Q4 2025 Yext Inc Earnings Call
Thank you very much.
Good afternoon and welcome to the Yext Incorporated 4th Quarter Fiscal 2025 Financial Results Conference Call
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After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Nils Erdmann, Senior Vice President of Investor Relations. Please go ahead.
Nils Erdmann: Thank you, operator, and good afternoon everyone. Welcome to Yext's fourth quarter fiscal 2025 earnings conference call. With me today are CEO and share of the board Michael Walrath and CFO Darryl Bond.
Nils Erdmann: During this call, we will make forward-looking statements, including statements related to our future financial performance.
Nils Erdmann: Statements regarding the expected effects of our recent acquisitions, expectations regarding the growth of our business, our outlook for the first quarter and full year fiscal 2026, our strategy and estimates of financial and operating metrics, capital expenditures and other indications of future opportunities as further described in our fourth quarter shareholder letter.
Nils Erdmann: These forward-looking statements are subject to certain risks and certainties and assumptions including those related to Yext's growth. The evolution of our industry, our product development and success, our ability to integrate acquired businesses with ours, our management performance and general economic and business conditions.
Nils Erdmann: 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 could cause actual results to materially differ from these forward-looking statements is included in our reports filed with the SEC, including in the sections titled Special Note regarding forward-looking statements and risk factors. In our most recent quarterly report on Form 10Q for the three-month-ended, October 31,
Nils Erdmann: Our earnings release and our shareholder letter that were issued this afternoon.
I will now turn the call over to Mike.
Mike: Thanks Nils and thanks everyone for joining us today. I hope everyone on the call is at a chance to read our fourth quarter fiscal year 25 shareholder letter. In case you missed it, we've included a summary Q&A supplement at the end of the letter below the financial tables to address anticipated top-of-mind questions based on our earnings materials.
Mike: Before we jump into Q&A, I'd like to highlight some key points. First, Yext is incredibly well positioned strategically and competitively.
Mike: We've made excellent progress with our integration of hearsay and our combined businesses are generating go-to-market and cost energies as expected. Our platform and product roadmap has been enhanced significantly with the hearsay products, Yex Social, and just this week with the launch of Yex Scout.
Mike: Product Innovation is accelerating at Yext and this will be a growth driver for us in the future particularly as we help our customers grapple with the fast rate of change being driven by AI.
Mike: In our discussions with customers and prospects we're hearing excitement and enthusiasm for how our platform is evolving, which is opening up new opportunities.
Mike: Second, we're seeing positive trends from our performance metrics, despite a mostly unchanged macroeconomic environment.
Mike: Our gross retention and net retention rates are both increasing with gross ARR retention increasing to the high 80s and net retention up across both direct and reseller.
Mike: Our EBITDA margins are north of 20% and our outlook for over 100 million in EBITDA on fiscal year 26 points to the financial strength of our business.
Mike: While the macro environment remains unchanged relative to last quarter and spending scrutiny still persists, we have none the less seen changes in the demand environment and these outcomes are the results of our recent product developments and our heightened focus on customer success.
Mike: Third, the launch of SCOUT represents a major milestone for Yext. In my 16-year tenure here, I have never experienced a more enthusiastic response from our customers to one of our products
Mike: We believe Yext got will fundamentally change the way our customers and partners gather data insights, expand their knowledge graph, and prioritize actions to win more visibility in an increasingly complex local marketing world. And our customers are just as optimistic.
Mike: We announced the closed beta for scout just two days ago and already we have had hundreds of waitless signups.
Mike: This is a very strong demand signal, especially given the very limited marketing of the launch. And I believe this will be an advantage for Yext's brands increasingly focused on the opportunities and challenges that a fragmented search landscape presents.
Mike: Finally, I'd like to take the opportunity to thank our entire global team for their ongoing efforts and commitment to our customers and our mission.
Now we'd like to open it up for questions.
We will now begin the question and answer session.
Mike: To ask a question, you may press star then one on your telephone keypad.
Mike: To draw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Mike: The first question is from Ryan MacDonald with Needham, please go ahead.
Speaker Change: Hey, this is Matt Shay on For Ryan. Thanks for taking the question. Maybe first on the outlook for 2026. I recognize you guys aren't in the top line.
Speaker Change: that had slowed down were starting to accelerate and that you weren't necessarily seeing tailwinds but headwinds were starting to evade. Is that still your assessment of the environment? Any changes in that optimism level from last quarter or anything you're seeing that's informing the outlook for 2026?
Speaker Change: Hey Matt, I'll go first and Darryl may have some financial comments on the outlook but I'd say no, I wouldn't say that we see anything really changing, I mean I think we talked about
Speaker Change: You know, I think what we're seeing across our base of customers and partners is that...
