Executive Summary / Key Takeaways

• Yext is strategically repositioning its digital presence platform to capitalize on the accelerating fragmentation of the consumer search market driven by generative AI, leveraging its core Knowledge Graph technology and recent acquisitions.
• The company delivered a strong Q1 Fiscal 2026, outperforming guidance on all metrics, with revenue growing 14% year-over-year, entirely driven by the inclusion of Hearsay, while the core business showed signs of stabilization.
• Recent acquisitions of Hearsay and Places Scout, coupled with the launch of Yext Scout, are enhancing the platform's capabilities in compliant engagement and AI-powered competitive intelligence, seen as critical differentiators in the evolving digital landscape.
• Yext has significantly improved its operational efficiency, achieving Adjusted EBITDA of $24.7 million in Q1 FY26 and guiding for over $100 million in Adjusted EBITDA for the full Fiscal 2026, providing financial flexibility for growth investments and opportunistic M&A.
• While macroeconomic uncertainty persists and revenue growth in the core business remains stable to modest, improving retention rates and the potential for upsell from new products signal a potential return to ARR growth in the future, contingent on successful execution and market conditions.

Setting the Scene: Yext's Role in a Fragmenting Digital World

Yext, Inc. operates at the intersection of brands and consumers in the digital age, providing a cloud-based platform designed to empower businesses to manage their digital presence and deliver accurate, engaging information across an increasingly complex online ecosystem. At its core, Yext's mission is to enable businesses to structure and organize information about their brands, locations, products, and people within its proprietary knowledge graph, known as Yext Content. This structured data is then distributed across a vast network of over 200 third-party service and application providers, including major platforms like Google (GOOGL), Apple (AAPL), Facebook (META), and Yelp (YELP), ensuring consistency and discoverability.

The company's journey has evolved from its early focus on listings management to encompass a broader suite of products including Reviews, Pages, and Search. This expansion reflects the changing dynamics of how consumers find information online. However, in recent years, Yext has faced headwinds, including a slowdown in revenue growth and operational challenges, leading to strategic adjustments and cost-cutting measures, including workforce reductions and leadership changes.

Today, Yext is navigating a pivotal moment defined by the accelerating fragmentation of the consumer search market, propelled by the rise of generative AI search experiences. This shift fundamentally alters how brands are discovered and elevates the importance of managing digital visibility across a multitude of platforms beyond traditional search engines. Yext's current strategy is squarely focused on leveraging its foundational technology and recent strategic moves to address this new reality, aiming to solidify its position as the essential platform for brands seeking to thrive in this fragmented landscape.

Technology as the Foundation: The Knowledge Graph and AI Innovation

The bedrock of Yext's platform is its Knowledge Graph. This sophisticated, structured data system serves as a single source of truth for a brand's digital information. Unlike disparate databases or manual processes, the Knowledge Graph centralizes and organizes complex entity data, making it authoritative and easily manageable. This core technology provides tangible benefits: it enables real-time or near real-time updates across the Publisher Network, ensuring accuracy and consistency, which is critical for maintaining brand integrity and discoverability in a dynamic online environment.

Building upon this foundation, Yext's platform powers its suite of products—Listings, Reviews, Pages, and Search—each equipped with robust analytics. These products allow businesses to control their presence, manage their reputation, optimize their web pages for discoverability, and power intelligent search experiences on their own digital properties. The integration of these capabilities on a single platform simplifies workflows and provides unified insights, addressing the operational inefficiencies inherent in managing multiple point solutions.

In response to the evolving digital landscape, particularly the impact of AI on search, Yext has accelerated its technological innovation. A key development is the launch of Yext Scout, an AI Search & Competitive Intelligence Agent. This product is designed to provide brands with critical insights into their visibility across both traditional and emerging AI search platforms. Leveraging the acquisition of Places Scout, which brought expertise in gathering and organizing SEO rank data and related attributes, Yext Scout combines this with Yext's R&D in AI share of voice and brand sentiment reporting. The stated goal is to create an AI agent that works 24/7 to identify opportunities for enhancing digital presence. Yext Scout provides over 150 nonperformance metrics, allowing brands to benchmark their performance against competitors and identify actionable recommendations.

The "so what" for investors is significant. This technological evolution, particularly the focus on AI-driven insights and actionability via Scout, is designed to create a stronger competitive moat. In a world where "good enough at half price" solutions for basic listings management have pressured core products, Scout aims to demonstrate the differentiated value of Yext's platform by showing how managing data across Listings, Reviews, Pages, and Social directly contributes to competitive outperformance in the complex AI search environment. This anti-commoditization pressure is expected to improve customer value perception, driving better retention and creating upsell opportunities, thereby supporting future ARR growth.

Competitive Landscape: Navigating a Fragmented Market

The market for digital presence management, AI search, and knowledge graph solutions is intensely competitive, rapidly evolving, and fragmented. Yext faces competition from a variety of players, ranging from broad marketing automation and CRM platforms to specialized SEO and data management tools.

