Yext, Inc.

Good afternoon, and welcome to the Yext Incorporated's first quarter fiscal 2026 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 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. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to YEXT's first quarter fiscal 2026 earnings conference call. With me today are CEO and Chair of the Board Michael Walrath and CFO Daryl Bond. During this call, we will make forward-looking statements, including statements related to our future financial performance, statements regarding the expected effects of our recent acquisitions, expectations regarding the growth of our business, our outlook for the second 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 first quarter shareholder letter, which is available at investors.yext.com. 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 acquired businesses with ours, 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 annual report on Form 10-K for the year ended January 31, 2025, and in our earnings release and our shareholder letter that were both issued this afternoon. During the call, we refer to certain metrics, including non-GAAP financial measures. Definitions of these non-GAAP metrics and other operating metrics, as well as reconciliations with the most comparable historical GAAP measures, are available in the shareholder letter. I will now turn the call over to Mike.

Thanks, Nils, and thank you all for joining us today. As I hope you read in our shareholder letter and earnings release, we had a very strong Q1, outperforming our guidance on all metrics, and we see continued strength into Q2. A few things I'd like to highlight before we dive into your questions. First, fragmentation of the consumer search market continues to accelerate with the advancement of AI search. This trend elevates the importance for brands of managing digital visibility, and it differentiates YEC's core products and provides fertile ground for our latest product release, YEC Scout. Second, core business health is improving. We're seeing improvement in both gross and net retention, customer satisfaction, and overall value perception across our platform. Third, the pace of innovation is advancing rapidly at Yext. We are speeding up our execution, even as our profitability and efficiency grow, setting the table for a growth flywheel well into the future. And finally, we have the balance sheet and cash flow further accelerate our growth while maintaining flexibility. This enables us to strategically reinvest in organic initiatives and pursue opportunistic investments, whether through M&A or partnerships that extend and enhance our business. I'm thrilled with the execution of our global team, who are bringing strong commitment to driving value for our customers, even as the pace of change in our industry accelerates. And now we're happy to take any questions that you may have for us.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Navid Khan with B Reilly Securities. Please go ahead.

Thank you very much. A couple of questions from me. Maybe just one on the Scout update. It's good to see the wait list of 2,000 customers. And I'm curious about the mix here in terms of are you, you know, besides the interest in existing customers, are you also seeing a good number of new customers sign up for this product? And maybe as a related question, as you start to see sort of more sales traction. How are you thinking about increasing sales headcount for the rest of the year?

Great. Hey, Naved. As far as the customers go, I think what we're seeing on the wait list is a mix. So we see existing customers. We also see new prospects, and we also see new customers. So it's sort of all of the above there. And that's driven by some of the demonstrations that we've had available for scouts since early April. As far as the sales headcount goes, I think we have room to run with our current headcount. I think we have opportunities to grow productivity, but we're going to continue to look at the demand universe, the market, and determine when the right time is to add additional headcounts. And we'll be, you know, opportunistic there because we're seeing plenty of positive signal. But we want to make sure that all of our sales folks have plenty of opportunity and that we don't get ahead of ourselves on that front.

Got it. And then maybe just staying on Scout maybe, maybe just talk about the velocity in terms of, you know, customers kind of, you know, of the sales cycle, maybe – shortening or not, and how should we be thinking about the product kind of becoming generally available to all the customers? How are we thinking about the timeline? Thanks.

Yeah, so, you know, I think it's too early to say with any, you know, sort of certainty what the sales cycle will look like for this product. From what I can tell so far, I would expect that, if anything, the sales cycle will be a bit shorter. It's an easier implementation. The core data is publicly available. And I think the value that our customers see, especially in light of what's going on in the market and the need to really understand the visibility around their brand with the rapid fragmentation that we're seeing, all of those things, you know, encourage me that this could, you know, be a shorter sales cycle product for most customers. As far as the – and look, I think that's reflected in the speed with which we've rolled the product out. So just as a reminder, we launched this product officially at our analyst day on April 2nd. That initial cohort was, you know, less than 10 development partners who we've been working with in advance of the – what I would call a more open data as of yesterday. So there were an incremental – I believe it was 37 customers rolled out. over the course of the last 48 hours or so. And so I would describe where we are today with the product as an open beta that will be incrementally rolling out additional customers as we get those customers, those beta customers lined up. We don't have a date yet for when we'll go full general availability, but I'm really confident that we have the capacity to roll out a lot of customers here.