AI Experiences and AI Search
Speaker Change: is driving a level of urgency that we haven't seen in quite some time to understand what the opportunities are to address the challenges that are going to come when winning visibility and winning traffic is a far more difficult thing to do than just manage your Google profile and Google Organic and Paid Search results.
So from that standpoint, we see that momentum continuing.
Speaker Change: You're still dealing with things like store closures and challenges around a number of licenses and things like that. But I'd say overall, we feel momentum continuing to build and it certainly doesn't feel like things are getting more difficult.
Okay, that's good to hear.
Speaker Change: And then maybe with hearsay and Yext Social, sounds like a lot of great demand there, which I think is likely partially been supported by industry specific factors like financial institutions just facing greater SEC crackdown, you know, forcing them to be more compliant basically. Is it fair to say that there's maybe some tailwinds in the financial services space that play to Yext's favor where we should see this vertical grow faster? Yes sirs.
Nils Erdmann
Speaker Change: UC is really right for Yext and FY26, despite that tough operating environment, some healthcare was really strong in Q4, so maybe we see that continue. Any color would be helpful.
Yeah, so I think we've seen momentum in healthcare, we've seen momentum in fins. It's not surprising in fins that...
Speaker Change: I think the other thing, and this really crosses all verticals, is anyone trying to optimize a local presence, whether it's a service area or a store location or an advisor or an agent.
Speaker Change: a sense of urgency around the need to understand how am I doing it across a far broader set of platforms? And it feels like, you know, at this point every week it feels like there's another player that you need to think about, how am I going to show up on? [inaudible]
Speaker Change: Proplexity, how am I going to show up on Chatchy Beauty, and Searchy Beauty, and this week we saw GROC, and, you know, that's an amazing experience.
Speaker Change: I think the, while the financial environment remains challenged, as I said before, I think the prioritization of how do I get my data?
Right.
Speaker Change: How do I use that data in a way that feeds a rapidly diversifying set of answer engines?
Speaker Change: and I think we see the opportunity to outrun some of the macro head witness this year.
Speaker Change: which is why we still see the business, we see the error growth coming back this year in spite of potentially an environment that remains challenged at the highest level.
Got it. Thanks for that, Mike.
The next question is from Rohit Kulkarni with Roth Capital Partners. Please go ahead.
Rohit Kuwakarni: Hi, thanks. I know on the fiscal year 26th guide, maybe talk about the philosophy around spend to the extent you can and what are the key investment priorities.
Rohit Kuwakarni: in the upcoming year above and beyond what you did last year to get to that 100 million plus EBITDA and how should we think about any incremental flow through in margins for the next 12 months?
Speaker Change: Sure, so I think we can do, I can probably tag team this one.
Speaker Change: Philisophically, the way we're approaching 26 and obviously you notice that we're not giving a full-year guide. We are expanding the disclosure around ARR to include on committed ARR, so you get to what we're doing here as we're giving you a fuller picture of what the entire ARR.
Speaker Change: Picture looks like obviously we had some effects that went in Q4 to that error picture so you can kind of factor those in
Speaker Change: And, you know, you'll remember that historically, you know, we've typically had between kind of like, you know, one to one and a half percent of revenue has been one time professional services. So, as you think about, you know,
Our Business
Speaker Change: And we believe that as we give you this clear as possible picture of ARR, you're going to be able to pretty clearly understand what the revenue picture is going to look like on a sort of forward.
Speaker Change: and then a fully-revenue guide. As far as how we're operating the business, this is what I would tell you is using those levers that I just gave you, you're going to have a pretty good sense of what the revenue picture looks like and that'll get updated quarterly with the new ARR Disclosures.
Speaker Change: We're going to be conservative in how we manage expenses until we see the growth developing And so you can assume in that EBITDA guide that that assumes you know a relatively modest recovery in the air our picture.
Speaker Change: You know, for example, more R&D investment or allowing more of that to flow to the Yvita line. So we see we see a lot of opportunity for our growth this year
Speaker Change: and we also see opportunity to either invest into that growth or to kind of flow the excess evaida that would come from that growth to the bottom line.
You know, excess cash flow and excess EBITDA.
Speaker Change: And the only thing I'd add to that Rohit is we've made pretty good progress on integrating and hearsay business and operating as one company going forward, so that'll obviously have a benefit to EBITDA as well.
Speaker Change: Okay, cool. And then I'll follow up on a lot of the discussion around search fragmentation and how
Speaker Change: your search offering in a fragmented marketplace could be viewed competitively speaking.
Speaker Change: Yeah, sorry, I got a little guard with everyone. I think you're asking about the places got acquisition and the launch of scout out.
Speaker Change: Oh yeah, exactly. And given the overall fragmentation of search and how the acquisition fits into the new competitive environment that you might be seeing.
