, that's right, I was just adding that.

Speaker Change: and just reinforce that point that they're all just made, which is when we look at our capabilities as a combined company we're going to look at.

Speaker Change: All the opportunities within the portfolio to deliver innovation, to deliver growth opportunity and also to unify teams. It's been fantastic to see the teams come together, I think we're seeing.

Speaker Change: And it's been part of a lot of acquisitions I think what we're seeing is we're seeing the teams really immediately coming together. There's cultural alignment.

Speaker Change: and it's really gratifying to see how well the teams are working together and just the energy and the level of effort across the whole organization.

Michael Walrath: As we go into next year, and as we think about improving margins, there are obviously two elements to that. There's the opportunity to get the revenue growth going again, and then there's also the opportunity to be more efficient and to determine how we allocate the portfolio of investments that we make. We do believe that there comes a point, and I'm going to stop short of predicting when this point is where we get through this macro. Then the market gets really interesting because the consolidation opportunity will be a headwind for some companies and a tailwind for other companies, and breadth will be a huge advantage.

Speaker Change: As we go into next year and as we think about improving margins, they're obviously two elements to that. There's the opportunity too.

Speaker Change: Get the revenue growth going again and then there's also the opportunity to be more efficient and to determine how we allocate the portfolio of investments that we make.

Speaker Change: We do believe that there comes a point and I'm going to stop short of predicting when this point is where we get through this kind of macro.

Speaker Change: and then the market gets really interesting because the consolidation opportunity will be a...

Speaker Change: A headwind for some companies and a tailwind for other companies and breadth will be a huge advantage. And that's really where we're setting ourselves up to make a lot of progress.

Michael Walrath: That's really where we're setting ourselves up to make a lot of progress. Even as I think the operating environment gets easier, there's still going to be, for quite some time. I think the digestion of 10, 12 years of what we call the technology hyperbuying environment. In that type of environment, we just feel we have some very strong value proposition and capabilities to unify platforms and make things work better.

Speaker Change: Even as I think the operating environment gets easier, there's still going to be for quite some time. I think the digestion of 10-12 years of what we call the technology hyperbying environment.

Speaker Change: And in that type of environment, we just feel we have some very strong value proposition and capabilities to unify platforms and make things work better.

Ryan McDonald: Appreciate all the color there. I'll hop back in here.

Operator: Thank you. Again, if you have a question, please press star, then one.

Speaker Change: Appreciate all the color, they'll hop back in the queue.

Speaker Change: Thanks for watching!

Naved Khan: Our next question comes from Naved Khan with B. Riley Securities.

Speaker Change: Again, if you have a question, please press star then one.

Naved Khan: Please go ahead. Great. Thank you. Thank you very much.

Speaker Change: Our next question comes from Navad Khan, with B Riley Securities, please go ahead.

Michael Walrath: So just a commentary on boomerang customers and the fact that you managed to get nine back in the last quarter. That's pretty encouraging. I'm curious if you're continuing to see these trends into the third quarter as well. And also about the terms on which these customers might be coming back. Are they coming on similar terms and tiers as they used to be? And what are the primary reasons for them coming back? Yeah, so thanks for the question.

Navad Khan: Thank you. Thank you very much.

Navad Khan: So, um...

Navad Khan: Just a commentary on boomerang customers and the fact that you managed to be as nine back in the last quarter that's pretty encouraging. I'm curious.

Navad Khan: If you're continuing to see these trends into the field corridor as well and also about the terms on these these customers might be coming back, are they coming at on similar terms and tiers as they used to be and what are the primary reasons for them coming back?

Michael Walrath: Yeah, we're thrilled about this. I think it's well known that it has been a tough couple of years. There's been a tremendous amount of competitive pressure. I think a lot of promises made. And one of the things we're seeing is that those promises are not always delivered upon. And so when that happens, one of the things that we've, I think, done a better job over the last particularly 12 months of doing is making clear to our customers that, you know, we're ready to help them come back, right? And in this type of environment, if the thing that you left for isn't working, the ROI implications that that can be enormous, because what you look at is the, you know, if you're losing organic traffic, if you're less competitive in a rapidly fragmenting search genre of world, it can be devastating for your business.

Speaker Change: Yeah, so thanks for the question of it. Yeah, we're thrilled about this. I think it's well known that it has been a tough couple years who has been a tremendous amount of competitive pressure.

