Yext, Inc.

Good afternoon, and welcome to the Yext Fiscal Third Quarter 2024 Earnings 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 your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Nils Erdmann, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Yext's Fiscal Third Quarter 2024 Earnings Conference Call. With me today are CEO and Chair of the Board, Mike Walrath, 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 fourth 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 third 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. 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 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 months ended October 31, 2023, 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 gap 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. With that, I will now turn the call over to Mike.

Thanks, Nils, and thanks, everyone, for joining us today. This quarter, we continue to execute our plan to operate Yext efficiently while laying the groundwork for long-term growth. In Q3, we generated revenue of $101.2 million, adjusted EBITDA of $13.5 million, and non-GAAP EPS of $0.09, which reflects our most profitable quarter ever on a non-GAAP EPS basis and a solid, sustainable foundation for us to grow our business. As we continue to improve our operations, we were hopeful this year would be a year of re-acceleration for Yext, but we aren't seeing this in our revenue or ARR growth rates yet. As we discussed on our Q2 call, the selling environment remains quite challenging, with some deals slipping or downsizing during the later stages of deal cycles. This caused softness in Q3 bookings as well as budget pressures on renewals. On top of this, we expect a singular large churn in Q4 attributable to a particular customer. We believe this is due to unusual factors that are unique to this customer. Dara will discuss churn in more detail, but this particular account, a happy customer, seems to be facing budgetary pressures of a magnitude we are not seeing with other accounts. The net result is that fiscal year 24 revenues and ARR will not see the reacceleration we anticipated when we began the fiscal year. We think this is temporary because we see real improvement in underlying trends around pipeline, sales productivity, and profitability, and we remain confident that we'll see a return to high single-digit ARR growth next year. We will share a full outlook on fiscal year 25 in our Q4 earnings discussion in March, but I'd like to take a few moments to share some of the reasons we remain excited for the future of our business. First, profitability has increased significantly. In addition to Q3 being our most profitable quarter ever, we are shaping up to deliver over $51 million in adjusted EBITDA for the full year, up over 200% versus last year. We've achieved this margin expansion the right way with gross margins up over 350 basis points compared to last year. Sales and marketing expense down 7% year-over-year, while still investing in R&D, which was up over 13% year-over-year in Q3. Progress is not just on a non-GAAP basis. Stock-based compensation has declined to just 12% of revenue, and operating cash flow creation for the year will be over 100% of adjusted EBITDA. We are becoming leaner and more efficient. Second, our sales productivity is improving across all categories and geographies. While total bookings are down, bookings per rep is improving even in the face of an increasingly challenging macro environment. We've made these improvements by sharpening our focus on value-based selling, rep performance, and qualified pipeline generation. A renewed marketing engine has been a bright spot for us this year, and our pipeline is strong and growing. It is unfortunate that the challenging macro environment is causing deal slippage and downsizing, as otherwise I think our renewed go-to-markets effort this year would truly be a bright spot for us. With improving productivity, we have laid the groundwork for growth, including the potential to grow sales capacity, which we will look to accelerate once we have confidence in an improving macro environment. Third, our reseller channel also showed some early signs of stabilization in ARR. We are encouraged by the progress and believe in the long-term growth opportunity of the reseller channel. We are focused on driving revenue through our resellers and are evaluating pricing strategies, including more usage-based models to drive growth in this channel as we move forward. We continue to focus on what we can control to put ourselves in the best position to capture growth as the macro environment improves. We are committed to improving customer satisfaction, and we continue to invest in the core products that are the main drivers of value for our customers today. We've aligned our sales motion and sharpened our focus on core product innovations across listings, reviews, pages, analytics, and search that deliver tangible near-term results to our customer and are increasing our focus on social features and functionality as well. We are hearing from our customers that they want a partner who does more across the entire digital experience, and our product roadmap is designed to concentrate on solutions that deliver tangible, measurable value. These innovations include our ongoing work with AI and large language models, which enhance the functionality of our core products across areas like content generation, review response, and AI chat. Several competitive wins in Boomerang customers during the third quarter underscore how important it is that we continue to innovate to set ourselves apart from our competitors. In Q3, we had several upsells and new logo wins across a variety of business verticals. In healthcare, for example, we signed deals with multiple providers, and in each case, we were able to identify and solve pain points that were unique to these customers. We've established a strong position in healthcare by demonstrating that our platform is cost-effective, efficient, and uniquely suited to managing customer information across our publisher network. One client in particular was an immediate win back from Q2 when they signed with a competitor and almost immediately ran into issues as the competitor failed to deliver on their deadlines. In August, they approached Yext and wanted to move back to our platform as soon as possible. We've similarly seen numerous competitive wins across the technology sector, including Altice and Vodafone, and in retail, restaurants, and hospitality with authentic restaurant brands, Golf Tech, Raising Cane Restaurants, and TJX UK, to name a few. All of our competitive wins in the quarter not only underscore the importance of focusing on innovation, but also signal the healthy demand for our products. We continue to see strong interest from our customers in consolidating functions across our portfolio of products. We're making progress on our cross-platform motion, and customers are seeing the additional value that's possible through leveraging our knowledge graph across more than one of our solutions. During the quarter, we were particularly successful upselling several large financial services customers. One of these customers, a multi-year deal and a new product build-out, was a notable upsell during the quarter. We created a strong value use case based on our success and the positive response we received building their financial advisor experiences for their wealth management businesses. We had similar success with a global investment management services firm, which is launching three search experiences on the home pages of their personal investing, pensions, and financial advisor websites, with a YEC search bar prominently displayed on each. We continue to invest in search and AI content generation products, which we believe will represent large incremental ARR opportunities in the years ahead. One of the world's largest retailers, for example, saw how our AI products could help enhance communications across intranet sites. Our team demonstrated the ease and effectiveness of implementing our knowledge graph and identified how AI-driven search could drive increasing employee satisfaction, which led them to becoming a new client in the quarter. We are committing development resources to deliver what our customers are ready to buy in the current macroeconomic environment. Our core listings, reviews, and pages products continue to be best in class. A top new logo in Q3 was with one of the world's largest tax preparation software services. The customer was looking for a flexible, open API platform to help their developers quickly stand up websites, listings, and reputation management. After seeing how our platform could help their tax professionals become discoverable across all digital channels, they chose Yext Products as their digital experience solution. Shifting to the fall release, we launched over 80 new features with enhancements across every area of our platform based on feedback from our customers, partners, and employees. We will continue to focus our attention on product enhancements to help our clients and partners drive internal efficiencies, boost their online presence, and delight their customers. We feel strongly that Yext remains well positioned to capitalize on the digital transformation taking place across organizations worldwide. We have laid the groundwork for future growth acceleration, and our highest priority is to capitalize on this opportunity when the buying environment has improved. As we complete our sixth full quarter of operations since our leadership transition last year, I feel great about the team we have in place globally, the future opportunity across our broadening set of products, and the leading indicators we are seeing of a return to accelerating growth in the future. I am very grateful for the focused and steady efforts of our entire global team in a very challenging environment. With that, I'd like to now turn the call over to Daryl.