Speaker Change: Yeah, so as you know, we've been talking for a couple quarters about how things get in an environment where Google is the environment which is really what we've been in for the last post to a decade.
Speaker Change: and I think what happens is, you know, people get really comfortable, marketers get really comfortable, and you know, C-Sweets get really comfortable with.
Speaker Change: Hey, that's where the traffic comes from, that's where the discovery is happening. And we feel like we're doing the right things to, we're doing SEO and SEM and, you know, managing our data in a way that makes sense.
Speaker Change: You know, I think what happens in an environment where we see this fragmentation and where the pace of that fragmentation is accelerating is you need a lot more data to understand what is what is happening competitively how am I showing up whether that's you need a lot more data to understand what is happening competitively how am I showing up
Speaker Change: You know, on an AI experience or on a more traditional search experience, what's my share of voice, what's the brand sentiment?
Speaker Change: And so, you know, where we're placed, this guy is really a best-in-class platform is on the gathering of the search rank information and the related attributes around reputation, reviews, photographs, and all the other attributes that we can gather around that platform.
Speaker Change: and really by acquiring places gathered and merging that with a multi-quarter effort looking back.
Speaker Change: R&D effort to build best-in-class AI share-of-voice AI brand sentiment reporting. We've created a comprehensive platform that's utilizing AI and really creating an AI agent for our customers that's going to work 24-7 to identify opportunities for them to enhance and increase their digital presence and their visibility.
Speaker Change: in a way where they can compare that data to benchmarks and to competition as well as even across their own universe of stores or locations or advisors.
Speaker Change: and then they can use that core data asset to make much better decisions about how to be discoverable in this increasingly complex world. And as I said in the call, I've never seen a reaction from customers to any products we've ever built as positive as the one that we're seeing from this one. And it's early, but...
You know, I just, I haven't seen anything like it
Speaker Change: Great, thanks for the update and looking forward to catching up. Thanks.
Thanks, Roy.
Speaker Change: The next question is from Tom White with DA Davidson. Please go ahead.
Tom White: Great. Thanks for taking my question. Maybe just a follow-up to the last one and hopefully it's not redundant but I agree, you know, the acceleration of kind of search fragmentation stuff is super interesting and it seems like my phone all of a sudden I have like three or four kind of...
Tom White: New Apps over the last quarter or two that I'm sort of using for search occasionally. So I guess if I think about places scout, I guess when I think about what they bring versus what you guys had been kind of working on internally, it sounds like...
Tom White: Optimization and SEO visibility across all these different things. What is the combination of the two things?
Tom White: Bringer, the two groups of assets bring that may be different from some of the other SEO optimization kind of offerings out in the market and then have a quick follow.
Tom White: Yeah, so I think the best way to think about it is that historically, Placescat has been a leader in gathering and organizing SEO rank based, it's kind of SEO core data.
Tom White: I think what we've recognized here and you know, a lot of people, you're going to hear a lot more talk about.
You know, does SEO need to become AIO?
How you're doing.
Tom White: has unlocked and I think will allow us to be best in class when it comes to those core traditional SEO metrics.
Tom White: We get a very talented team there and a lot of expertise around gathering data and that's going to be really helpful and useful. It's a really strong team, small but very strong team there.
Tom White: and so I think the second part of this is that there aren't any established rules and understanding around how do I measure how I'm doing on AI experiences, how do I figure out how I'm showing it up across.
Tom White: Search GBT and Chat GBT and Grok and Proplexity and what will be dozens of, you know, maybe more, you know, kind of verticalized search experiences. And so, you know, we believe that marketers of all types are going to need.
Tom White: to understand what they can do to influence the answers that are being given. And it's just a very different problem than how do I rank on Google and how do I, you know, buy a paid, a paid search placement there. And this is what we're hearing from our customers is...
helped me solve that problem and, you know, and-
Tom White: As it turns out, what we have here at Yext is an amazing set of products to help them solve those problems, listings, reviews, pages, social, you know, they're all knowledge and the sort of core underlying knowledge graph. Those are the actionable items. That is how you take action.
Tom White: We'll recommend and ultimately automate the taking of those actions annoyed us much more scalable and I think that's where a lot of the excitement with the customers come from is that it's going to allow them to unlock advantage in a world that is going to be increasingly less predictable.
Speaker Change: That was very helpful. Thank you for that. Just one follow-up on kind of capital deployment.
Speaker Change: You guys have done a couple of acquisitions here recently also so that you increase the buy-back to
Speaker Change: You know, I don't know if I was kind of like reading into this too much in the letter, but the letter sort of sounded like you guys were still very much on kind of the hunt for other acquisitions.
Speaker Change: You know, and you've been kind of referring to the vendor consolidation kind of dynamic that's happening out there. I mean, did I interpret that correctly and maybe just talk a little bit about how you're weighing, you know, your various uses of capital here this year. Thanks.