Speaker Change: I think a lot of promises made and one thing we're seeing is that

Speaker Change: You know, those promises are not always delivered upon. And so when that happens, one of the things that we've, I think, done a better job over the last particularly 12 months of doing is making it clear to our customers that...

Speaker Change: You know, we're ready to help them come back, right? And in this type of environment, if the thing that you left for isn't working the ROI implications, that that can be enormous when you can be the weird.

Speaker Change: What you look at is that if you're losing organic traffic, if you're less competitive in a rapidly fragmenting search genre of world, it can be devastating for your business.

Michael Walrath: And so we are, you know, just as we're taking a very partner, you know, long term partnership mindset to the to our customer relationships and to the renewal cycles. We're also making it as easy as possible for companies who, you know, who have left and feel that the value they've been promised hasn't been delivered to come back. In a lot of cases, this is happening faster because we're able to revert back. We, you know, we, we maintain a lot of infrastructure to be able to quickly get them back up and running and solve the, you know, whether it's a listings or pages or reviews challenges they're having.

Speaker Change: And so we are, you know, just as we're taking a very partner, you know, long-term partnership mindset too.

Speaker Change: to our customer relationships into their renewal cycles. We're also making it as easy as possible for...

Speaker Change: For companies who have left and feel that the value they've been promised hasn't been delivered to come back in a lot of cases.

Speaker Change: This is happening faster because we're able to revert back. We maintain a lot of infrastructure to be able to quickly get them back up and running.

Michael Walrath: So this is a trend we, we, we think, you know, it's a credit to our teams staying close to the customers and really remaining partnership-minded, even when the customers decide to go experiment with other solutions that we can, you know, get them back up and running really quickly. And, you know, this is; I just, I just want to credit the global team on this. It's a, it's a different mindset. And it creates a long term partnership value that I think is hard to put a, put a, put a value on, but it's a lot.

Speaker Change: Solve the, you know, whether it's a listings or pages or reviews, challenges they're having. So, this is a trend, we think, you know, it's a credit to our teams staying close to the customers.

Speaker Change: and really remaining partnership minded even when the customers decide to go experiment with other solutions that we can get them back up and running really quickly. I just want to credit the global team on this. It's a different mindset.

Speaker Change: and it creates a long-term partnership value that I think is hard to put a value on, but it's a lot.

Naved Khan: That's great to hear.

Naved Khan: And then maybe quick follow-ups. It's definitely guidance for the four year versus the third quarter. If I try to back into the, even the margin for the fourth quarter, it kind of implies mid, mid 20s kind of range.

Speaker Change: and the other two of us.

Speaker Change: And then maybe quick follow-ups into the guidance for the fully air versus the cold. I'll try to back into the...

Speaker Change: Even Darmargin for the fourth quarter, it kind of implies.

Naved Khan: And just wondering if I'm off somewhere or give us some color on how to think about that.

Speaker Change: Medtone is kind of French, it's learning time off somewhere or give us some color on how to think about it.

Darryl Bond: I think if you look at Q4 implied EBITDA margin, it's around 22%.

Darryl Bond: Darryl Bond.

Speaker Change: I think if you look at Q4 implied, EBITDA margin, it's around 22%.

Darryl Bond: When we talk about getting up into the mid-20s, I think the legacy ex business is kind of there, and as we talked about a couple minutes ago, hearsay is a little bit dilutive to that. I think as we get into next year, that's where we see the opportunity to continue to expand the margins. Both, like Mike said, through finding efficiencies in the business, but also hopefully getting some benefit from Rebs.

Speaker Change: When we talk about getting up into the mid-20s.

Speaker Change: I think the legacy of business is kind of there and as we talked about a couple minutes ago, you know, here's a little bit dilutive to that. I think as we get into next year, that's where we see.

Mike: You know the opportunity to continue to expand the margins, you know both like Mike said through finding efficiencies in the business but also you know hopefully getting some benefit from revenue.

Naved Khan: And last question, maybe just on this move from the contractual era to a usage base on the third-party research side of things. What is driving that move, and if it really doesn't affect revenue, then what are the dynamics behind the scenes that need to this change? Yeah, so this has always been part of that business, but I think it's been an easy default to, we want the committed revenue predictability, and sometimes what I would file this under customer centricity. I would file this under in a lot of cases. What we've determined is that we might be missing opportunities, companies who don't want to commit to a certain level of spend, but have a set of customers who they want to deliver the platform to.

Mike: [inaudible]

Mike: and last question.

