Yext, Inc.

Hello and welcome to the Yext Fourth Quarter and Fiscal 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 from the question queue, please press star, then two. Please note, this event is being recorded. 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 Fiscal Fourth Quarter 2023 Earnings Conference Call. With me today are CEO and Chair of the Board, Mike Walrath, COO and President, Mark Ferrantino, and CFO, Daryl Bond. During this call, we will make forward-looking statements, including statements related to our future financial performance, expectations regarding the growth of our business, our outlook for the first quarter and fiscal year 2024, our strategy, and estimates of financial and operating metrics, capital expenditures, and other indications of future opportunities, as further described in our fourth quarter earnings press release. 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 management performance, and general economic and business conditions. We undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from those forward-looking statements are discussed in our reports filed with the SEC, including our most recent Form 10-Q for the quarter ended October 31, 2022, our annual report on Form 10-K, but the fiscal year ended January 31st, 2022, and our press release that was 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 earnings press release, which is available at investors.yext.com. We also provide definitions of these metrics in the earnings press release. I will now turn the call over to Mike.

Thanks Mills, and thanks everyone for joining us today. We are pleased to report our Q4 results and a solid finish to our fiscal year 2023. For the full year, we generated revenue of $400.9 million and a non-GAAP net loss per share of $0.02, which compared to a loss of $0.15 last year. We made meaningful progress in driving transformation across our business through continued product innovation, focused execution, and improved productivity. We strengthened our commitment to solving customer pain points and drove increasing adoption of our platform. At the same time, we delivered operating margin improvement and two consecutive quarters of non-gap profitability. When we presented our management changes one year ago, we made several commitments. We committed to increasing customer focus and satisfaction. We committed to shift our go-to-market model from a capacity-driven model to a productivity-driven model. We committed to operating more efficiently and more profitably. We committed to our shareholders and our employees to increase our transparency and communicate better. We've made significant progress with the objectives we set a year ago, and I would like to highlight some of the actions we took to improve our performance in a few key areas. First, we dramatically improved our go-to-market motion with a focus on increasing customer satisfaction. We rolled out new brand positioning that better aligns with what we do, making it easier for our customers to understand our product's value. We hired a new CMO to lead the development of our integrated marketing strategy and execution. And we hired a new CRO to drive improved sales execution, increase customer satisfaction, and accelerate global revenue growth. Rayanne and Tom have hit the ground running and brought fresh energy and perspectives to the organization. Our renewed focus on customer satisfaction has begun to show up in our numbers, with gross retention improving throughout the year to the high 80s in the fourth quarter. While we have much more to do here, I'm pleased with our early progress. Second, we executed on our commitment to sustain profitability by operating more efficiently, resulting in a non-GAAP profitable second half of the year. We did this by making strategic changes such as reducing layers, increasing spans of control, better aligning our people and resources, and enhancing coordination across teams to create a leaner, more agile organization. We began fiscal year 23 with approximately 1,400 full-time employees, and we began fiscal year 24 with around 1,100, a reduction of about 20%. I believe our company is stronger and more agile than it was a year ago, and we are committed to continuing to drive better operating results in fiscal year 24 and beyond. Third, we continue to drive product innovation to maximize our long-term growth potential. Throughout the year, we enhanced all our products with dozens of new features and upgrades, including our flagship listings product. This innovation is having a tangible business impact, resulting in several new logo wins where Yext replaced entrenched competitors after side-by-side comparisons demonstrated our product's ability to drive superior value. Our innovations across natural language processing, analytics and security, as well as our leading technology integrations are driving competitive wins in the marketplace and setting the stage for stronger growth moving forward. Finally, we made use of our strong balance sheet to repurchase 13.8 million shares in fiscal year 23, reducing share count by roughly 10%. We will continue to focus on minimizing dilution to shareholders and using our strong balance sheet strategically. Our work in these areas, driving customer value, operational efficiency, and product innovation are paying off, and I am confident that we are building a best-in-class SaaS company. We've made significant strides, and we're looking forward to further progress in the year ahead. Despite the challenges of the last year, our global team has remained committed and focused, and I couldn't be more proud of the way they have delivered in a very difficult environment. Fiscal 2023 was a pivotal year for YACS, and our Q4 performance demonstrates the strength of our platform, our focused execution, and a go-to-market strategy that is increasingly