Direct competitors include companies like SEMrush (SEMR), HubSpot (HUBS), and Salesforce (CRM). SEMrush specializes in SEO and competitive intelligence, offering robust tools for keyword tracking and market analysis. HubSpot provides a comprehensive suite of marketing, sales, and service tools, emphasizing an all-in-one integrated ecosystem. Salesforce, a dominant force in enterprise CRM, offers broad business solutions with increasing AI integrations.

Compared to these rivals, Yext positions itself as a specialist in AI-driven digital presence and knowledge management for multi-location brands. While competitors like SEMrush excel in traditional SEO analytics and HubSpot in broad marketing automation, Yext's core strength lies in its ability to centralize, structure, and distribute authoritative brand data across a vast network. Its Knowledge Graph and platform offer efficiencies in managing fragmented data sources and ensuring consistency that rivals may lack. For instance, Yext's platform enables faster processing speeds for data updates compared to some competitors.

The introduction of Yext Scout further sharpens this competitive edge, specifically addressing the challenges of the AI search era. While competitors are also incorporating AI, Scout's focus on providing insights into visibility across new AI search experiences and benchmarking against competitors offers a differentiated value proposition. This capability, leveraging the Places Scout acquisition, aims to make Yext best-in-class in understanding and influencing brand discoverability in this evolving landscape, a problem distinct from traditional Google SEO.

However, Yext faces vulnerabilities due to its smaller scale compared to giants like Salesforce and HubSpot. This can lead to lower margins and potentially higher customer acquisition costs. Competitors offering broader platforms or lower-cost solutions can exert pressure. The dependence on maintaining relationships with its Publisher Network also presents a risk if key providers alter terms or access.

Indirect competition comes from the very platforms Yext integrates with, such as Google's own tools (e.g., Google Business Profile) and emerging AI platforms from tech giants. While these may offer basic functionalities at lower costs, they often lack the comprehensive, centralized management and analytics capabilities of Yext's platform.

Strategically, Yext is responding to this competitive environment by focusing on innovation, particularly in AI, and pursuing accretive acquisitions like Hearsay and Places Scout to build a more comprehensive platform that addresses customer needs for unified data, insights, and engagement in a fragmented world. The goal is to leverage its technological foundation and specialized expertise to differentiate itself and capture market share in the evolving digital landscape.

Financial Performance and Operational Details

Yext's recent financial performance reflects a business undergoing strategic transformation and navigating a challenging macroeconomic backdrop, while demonstrating improving operational efficiency. For the three months ended April 30, 2025 (Q1 Fiscal 2026), Yext reported total revenue of $109.5 million, a 14% increase compared to $96.0 million in the prior-year period. This growth was entirely inorganic, driven by the inclusion of revenue from the Hearsay acquisition, which closed on August 1, 2024. Without this acquisition impact, core revenue would have seen a slight year-over-year decline.

Subscription and associated support revenue remained the dominant component, accounting for 93% of total revenue in Q1 FY26. Geographically, North America contributed $88.9 million (81%) and International contributed $20.6 million (19%). Direct customer revenue increased to $91.4 million (84% of total), primarily due to Hearsay, while third-party reseller revenue decreased slightly to $18.1 million (16%), mainly due to customer attrition.

Gross profit for Q1 FY26 was $82.4 million, resulting in a gross margin of 75.2%. This represents a decrease from the 77.6% gross margin in Q1 FY25, primarily driven by increased cost of revenue, including higher amortization expense from acquired intangibles (largely Hearsay), royalties, integration fees, and personnel costs.

Operating expenses totaled $81.3 million in Q1 FY26, a modest increase from $79.9 million in Q1 FY25. Sales and marketing expenses decreased by 16% to $36.2 million, reflecting lower headcount and reduced spending on conferences and advertising, partially offset by amortization of acquired intangibles. Research and development expenses increased by 28% to $21.9 million, driven by higher employee-related costs and headcount. General and administrative expenses increased by 18% to $23.2 million, primarily due to changes in the fair value of contingent consideration related to the Hearsay acquisition, increased professional costs, and higher stock-based compensation.

The company achieved net income of $0.8 million in Q1 FY26, a significant improvement from a net loss of $3.8 million in Q1 FY25. On a non-GAAP basis, Adjusted EBITDA saw a substantial increase to $24.7 million in Q1 FY26, up from $9.6 million in Q1 FY25. This improvement highlights the impact of cost-cutting initiatives and operational efficiencies implemented over the past year.

Operational metrics show signs of stabilization and improvement in core business health. The pace of decline in the core Yext ARR has tapered significantly compared to the prior year. The company has observed four consecutive quarters of improving renewal rates and three straight quarters of improvement in overall renewal rates. Gross ARR retention has moved back into the high-80%s. While total committed ARR saw a sequential decline from Q3 to Q4 FY25, largely due to FX impacts and some non-FX related factors including downgrades, reseller revenue has remained relatively consistent, indicating a focus on driving usage rather than solely committed contracts in that channel. The company is also seeing "boomerang" customers return after experimenting with competitors.

Liquidity and Capital Allocation

As of April 30, 2025, Yext maintained a solid liquidity position with $115.0 million in cash and cash equivalents. The company believes its existing cash resources are sufficient to meet operating requirements for at least the next 12 months.