Speaker Change: If I may be just on this, you know, move from contractor to usage base on the third party reseller side of things. This is kind of what kind of is driving that move and if it really doesn't affect revenue then this kind of what are the dynamics behind the thing is kind of need to change.

Speaker Change: Yeah, so this has always been part of that business, but I think...

Speaker Change: Yeah, yeah.

Speaker Change: [inaudible]

Speaker Change: I think there's been an easy default to, you know, we want that a committed revenue productivity.

Speaker Change: and sometimes what, you know, I would file this under customer centricity. I would file this under, you know, in a lot of cases.

Speaker Change: What we've determined is that we might be missing opportunities companies who don't want to commit to a certain level of spend.

Speaker Change: But have a set of customers who they want to deliver the platform too.

Michael Walrath: What we're trying to do here is create a lot of flexibility for our customers. Many, many cases, they want to make a commitment, and I think it's fairly simple. The more volume of products that someone that any customer commits to, the better the pricing is going to be. But I think we've probably over-rotated to that type of a structure, to the point where it probably felt like we were demanding commitments. From customers whose business might be at a stage, it might be a smaller business, a growing business, who needed less commitment, who might have less of a predictability to their own business.

Speaker Change: and so what we're trying to do here is create a lot of flexibility for our customers, you know, many, many cases.

Speaker Change: They want to make a commitment and they want a lot of it and I think it's fairly simple.

Speaker Change: The more volume of products that any customer commits to, the better the pricing is going to be.

Speaker Change: But I think we've probably over rotated to that type of structure. So the point where I probably felt like we were demanding commitments from customers who business might be at a stage, you might be a smaller business, a growing business.

Speaker Change: who needed less commitment, who might have less of us.

Michael Walrath: Really, it's just been a focus shift to meeting our customers where they are and making sure that there's always a trade. The unit pricing might not be as good for a deal that has less commitment or no commitment. I think we're trying to shine light on here is that, as we do this, it can have a dampening effect on the reported ARR because, conservatively, we only report contractually committed ARR. You'll have to, as we move forward here, and we've been signaling this for a couple of quarters, and we'll try to make this as clear as possible.

Speaker Change: Pretty ability to their own business, and so really it's just been a focus shift to meeting our customers where they are and making sure that there's always a trade at the unit pricing might not be as good for a deal that has less commitment or no commitment.

Speaker Change: So I think we're trying to shine light on here is that...

Speaker Change: As we do this, you know, it can have a dampening effect on the reported ARR because conservatively we only report contractually committed ARR.

Speaker Change: And so you'll have to, you know, as we move forward here and we've kind of been signaling this for a couple of quarters.

Michael Walrath: We're not going to change the way that we report ARR; at least we don't have plans to right now, but we'll try to give you some indications around you'll be able to look at the revenue trend, but also the committed ARR number for the reseller business. I think that'll help you figure out what's going on there. We wanted to call it out this quarter just because there was that $2 million-ish drop in committed ARR for the reseller business, but if you look at the revenue and then you just for the days and the quarter thing, what you get is there's basically flatness in that revenue and obviously as we go forward.

Speaker Change: and we'll try to make this as clear as possible. We're not going to change the way that we report ARR, at least we don't have plans to right now.

Speaker Change: But we'll try to give you some indications around you'll be able to look at the revenue trend but also the committed ARR number for the resolar business.

Speaker Change: and I think that'll help you figure out what's going on there. So we wanted to call it out this quarter just because

Speaker Change: You know, there was that, you know, kind of $2 million, I think, drop in, committed air for the reseller business, but if you look at the revenue and then you just for kind of the days and the quarter thing, what you get is there's basically flatness and in that revenue and obviously as we go forward, continue.

Naved Khan: We'll continue to kind of call that out, but hopefully that makes some sense. It does.

Speaker Change: and we can call that out. Hopefully that makes some sense.

Michael Walrath: Appreciate the details. Thank you, guys. Our pleasure.

Speaker Change: It does appreciate the details. Thank you guys.

Michael Walrath: It includes our question and answer session.

Speaker Change: Replayer.

Speaker Change: [inaudible]

Michael Walrath: I would like to turn the conference back over to Mike Walrath for any closing remarks.

Speaker Change: Includes our question and answer session. I would like to turn the conference back over to Mike Walrath for any closing remarks.