Great. Thanks, Mike. I'll get back in the queue. Thanks, David.

The next question is from Ryan McDonald with Needham & Company. Please go ahead.

Hi, congrats on a great quarter, really strong results, and a lot of positive momentum. Mike, it seems like that from reading the shareholder letter and hearing you speak right now, there's a lot of good things going on in the business, great Q1, good momentum to Q2. Scouts obviously seeing some really nice demand, hearsay, social, et cetera. but yet we still don't have a sort of full year top line outlook yet. I'm just curious, can you help us understand sort of how you're balancing sort of the enthusiasm and the momentum in the business right now versus maybe what you're seeing in the macro and sort of what's kind of creating the lingering caution, if you will?

Yeah. No, look, I think the lingering caution is two things, but probably primarily the macro, right? So, you know, It was interesting, you know, I think, you know, I listened to all the software calls and, you know, I thought it was interesting to listen to the March, how the March quarters and the April quarters, you know, potentially sound a little bit different. You know, while we don't have any direct impact in our business from tariffs and things like that, we are obviously well aware that, you know, businesses who do are thinking carefully about how they're, you know, expending dollars. At the same time, I think there's a competing tailwind here, which is it's not really deniable anymore that the brand discovery landscape is shifting enormously. We saw Google dip below 90% market share recently for the first time in a very long time. And candidly, that's not the best measure for two reasons. One is that's really only measuring traditional search, and the second is that you know, the fragmentation that's happening here isn't a zero-sum game. So we think the fragmentation drives more search, not less search. So all of those things, I think, factor into the puts and takes around feeling really positive on The fact that this environment is very fertile for us, the commoditization pressure that we've talked about for years in our product, you know, abates in a market where having the best digital visibility, brand visibility products is going to drive value perception, right? But we're always going to be mindful of the fact that there's a lot of uncertainty around the macroeconomic landscape. And so, you know, I think our overall outlook, you know, will remain conservative as long as that uncertainty exists.

Helpful color. Maybe on Scout in the beta program, I'm just curious what you're looking for within customers that have launched in the beta or from the development customers thus far. Are there any sample data points in terms of ROI generation that you can talk about? And then, you know, maybe perhaps based on what you're seeing, you know, or based on maybe the value you're seeing being delivered in your early days of Scout, is this evolving how you're thinking about monetization of the product when it eventually is generally available later this year or next year?

Yeah, so, I mean, look, I think a development partner – you know, relationship is a little different than these initial beta launches. So the development partners are signing up for a product, you know, to experiment with a product that is not ready for a public launch. The launch that we've had over the last 48 hours is really a public beta launch. And so we've been gating that. We're controlling how many customers are launched. But But sitting today with something like 45 live customers, we're getting amazing feedback from the customers. I've personally sat through dozens, many dozens of customer interviews and customer meetings, both demonstrations but then also customers who are actively using the product. I can tell you that so far there's a 0% disinterest rate in the product. and there's very high value perception both around the product but also around how it demonstrates value of our other core existing products. So we talk a lot about Scout has over 150 non-performance metrics that we're able to gather. Big chunks of those metrics are things around how are you distributing your listings information to create citations both for traditional search and AI search, your page performance, your review performance, reputation performance, And so when we start demonstrating at the location level to our customers how those metrics are contributing, you know, any questions about the value of our listings product or our reviews product or our pages product or our social product, they start to fall by the wayside because you can see that that is the thing that differentiates you and you can see how you're outperforming your competition because of those things. So when I talk about, you know, kind of Maybe the earliest benefit of the product is the anti-commoditization pressure of our core products against what we've seen is, you know, pressure from a lot of small competitors with less capable products. That's probably the earliest benefit. The second area, or maybe the more important benefits over the long run, are the TAM expansion and the attachment opportunity with Scout as a standalone product.