Speaker Change: The need to evaluate M&A opportunities against the opportunity to buy our own stock at what we think is an incredibly attractive level.
Speaker Change: You know, the good news is that we're seeing obviously increased EBITDA.
We're seeing, you know...
Speaker Change: You know, that conversion rate, I think we're talking about a 90% conversion rate that there's 70% conversion rate, but that's kind of...
Speaker Change: affected by one-time payment with the hearsay, right, Darryl? In this coming fiscal year, we said in the letter we've got...
Speaker Change: a conversion rate of free cash flow around 70%, and that is going to include some acquisition related payments.
Speaker Change: to the hearsay team. But we continue to throw off a strong free cash flow now. That gives us a lot of flexibility to do the repurchases, the potential M&A opportunities that come up and continue investing in the business.
Speaker Change: Yeah, so high level we see our cash.
Speaker Change: The situation is really healthy. We see a lot of opportunity.
Speaker Change: to, you know, look at different ways to allocate that capital, whether it's into organic growth or it's into M&A or it's into share buybacks, or just let it accumulate on the balance sheet if we don't think that any of those three things are particularly good uses of capital at the time.
Speaker Change: So, we'll continue to be fairly unreligious and undogmatic about this, but I'd say opportunistic, and the increased authorization really just reflects the fact that, you know, we see our stock as a tremendous value right now and we'll continue to be opportunistic about buying
Thanks Mike, thanks Darryl
My pleasure.
Speaker Change: Again, if you have a question, please press star then one. The next question is from Naved Khan with B-Riley Securities. Please go ahead.
Great. Thank you very much.
I had a question on the on the scout.
Thank you.
Speaker Change: No, no, no. There's no meaningful impact. It was a relatively small company and a lot of the benefits that Mike described are underpinned by the technology and the capabilities they have, but we're not forecasting or modeling in any meaningful financial contributions.
Speaker Change: Yeah, other than what's in our, you know, in effect, it's it's in our plan for the year and it be, you know, and it's it's in our in the dot guy that we're giving for the year. So just because of the timing and the deal, we were able to, you know, kind of bake it all into the plan.
Speaker Change: So at this time to sort of understand the era dynamics in Q4, sequentially, era, detail that I am trying to think.
Speaker Change: whether it's a listings business that's seeing some headwind or what's causing this number to come down and then
Speaker Change: You know, you still expect there to increase in 2026, this current fiscal year, what would lead to that for an organic basis.
Yeah, so, um,
Speaker Change: So that's the biggest driver of the decline. There's a little bit, if you plus as a minuses from just bookings in turn, which makes up the delta. Yeah, and so
Not me, I'm...
Speaker Change: You know, the roughly, let's call it, you know, kind of two and a half million of non-fx related decline there. That's a continuation of, you know, the trend we've been talking about which is
We are still seeing Yext.
Quarerar
Speaker Change: Decline as we restructure contracts, but the pace of that decline has really tapered way down, so I think it was something like 12 million in Q4 last year of total decline in this year we're talking about something in the two and a half million range, right? Yeah, and a lot of it's driven by downgrades, not logo churn.
Speaker Change: What I think we're seeing, we're seeing a bunch of green shoots. So we're seeing four consecutive quarters of improving renewal rates. We're seeing that gross error retention has moved back up into the high 80s.
Speaker Change: and what's really going to change the equation on ARR is...
and that includes the hearsay and relief.
The hearsay, social and relate products, that includes.
Speaker Change: Yeah, social, which we're starting to see make progress and then obviously...
Speaker Change: You know, this scout launch is a big one and we think that the enthusiasm for this [inaudible]
Speaker Change: is a driver, both of, you know, kind of improved retention, as well as potential...
Speaker Change: Error growth in the future. So that's what causes us to be really bullish about the business as we look out, you know, a few quarters.
Speaker Change: Really big customer dissatisfaction, we're talking painfully a couple of years ago about just customers we lost touch with and dissatisfied customers and service and support issues and we're just seeing a lot of those headwinds.
Speaker Change: You know, our abating, and that's the strong work of the team, and that causes us to be more positive on the outlook.
Speaker Change: with the top nine books like that. Is that a fair statement? Yeah, I think it's fair to say that we have more control over that number in any environment because we control the way that we invest.
Speaker Change: based on the signal that we're seeing. I think our confidence there is in that the improvements that we've made and the marked improvements we saw over the course of last year are sustainable and even expandable in just about any operating environment.
Darryl. Okay, perfect. Thank you so much, guys.
Ate fine.
Speaker Change: This concludes our question and answer session. I would like to turn to the conference back over to Mike Walrath for any closing remarks.
Mike Walrath: I'd like to thank everyone for joining us today and look forward to speaking with you next
Mike Walrath: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.