Michael Walrath: I just like to thank everyone for joining us again today, and I just want to take a moment one more time to thank our global team. I know many are listening to this, and the team's doing an amazing job delivering value for our customers and focusing on the long-term value creation. That would be remiss not to acknowledge it every possible moment.

Mike Walrath: Oh, I just thank everyone for joining us again today, and I just want to take a moment one more time to thank our global team. I know many are listening to this, and the team is doing an amazing job delivering value for our customers and focusing on the long-term value creation.

Michael Walrath: So I really appreciate everyone's time today and look forward to speaking with you next quarter.

Mike Walrath: would be remiss not to acknowledge it in every possible moment, so really appreciate everyone's time today and look forward to speaking in the next quarter.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star then two.

Operator: Please note this event is being recorded.

Nils Erdmann: I would now like to turn the conference over to Nils Erdmann. Please go ahead. Thank you, operator, and good afternoon everyone. Welcome to Yext's second quarter fiscal 2025 earnings conference call. With me today, our CEO and Chair of the board, Mike Walrath and CFO Darryl Bond. During this call, we will make forward statements, including statements related to our future financial performance, statements regarding the expected effects of our acquisition and integration of hearsay systems, expectations regarding the growth of our business, our outlook for the third quarter and full fiscal year 2025, our strategy and estimates of financial and operating metrics, capital expenditures, and other indications of future opportunities, as further described in our second quarter shareholder letter.

Nils Erdmann: These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, our ability to integrate hearsay systems business with hours, our management performance, and general economic and business conditions. These forward-looking statements represent our beliefs and assumptions only as of the date made, and we undertake no obligation to revise or update any statements to reflect changes that occur after this call.

Nils Erdmann: Further information on factors and other risks that cause actual results to materially different from these forward-looking statements is included in our records filed with the SEC, including in the section titled Special Note regarding forward-looking statements and risk factors. And our most recently filed quarterly report on form 10Q for the three and six months and did July 31st, 2025, excuse me, 2024, our earnings release and our shareholder letter that were issued this afternoon.

Nils Erdmann: During the call, we also refer to certain metrics, including non-gap financial measures. Reconciliation with the most comparable historical gap measures are available in the shareholder letter, which is available at investors.gext.com. We also provide definitions of these metrics in the shareholder letter.

Mike Walrath: With that, I will now turn the call over to Mike. Everyone, thanks for joining us today. Hopefully, by now, you've had a chance to read our press release as well as our second quarter letter to shareholders, which was posted to our website after the close of the market. We'd like to jump right into your questions. We can go ahead and do that now. We'll now begin the question and answer session. To ask a question, you may press star then one on your touchstone phone.

Mike Walrath: If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

Thomas White: And our first question today comes from Tom White with DA David. Please go ahead. Great. Thanks for taking my questions to if I could.

Thomas White: I guess just first off on the updated revenue guide, is that all hearsay contribution or is there a change to kind of any change of the outlook in the core business? And I guess if the only change is related to hearsay, my arithmetic says the new guide implies maybe a full year revenue number for hearsay of maybe around 51 million. I think you said it did 60 million in revenues last year. Can you just maybe help me square those two things?

Thomas White: And then I got to follow up. Thanks.

Darryl Bond: Yeah, hey, Thomas Darryl. Yeah, since we closed the hearsay acquisition on August 1st, the Q3 and full year guide includes two full quarters of hearsay revenue. Previously, we had said the hearsay ARR was around 60 million, so you can kind of infer what the revenue is based off that. I'm not sure how you got to your numbers, but when we look at the balance of the year, adding in the hearsay business for the second half, we've talked about the top line synergies that we believe are available, and we're starting the joint-go-to-market motions to can you take, celebrate both the legacy hearsay business and our business, so all of that is contemplated in the guide.

Mike Walrath: Okay, that's helpful. Then maybe just a higher level on Mike, the last couple quarters you've talked a bit about this broader theme of consolidation of software vendors when kind of the broader market slows and how that's driven by customers. I'm just hoping you could maybe just talk a little bit about what you're seeing or sort of where we are in kind of that general cycle. Right now, do you think any signs of things are kind of loosening up a bit, or if not, what's your appetite for potentially looking to add other products to the portfolio if this consolidation kind of theme continues, so thanks.