Great. It's exciting to hear, and I can't wait to hear more. Thanks. Thanks, Ryan.

The next question is from Tom White with DA Davidson. Please go ahead.

Great. Thanks for taking my questions, too. If I could, I was hoping you guys could just give a bit more color on the drivers of the revenue outperformance in the first quarter. And, you know, I guess specifically, did the direct ARR improve sequentially there by a few million bucks, I think? Maybe talk a little bit about the extent to which it was sort of legacy product-driven versus – some of your newer offerings versus maybe some of the recent M&A like hearsay. And then just secondly on, um, on, on the buyback, I think that the kind of the pace of buybacks picked up, uh, in the quarter versus kind of the cadence of the past couple, maybe you might just talk about like your appetite to focus on, you know, reducing the share count here, potentially just given the strong cashflow, um, you know, the improved liquidity after this debt deal? Like, where is the buyback kind of ranking with your other kind of opportunities or things you're thinking about? Thanks.

Thanks, Daryl. On the revenue and the ARR performance in Q1, you know, it was a couple things. You know, one, we did see a bit of a tailwind from FX rates. You know, if you recall, you know, for the last few quarters, we've been talking about FX headwinds, particularly as it rates to the pound. And that sort of evaded and came back. And I think, you know, the rates at the end of Q1 this year are kind of, you know, roughly in line with where they were Q1 of last year. So that drove, you know, some of the improvement on both the revenue and on the ARR side. And we called it out in the shareholder letter in the back pages after the remarks. But we also, you know, continue to see improvements in retention. You know, we We disclose gross retention and net retention on the basis of ARR. And, you know, our customer success motion and our ability to, you know, retain customers and drive value to customers continues to show improvement. And that also helps with, you know, obviously the revenue but also the ARR picture. On the buybacks, you know, I'll make a couple comments, but obviously, you know, you saw, you know, where the stock traded throughout Q1 and even at the levels that we're at today, we continue to believe it's a great investment when you look at it from an EBITDA multiple perspective. So it becomes a really important, you know, tool in our capital allocation belt, and I'm sure Mike will have some additional comments.

Yeah, I think – We're going to look at the buyback as an opportunity to – you know, I think we've – since, you know, over the last three years, I think we've reduced the overall share count. I think we'll continue to look to drive that type of anti-delusion through the business as – especially with what we think is the stock price being very attractive – As far as our optionality around buyback versus M&A, it's not necessarily an either-or situation. So we have a really strong balance sheet. We have cash, we have cash flow, and now we have a great partner with BlackRock and a debt facility that would enable us to look at the opportunistic about M&A. highly accretive acquisitions. And so, you know, it does feel like it's going to, you know, will continue to be a good time to look at M&A opportunities. But, again, I just don't really think that that's necessarily an either-or situation. You can see, you know, we did buy a lot of shares in Q1, and we continued to buy shares in May because we gave you the year-to-date, or I guess through the 530 number there, so. You know, we feel great about that investment, just as we feel great about the M&A transactions we've had with PeerState and PlacesCap.

Got it. Appreciate that. Thanks, Daryl. Thanks, Mike.

Again, if you have a question, please press star, then 1. The next question is from Rohit Kulkarni with Roth Capital Partners. Please go ahead.