resonating with our customers and partners. For the fourth quarter, we delivered revenue of $101.9 million and non-GAAP net income per share of $0.05, both of which were better than the high end of our guidance ranges. As we seek to expand our margins through focused investment on our highest ROI opportunities, we made a number of decisions in Key4 to sharpen our focus and reduce investment in areas of the business that were inefficient from an operating perspective. These actions included moving to a partner-centric go-to-market strategy in Japan and reducing our direct sales efforts to SMBs. The most significant restructuring effort we made in Q4 was the decision to focus our services offering on the highest value activities for customers, which I'd like to discuss in more detail. Our services business represented a small amount of overall revenue, approximately 9% of total this year, but our focus on delivering the vast majority of services ourselves has had a meaningful impact on gross margin. We plan to transition a portion of our services business to our systems integrator and partner ecosystem over the coming years. We will also continue to invest in automation that will require less services and create more value with customers. By making this decision now, we've been able to significantly reduce the size of our professional services organization. In fact, this was the largest part of our Q4 restructuring, and the result will be an immediate improvement in our non-GAAP gross margin, which Daryl will discuss in more detail. Over the last several months, the world has been captivated by the potential of generative artificial intelligence to transform customer experiences. ChatGPT is one of the most rapidly adopted technologies of all time, and general purpose large language models have potential to bring disruption to the dominant search paradigm. These models are trained on a wide variety of public data sets, which often include little to no authoritative information about a business. And because of this, the accuracy of generated responses is unreliable or can't be independently verified. As an example, we addressed this problem with Yext Chat, which can provide every business with conversational AI experiences that are generated from accurate information stored in their own knowledge graph. In fact, the R&D investment we have made in integrating large language models and machine learning throughout the Answers platform ideally positions us to help enterprise customers leverage the potential of AI while eliminating the risks of unanswered, so-called hallucinations, and data insecurity. We've been meaningfully investing in AI and large language models in the X Answers platform since 2017. We also intentionally built our platform to be model agnostic, which positions us well to add value for our customers regardless of what happens with consumer search. As chatbots and other content generation models continue to gain adoption, we believe this will lead companies to place increased strategic emphasis on ensuring their knowledge and information are optimized. For Yext, this presents an exciting future growth opportunity. We can help our customers leverage this emerging technology to deliver perfect answers across every digital experience. Today, we believe that we're in a great position to take advantage of the rising needs of businesses to safely and effectively put AI to work across their digital experiences. We will continue to take a thoughtful and cautious approach to formulating our financial guidance, which Daryl will discuss in greater detail in a few minutes. there are three potential revenue headwinds factored into our guidance for fiscal year 24. First, deemphasizing certain areas of our go-to-market focus, such as direct sales to SMBs and direct sales in Japan. While these choices will be a net positive in terms of focus, efficiency, and profitability, they will have a modest impact on the revenue in the short term. Second, our decision to focus on building systems, integrator, and partner relationships for managed and professional services and limiting our own services business to the highest value expert services will benefit our clients in many ways. This decision will also benefit gross margins and our bottom line. However, we anticipate that it will put modest pressure on revenue and renewals as we restructure some existing service agreements. Finally, we continue to consider the uncertain macro environment and assume that elongated sales cycles and budget pressures could persist for the foreseeable future. FX also remains a headwind to revenue growth. Despite the anticipated revenue headwinds in fiscal 24, we expect a more efficient and profitable business next year and believe we're on the path to sustainable and profitable growth for the long term. I have great confidence in the long-term success of our business. We have significant opportunities ahead given our expanding base of new and existing customers and the increasing value of our Answers platform. Satisfaction across our customer base is improving and we are uniquely positioned to add increasing value in ways that our customers are only just now beginning to appreciate. We will remain laser focused on driving sustainable growth and running an efficient organization. We look forward to discussing our financial objectives in greater detail, along with our strategy and technology developments at our upcoming Investor Day on April 4th in New York City. In this meeting, we'll discuss the drivers of our fiscal year 24 financial plan, measures we are using to benchmark and forecast our growth, our product and go-to-market strategies, as well as customer testimonials on why they chose our platform. We invite all investors and analysts to attend, and we're excited to see you next month. With that, I'd now like to turn the call over to Mark.