Mike Walrath: Yeah, no, thanks for the question, Tom. It's, so you know, this has kind of been our thesis, and I think we're seeing, you know, what we would expect to see in this environment. So I've been spending a lot of time with our customers, and particularly our joint customers with hearsay over the last, particularly last five weeks since we've closed that acquisition, and we're hearing the same themes over and over again, that they have too much vertical software, it's creating workload on their teams, you know, which are smaller than they have been.

Mike Walrath: It's really all the same themes. So too much software, too many platforms, data, and again, consistencies, the inability to run analytics across, you know, these vertical siloed technologies, you know, this is why consolidation makes so much sense, and so it's also one of the reasons why we've seen such a strong, positive reaction from our shared customers with hearsay on the two companies coming together, because the promise of being able to deliver better analytics, a better data platform, more, you know, more efficient workflows.

Mike Walrath: And all of, you know, I talk a lot in the letter about, you know, how important all of those things are going to be in a generative AI experience world. So none of that has changed. I think if anything what we've seen from customers is that with the amount of uncertainty that there is in the world's elections, interest rates, recessions, geopolitical risk, you know, that a lot of our customers are seeing this is a great time to think about their tech stack, think about their investment, and really figure out how to get the most value from it.

Mike Walrath: And so from our standpoint, we're fortunate in that sense that we, I think we're going to participate in a lot of those conversations because we already have a much broader platform than any of our individual competitors. And we're really just getting started with the organic innovation piece of this. Certainly, we will continue to ask our customers where we should go next. I think this is a big part of the innovation reboot that we've been going through here is having the customers drive us to what's the next most important product which had a lot to do with the strategic rationale behind a deal like here say so I think these personally I love these conversations, I think we get into problem solving with customers, we get into where the where the pocket is going and that's going to help us build a roadmap of organic growth and in organic growth opportunities.

Mike Walrath: One of the things I did in the letter is really layout how we think of that as a long term value driving, framework, both from a investing in organic growth, expanding in organically where those opportunities exist. And then obviously the third pillar of that is the ability to buy back our shares and create a positive anti-delusion effect.

Thomas White: Thank you very much, I'll get back in the queue.

Rohit Kulkarni: Our next question comes from Rohit Alkarni with Ross, Capitol Partners, please go ahead. Hey, thank you, a couple of questions. One is on how do you think upsell into hearsay or hearsay upsell into ex co customer base, how do you feel where is the greatest lowest hanging fruit in the next six, nine, 12 months. And I think you mentioned earlier that excluding the loss of large customer, I think organic ARR growth could get to mix in the digits by end of this year and I think the digits in first of next year just wondering what are your latest thoughts on that organic growth based on and then perhaps you could update based on hearsay and then I have a couple of those generic questions.

Rohit Kulkarni: Sure, so thanks for the questions, Rohit. So on the first question, I think that there are several opportunities. Where we have joint relationships with customers who are customers of both the ex and hearsay, there's an opportunity to create more value, as I mentioned by unifying the data platform, the analytics, the workflows over time. And that's something our customers are really excited about. Probably the most actionable opportunities for us are the ones are the opportunities where we may, yes, may have a customer that hearsay doesn't work with our vice versa.

Rohit Kulkarni: And this consolidation theme remains a tail, you know, becomes a tailwind in those, in those discussions because the customers can, can, can look at ways to, you know, can be saved money, it can be saved expense operating expense. I mean, one of the things I think people overlook a lot of is when we, you know, and we've, we've done it at X to when we over by software, it's not only the cost of the software.

Rohit Kulkarni: And when we have all the, you know, when we have too much too many pieces of vertical software in the business, there's an operational load on that on that diversity of software as well, where, you know, are the people running these systems are moving back and forth between different systems throughout the day and that's just inefficient. So those are where we see the opportunities and probably the most. First, the best thing about the hearsay acquisitions so far is how quickly the conversations with customers have turned from being a Yext conversation or a hearsay conversation or really about a partnership discussion.

Rohit Kulkarni: And so it's really remarkable in one of the things meeting with customers I've seen is how, you know, there is in a, you know, these businesses are emerging together very quickly and it's almost, you know, almost immediately indistinguishable. Is this a Yext opportunity or a hearsay opportunity? It's a, how do we create value for the customer opportunity?

Rohit Kulkarni: So that's really encouraging. I think your second question was on organic ARR growth. And, you know, one of the things that we talk about in the letter is that we're seeing a lot of stability overall in the ARR picture and we're also accounting for a lot of risk. And, you know, I think we all entered this year and I've talked a lot of other software CEOs about this, entered this year thinking that this year was going to be an improvement in the environment.