Hey, thanks. Nice call, guys. Just on the organic part of the business, net ARR, net retention rate is up. That's a very healthy sign. Any color on as to what is driving that with regards to upsell or any improvements in GTM that you may have implemented? And then, I know both companies are now fully integrated, but anything that you can share with regards to the core EX

I think the first question was a little hard to hear you, but I think it was net retention and what's driving it. So I think the good news is we're seeing growth retention and net retention both up. To me, what I observe in the business is I observe, you know, that – and it's no secret that, you know, we've been fighting a lot of, you know, sort of good enough at half price for a long time in the business on a lot of our core products, certainly on the listings products primarily. I think in this – and I've mentioned this a few times – in this world where it's getting harder and harder to manage brand visibility and because you have to go so far beyond just sort of the core, you know, GMB page at this point. That is having an impact in customer value perception across our product, and that's going to be an anti-churn metric for us, both in terms of logo churn, but also in terms of downgrade churn, because, you know, it's really not going to be an environment where you can afford, where a brand can afford to be missing out on opportunities to generate visibility through proper citation building, through listings, through reputation, social, and all those products. So, you know, we're really encouraged to see that the market is, and our customers are very focused on this, and I think it's helping a lot that we have best-in-class products here and that the value, the perception of value of those best-in-class products are, I think they're getting the attention that they deserve because of the search, the fragmented search environment. I forgot what your second question was. I'm sorry.

Just any other color on the growth in the underlying core EXT business excluding ERC and Scout?

Yeah, I mean, I think we're in a similar place in terms of the stability of that ARR. So what's going to help us – there are two things that are going to help us there, obviously. One is going to be better retention, which we're seeing, and the other is going to be more upsell, and that comes from the opportunity to attach more products. So the way I look at this is we have – I just described the whole sort of, I think, value perception of our core. That's going to help a lot with the gross retention situation. Okay. especially as we get into our heavier renewal periods, which are always in the back half of the year. So you can move the needle a little bit in the first half of the year, but because most of the book winds up being up for renewal in the second half of the year, that's where you have the opportunity to really change that math. And then on the upsell, what you need is you need innovative products that customers value in order to get the upsell and the boomerang customers that drive ultimately the ARR growth. So We're encouraged on both of those fronts. We're really excited about the customer reception for Scout. Our customers are watching AI disrupt the landscape in which they try to manage their digital visibility, and they need AI products like Scout that are going to help them to combat the challenges and take advantage of the opportunities of fragmenting digital search landscape.

Okay, great. And I guess just maybe a why or why now around this – loan facility that you have from BlackRock. Maybe just talk about there are obvious conclusions one can draw, but would love to hear why and why now. Are you seeing any specific urgency in pursuing some growth initiatives that led you to doing it now?

Hey, Ro, hey, Daryl. One of the primary reasons was that our facility, our credit facility was SBB. was expiring at the end of the calendar year. So we needed to do something because we do leverage that for some availability to collateralize letters of credit with leases and things like that. But as we got into the conversations with BlackRock, we realized, obviously, they're a really great partner. They're well-known. They felt really good about our business. And we looked at the opportunity. And as Mike mentioned, with our point of view on the M&A outlook and the opportunities that may arise, it just made sense for us to do something a little bit bigger. The SAB facility was written years ago, right around the time we did our IPO. Some of the covenants were meant for a smaller company. So as we got into the conversations, we felt pretty good about the terms we were getting, about the covenants we were getting, and the flexibility it provides us with some of the things we want to do to continue to invest and grow the business.

Okay. Thank you. The only thing I would add to that, Roy, just like is, you know, I think we've done two acquisitions in the last, you know, year, basically. One of those was what we, you know, think is a highly creative strategic acquisition. And obviously, PlacesCout was a smaller but very strategic, you know, I think product-led acquisition. We're really happy with both of those. And we think that the opportunity for more of those exists. We're going to be super diligent in and, you know, and I think very disciplined buyers. But this environment is definitely creating opportunities. Just as it's creating organic growth opportunities, it's also creating opportunities for us to consider different assets. And so, you know, having a facility in place with a partner like BlackRock is just going to make it easier for us to be really, really smart and agile when it comes to those opportunities.

Okay. Okay. Anything with the word agentic in the PR would definitely help. Anyway, thank you for that.

Thanks. I'm sorry.

Anything what? In the word having agentic. Agentic in your PR would help.

Yeah. This concludes our question and answer session. I would like to turn the conference back over to Mike Walrath for any closing remarks.

I'd just like to thank everyone for joining and for all of your support and look forward to speaking with you again next quarter.

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