A significant development post-quarter end was securing a new $200 million senior secured term loan facility with BlackRock (BLK) on May 15, 2025. This facility, which matures in May 2030, replaces the previous credit facility with Silicon Valley Bank. The proceeds from the initial $100 million draw were used to repay the SVB facility and provide enhanced financial flexibility. The facility includes additional delayed draw options, providing capital for growth initiatives and strategic acquisitions. Key covenants include maintaining minimum qualified cash of $35.0 million and minimum consolidated EBITDA, tested quarterly. This new facility underscores the company's improved financial standing and provides optionality for future investments.

Net cash provided by operating activities in Q1 FY26 was $37.7 million, reflecting the net income adjusted for non-cash items and favorable changes in working capital, particularly a significant decrease in accounts receivable due to billing and collection timing. Net cash used in investing activities was $19.4 million, primarily for the Places Scout acquisition and capital expenditures. Net cash used in financing activities was $29.0 million, driven by common stock repurchases and tax payments related to stock-based compensation.

Yext continues its share repurchase program, which was increased by an additional $50.0 million in March 2025, bringing the total authorization to $200 million. The company repurchased 4.47 million shares for $27.8 million in Q1 FY26. As of April 30, 2025, approximately $54.2 million remained available under the program. Management views the buyback as an attractive use of capital, particularly at current stock price levels, contributing to anti-dilution. The combination of a strong balance sheet, positive cash flow generation, and the new debt facility provides Yext with significant flexibility to invest organically, pursue opportunistic and accretive M&A, or return capital to shareholders through buybacks.

Outlook and Risks

Yext's outlook for Fiscal Year 2026 reflects a cautious yet increasingly optimistic stance, balancing macroeconomic uncertainties with improving operational trends and strategic momentum. While the company is not providing full-year revenue guidance at this time due to the uncertain macroeconomic environment, it has provided guidance for Adjusted EBITDA of over $100 million for Fiscal Year 2026. This guidance signals management's confidence in the sustainability and potential expansion of the operational efficiencies achieved, with the expectation that the consolidated business margin will improve from the low-20s exiting FY25.

Management anticipates stable to modest growth in Annual Recurring Revenue (ARR) for FY26. This expectation is underpinned by the observed improvements in gross and net retention rates and the potential for upsell opportunities from the newly integrated Hearsay offerings, Yext Social, and the recently launched Yext Scout. The abatement of some prior headwinds, such as extreme cost optimization and customer dissatisfaction, also supports this outlook. Management emphasizes that their financial guidance is conservative in the short term and that a faster recovery in the ARR picture could lead to further investment in growth or additional flow-through to the EBITDA line.

Despite the positive momentum, several risks could impact Yext's ability to achieve its objectives:

• Macroeconomic Headwinds: Continued uncertainty regarding inflation, interest rates, and potential recession risks could lead to reduced technology spending, longer sales cycles, or increased customer churn and downgrades.
• Acquisition Integration: Successfully integrating Hearsay and Places Scout, realizing expected synergies (both revenue and cost), and retaining acquired customers and talent pose execution risks.
• Competition: The fragmented and intensifying competitive landscape, including larger players and emerging AI-focused solutions, could pressure pricing, market share, and growth rates.
• Technology Execution: The success of new products like Yext Scout depends on market acceptance, timely development, and the ability to deliver promised value and performance metrics. Risks associated with AI technology (bias, compliance, reliance on third-party LLMs) also exist.
• Regulatory Environment: Evolving regulations around privacy, data protection (e.g., GDPR, CCPA), and the use of AI could increase compliance costs and impact product offerings or market access.
• Publisher Network Dependence: Changes in relationships or access terms with key third-party application providers could negatively impact the core platform's functionality and value proposition.
• Talent and Organizational Changes: Attracting and retaining skilled personnel, particularly in specialized areas like AI and sales, remains challenging, and managing ongoing organizational evolution requires careful execution.

Conclusion

Yext is strategically positioning itself to capitalize on the fundamental shift in consumer search driven by generative AI. By leveraging its core Knowledge Graph technology and enhancing its platform through key acquisitions like Hearsay and Places Scout, the company is building a more comprehensive solution for brands to manage their digital presence and navigate the complexities of a fragmented online world. The launch of innovative products like Yext Scout underscores this strategic pivot towards providing essential AI-powered insights and actionability.

Financially, Yext has demonstrated a significant improvement in operational efficiency, achieving profitability in the recent quarter and guiding for substantial Adjusted EBITDA in the coming fiscal year. This enhanced financial health, coupled with a strengthened balance sheet and new debt facility, provides the necessary flexibility to invest in organic growth initiatives and pursue opportunistic M&A. While macroeconomic uncertainty and competitive pressures remain notable risks, improving retention rates and the potential for upsell from a broader product portfolio offer a pathway to stable to modest ARR growth in the near term, with the potential for acceleration as the market adapts to the AI search era. Investors should closely monitor the successful integration of acquisitions, the market adoption of new AI-driven products, and the company's ability to translate operational efficiency into sustainable ARR growth in the evolving digital landscape.