Rohit Kulkarni: We haven't seen evidence of that and as we look at the risk factors in the second half of the year that I've laid out a couple times already, we're just going to take a cautious approach on how we talk about expected ARR growth. So, you know, what I would say is we, you know, in total, we expect stable to modest growth in the ARR this year and maybe we'll be pleasantly surprised by an environment that helps us, but we're just going to be overall conservative in how we look at that. Okay, great.

Mike Walrath: I guess I like the commentary around GNII and the fact that I'll take the last half of the interpretation that where you say that the wave is coming. So, perhaps talk about how are you thinking from your conversations with decision makers and enterprises around, kind of puts in takes as to then or how GNII related tools that you provide would start to move the needle and would start to essentially be the driver in more and more deals in bookings and what would be to do if you index it even in the direction to make.

Mike Walrath: Yeah, so, you know, as you know, I've been a little bit of a curmudgeon on this topic and, you know, I think that's probably because I've been around too long and seen a few of these cycles before and, you know, we get really excited and, and then, you know, we sort of entered this phase which I think where we're living now, which is we're asking ourselves, you know, as an industry is, you know, is this real beyond obviously it's driving a ton of value for anyone producing hardware to support the AI infrastructure build out and it's driving a lot of workloads. But it's really, you know, as I think has been broadly commented, it's not driving a lot of, it's not certainly not driving the wave of bookings that I think we were hoping AI would drive.

Mike Walrath: And so, you know, this reminds me of mobile and social and, you know, even the internet in the late 90s when I was just kind of cutting my teeth where it was, you know, it was happening right now and then, you know, it then it wasn't happening right right now and then it took a long time. But it turns out when it did happen, it happened a lot bigger than even we could have expected.

Mike Walrath: And so, so I draw on those experiences and what I see is I see I just don't think in a couple of years that we're going to, you know, two, three, four, five years, I and I, it's hard to put a timeframe on it, that we're going to be talking about, you know, AI so much as we're going to be talking about the value that's being generated through the platform. And so, foundational to that, you know, we talk a lot inside Yext about, you know, your AI strategy is your data strategy.

Mike Walrath: And so the more fragmentation that we see across the consumer experience, the more important it's going to be that you have a cohesive content and data strategy and that the applications that you're using to deliver that data to those consumer experiences, in particular, you know, it has to be organized, it has to be authoritative, it has to be actionable. And when that happens, we expect this becomes an extraordinary tailwind. Now, you know, some of the risk factors, what I would call time-based risk factors are the, you know, the compliance level for engaging through LLMs and various other forms of AI with the consumer is going to be a very high bar, particularly inside large enterprises, like financial services institutions and healthcare.

Mike Walrath: And so that, you know, the promise of the technology will, any, any ability of the technology will outrun the comfort level that large enterprises are going to have with using it. So, now, the flip side of that coin to try to give you a thorough answer to the question is, we're already seeing it benefit inside the platform. So, when we talk about things like listings, recommendations, like automated and generated review response, we're beginning to see customers dip their toe in the water of using these technologies in a very safe and very constrained way.

Mike Walrath: And not everyone is a regulated industry. So, you know, and hopefully that doesn't sound too contradictory. This is going to take a while when it happens, it'll be bigger than people think. And the way we're going to deliver, you know, as an industry, the way we're going to deliver a lot of this AI innovation is through software platforms that have the right componentry around data, workflow, analytics, learning, and things like that.

Rohit Kulkarni: Okay, fantastic answer Mike. I'll go back in the tube. Okay, thanks, right?

Ryan Macdonald: Our next question comes from Ryan McDonald's with Needham. Please go ahead. All right, thanks for taking my questions. My first one is now that you've got hearsay closed, you're starting the integration work. How quickly can you start to maybe recognize some of those revenue synergies or what are some of the processes or steps you're taking to be able to, you know, start to better go after the not shared customers and maybe some of your key verticals.

Ryan Macdonald: And can you just remind us how hearsay sales cycles compared to sort of core yaks? Thanks. Yeah, so we think we think there's a, you know, it's kind of a layer cake of our opportunity there on the on the revenue side of things. I think we see a sales process and a customer support process that's very similar between yaks. And in hearsay, I think the deal cycles are very similar. It's a lot of the same buyers and same buying centers or at least I think we really do we do see an opportunity where anywhere where there is the X customers, not a hearsay customer, we'll have a, you know, I think an opportunity to have a discussion there around the benefits of a unified platform and data layer.

Ryan Macdonald: And we also, you know, as you know, we've been probably the biggest investment we've made from product standpoint over the last 12 months is in a non financial services social, selling social management and analytics platform. Which I think we're, you know, talking about, you know, getting to GA within days in the letter. So that's coming. We're really excited about it. We've had a large customer beta going there and and we think that it's going to be a really nice addition to the portfolio.

Ryan Macdonald: As we integrate the products, there are going to be many opportunities to take hearsay functionality and and extend it beyond the financial services vertical and also potentially bring yaks core products to those core financial services teams. So all of that, you know, I think we need a little bit of time to work through organizationally how we're going to manage this. And obviously there's a whole product road map element to this too.

Ryan Macdonald: And we're going to we're going to approach that patiently because fortunately, you know, we have the time that we need to figure that out. There's obviously the other side of it as well, which is the cost energy element and there are clearly going to be opportunities for us to bring the teams together and drive both revenue upside and cost energy, which is part of what you see us kind of alluding to in the outlook with a consolidated low single low 20s margin by the end of the year, but improving upon that next year.

Darryl Bond: I appreciate the color there. I wanted to ask on the adjusted EBITDA margin. So is it right to assume, as you talk about the low 20s consolidated, adjusted EBITDA margin exiting the year, that at that point, you're still a bit dilutive to EBITDA margin now, and that much of the potential expansion or growth upon that in fiscal 26 is primarily synergy driven, or is there incremental leverage you're kind of seeing in the core business as well.

Darryl Bond: Thanks. Yeah, hey Ryan, Darryl, I think the first part of that is right, the consolidated margin that we guided to include both businesses, and the hearsay portion component is a little bit dilutive to overall margins. I think as we get into next fiscal year, we'll continue to sort of run the business in an efficient way, and since we're integrating the businesses and putting things together, it's hard to say, do the efficiencies come from the legacy, Yext business or the legacy, hearsay business, because to us it's really just one business at this point.

Darryl Bond: We're going to look at how are we allocating capital, how are we making decisions with respect to investments and deficiency that are going to throw off the best return, so we don't necessarily think about it as two different pieces. It's really just one overall set of operations. Yeah, that's right. I would just reinforce that point that Darryl just made, which is when we look at our capabilities as a combined company, we're going to look at all the opportunities within the portfolio to deliver innovation, to deliver growth opportunity, and also to unify teams, and so it's been fantastic to see the teams come together.

Darryl Bond: I think we're seeing, and it's been part of a lot of acquisitions. I think what we're seeing is we're seeing the team's really immediately coming together. There's cultural alignment, and it's really gratifying to see how well the teams are working together and just the energy and the level of effort across the whole organization. As we go into next year, and as we think about improving margins, there are obviously two elements to that.

Darryl Bond: There's the opportunity to get the revenue growth going again, and then there's also the opportunity to be more efficient and to determine how we allocate the portfolio of investments that we make. We do believe that there comes a point, and I'm going to stop short of predicting when this point is, where we get through this macro. The market gets really interesting because the consolidation opportunity will be a headwind for some companies, and a tailwind for other companies, and breadth will be a huge advantage.

Darryl Bond: That's really where I think ourselves up to make a lot of progress. Even as I think the operating environment gets easier, there's still going to be for quite some time. I think the digestion of 10, 12 years of what we would call the technology hyperbuying environment. In that type of environment, we just feel we have very strong value proposition and capabilities to unify platforms and make things work better. Appreciate all the color there.

Operator: I'll hop back in here. Thank you. Again, if you have a question, please press star, then one.

Naved Khan: Our next question comes from Naved Khan with the Riley Securities. Please go ahead. Great. Thank you. Thank you very much. So just the commentary on boomerang customers and the fact that you managed to get nine back in the last quarter, that's pretty encouraging. I'm curious if you're continuing to see these trends into the third quarter as well. And also about the terms on which these customers might be coming back, are they coming on similar terms and tiers as they used to be? And what are the primary reasons for them coming back?

Mike Walrath: Yeah, so thanks for the question. Yeah, we're thrilled about this. I think it's well known that it has been a tough couple of years. There's been a tremendous amount of competitive pressure. I think a lot of promises made. And one of the things we're seeing is that those promises are not always delivered upon. And so when that happens, one of the things that we've I think done a better job over the last particularly 12 months of doing is making it clear to our customers that, you know, we're ready to help them come back, right?

Mike Walrath: And in this type of an environment, if the thing that you left for isn't working, the ROI implications that that can be enormous because what you look at is the, you know, if you're losing organic traffic, if you're less competitive in a rapidly fragmenting search genre of world, it can be devastating for your business. And so we are, you know, just as we're taking a very partner, you know, long-term partnership mindset to the, to our customer relationships and to the renewal cycles.

Mike Walrath: We're also making it as easy as possible for companies who, you know, who have left and feel that the value they've been promised hasn't been delivered to come back. And in a lot of cases, this is happening faster because we're able to revert back. We, you know, we maintain a lot of the infrastructure to be able to quickly get them back up and running and solve the, you know, whether it's a listings or pages or reviews challenges they're having.

Mike Walrath: So this is a trend. We think, you know, it's a credit to our teams staying close to the customers and really remaining partnership minded even when the customers decide to go experiment with other solutions that we can, you know, get them back up and running really quickly. And, you know, this is, I just, I just want to credit the global team on this. It's a, it's a different mindset. And it creates long-term partnership value that I think is hard to put a, put a, put a value on, but it's, it's a lot.

Darryl Bond: That's great to hear. And then maybe quick follow-ups. It's just to the guidance for the full year versus the third quarter. If I try to back into the, even the margin for the fourth quarter, it kind of implies mid, mid-20 is kind of range. And just wondering if I'm off somewhere or give us some color on how to think about that. I think if you look at Q4 implied, EBITDA margin, it's around 22%.

Darryl Bond: When we talk about getting up into the mid-20s, I think the legacy ex business is kind of there. And as we talked about a couple minutes ago, hearsay is a little bit dilutive to that. I think as we get into next year, that's where we see the opportunity to continue to expand the margins. Both like Mike said, through finding efficiencies in the business, but also hopefully getting some benefit from Rebs.

Darryl Bond: And last question, maybe just on this move from contractual era to a usage base on the third-party research side of things. What is driving that move? And if it really doesn't affect revenue, then what are the dynamics behind the scenes that kind of need to this change? Yeah, so this has always been part of that business, but I think it's been an easy default to we want the committed revenue predictability. And sometimes what I would file this under customer centricity, I would file this under in a lot of cases.

Darryl Bond: What we've determined is that we might be missing opportunities companies who don't want to commit to a certain level of spend, but have a set of customers who they want to deliver the platform to. And so what we're trying to do here is create a lot of flexibility for our customers. Many, many cases, they want to make a commitment and they want a lot of, and I think it's fairly simple, like the more volume of products that any customer commits to, the better the pricing is going to be.

Darryl Bond: But I think we've probably over-rotated to that type of a structure to the point where it probably felt like we were demanding commitments from customers who's business might be at a stage. It might be a smaller business, a growing business who needed less commitment who might have less of a predictability to their own business. And so really it's just been a focus shift to meeting our customers where they are and making sure that there's always a trade.

Darryl Bond: The unit pricing might not be as good for a deal that has less commitment or no commitment. So I think what we're trying to shine light on here is that as we do this, it can have a dampening effect on the reported ARR because conservatively we only report contractually committed ARR. And so as we move forward here and we've kind of been signaling this for a couple quarters and we'll try to make this as clear as possible.

Darryl Bond: We're not going to change the way that we report ARR, at least we don't have plans to right now. But we'll try to give you some some indications around you'll be able to look at the revenue trend but also the committed ARR number for the reseller business. And I think that'll help you figure out what's going on there. So we wanted to call it out this quarter just because there was that kind of $2 million or I think drop in committed ARR for the reseller business.

Darryl Bond: But if you look at the revenue and then you just for kind of the days and the quarter thing what you get is there's there's basically flatness and in that revenue and obviously as we go We'll continue to kind of call that out, but hopefully that makes some sense.

Naved Khan: It does. Appreciate the details. Thank you, guys. Our pleasure.

Operator: It includes our question and answer session.

Mike Walrath: I would like to turn the conference back over to Mike Walrath for any closing remarks. Oh, I just like to thank everyone for joining us again today, and I just want to take a moment one more time to thank our global team. I know many are listening to this, and the team's doing an amazing job delivering value for our customers and focusing on the long-term value creation that would be remiss not to acknowledge it every possible moment. So I really appreciate everyone's time today and look forward to speaking with you next quarter.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.