YEXT

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(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from                  to                 

Delaware						20-8059722
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

61 Ninth Avenue

New York, NY 10011

(Address of principal executive offices, including zip code)

(212) 994-3900

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

YEXT

New York Stock Exchange

reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes  ☐  No  ☒

TABLE OF CONTENTS

									PAGE
PART I.						FINANCIAL INFORMATION
			Item 1			Financial Statements			5
						Condensed Consolidated Balance Sheets (Unaudited)			5
						Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)			6
						Condensed Consolidated Statements of Stockholders' Equity (Unaudited)			7
						Condensed Consolidated Statements of Cash Flows (Unaudited)			8
						Notes to Condensed Consolidated Financial Statements			9
			Item 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
			Item 3			Quantitative and Qualitative Disclosures About Market Risk			31
			Item 4			Controls and Procedures			32
PART II.						OTHER INFORMATION
			Item 1			Legal Proceedings			33
			Item 1A			Risk Factors			33
			Item 2			Unregistered Sales of Equity Securities and Use of Proceeds			58
			Item 3			Defaults Upon Senior Securities			58
			Item 4			Mine Safety Disclosures			58
			Item 5			Other Information			58
			Item 6			Exhibits			59
SIGNATURES

This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “could,” “would,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

(Unaudited)

			October 31, 2022						January 31, 2022
Assets
Current assets:
Cash and cash equivalents			$	162,268					$	261,210
Accounts receivable, net of allowances of $995 and $2,042, respectively			68,027						101,607
Prepaid expenses and other current assets			14,887						13,538
Costs to obtain revenue contracts, current			30,368						33,998
Total current assets			275,550						410,353
Property and equipment, net			65,308						74,604
Operating lease right-of-use assets			86,617						97,124
Costs to obtain revenue contracts, non-current			20,619						27,286
Goodwill			4,235						4,572
Intangible assets, net			199						217
Other long term assets			3,578						6,179
Total assets			$	456,106					$	620,335
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities			$	48,252					$	48,432
Unearned revenue, current			153,267						223,427
Operating lease liabilities, current			17,847						18,845
Total current liabilities			219,366						290,704
Operating lease liabilities, non-current			102,613						113,776
Other long term liabilities			4,276						3,985
Total liabilities			326,255						408,465
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at October 31, 2022 and January 31, 2022; zero shares issued and outstanding at October 31, 2022 and January 31, 2022			—						—
Common stock, $0.001 par value per share; 500,000,000 shares authorized at October 31, 2022 and January 31, 2022; 141,658,521 and 137,662,320 shares issued at October 31, 2022 and January 31, 2022, respectively; 122,747,392 and 131,156,986 shares outstanding at October 31, 2022 and January 31, 2022, respectively			141						137
Additional paid-in capital			886,185						834,429
Accumulated other comprehensive loss			(6,751)						(187)
Accumulated deficit			(668,744)						(610,604)
Treasury stock, at cost			(80,980)						(11,905)
Total stockholders’ equity			129,851						211,870
Total liabilities and stockholders’ equity			$	456,106					$	620,335

			Three months ended October 31,												Nine months ended October 31,
			2022						2021						2022						2021
Revenue			$	99,280					$	99,529					$	298,951					$	289,645
Cost of revenue			25,663						25,255						77,473						73,724
Gross profit			73,617						74,274						221,478						215,921
Operating expenses:
Sales and marketing			49,360						58,548						164,244						172,292
Research and development			17,649						17,986						53,770						50,343
General and administrative			18,740						22,094						60,619						61,284
Total operating expenses			85,749						98,628						278,633						283,919
Loss from operations			(12,132)						(24,354)						(57,155)						(67,998)
Interest income			587						5						797						15
Interest expense			(211)						(113)						(483)						(403)
Other (expense) income, net			(156)						(191)						111						(1,018)
Loss from operations before income taxes			(11,912)						(24,653)						(56,730)						(69,404)
(Provision for) benefit from income taxes			(398)						(273)						(1,410)						(745)
Net loss			$	(12,310)					$	(24,926)					$	(58,140)					$	(70,149)
Net loss per share attributable to common stockholders, basic and diluted			$	(0.10)					$	(0.19)					$	(0.46)					$	(0.55)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted			123,500,961						128,570,237						126,239,773						126,967,336
Other comprehensive loss:
Foreign currency translation adjustment			$	(1,127)					$	(1,586)					$	(6,548)					$	(1,239)
Unrealized loss on marketable securities, net			(16)						—						(16)						—
Total comprehensive loss			$	(13,453)					$	(26,512)					$	(64,704)					$	(71,388)

(Unaudited)

												Accumulated
									Additional			Other									Total
			Common Stock						Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
			Shares			Amount			Capital			Income (Loss)			Deficit			Stock			Equity
Balance, January 31, 2021			123,989			$	130		$	733,933		$	2,422		$	(517,345)		$	(11,905)		$	207,235
Exercise of stock options			2,220			2			19,195			—			—			—			19,197
Vested restricted stock units converted to common shares			4,402			4			(4)			—			—			—			—
Issuance of restricted stock			15			—			—			—			—			—			—
Issuance of common stock under employee stock purchase plan			531			1			6,484			—			—			—			6,485
Stock-based compensation			—			—			74,821			—			—			—			74,821
Other comprehensive loss			—			—			—			(2,609)			—			—			(2,609)
Net loss			—			—			—			—			(93,259)			—			(93,259)
Balance, January 31, 2022			131,157			137			834,429			(187)			(610,604)			(11,905)			211,870
Exercise of stock options			208			—			526			—			—			—			526
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes			2,992			3			(1,960)			—			—			—			(1,957)
Issuance of common stock under employee stock purchase plan			796			1			3,814			—			—			—			3,815
Stock-based compensation			—			—			49,376			—			—			—			49,376
Repurchase of common stock			(12,406)			—			—			—			—			(69,075)			(69,075)
Other comprehensive loss			—			—			—			(6,564)			—			—			(6,564)
Net loss			—			—			—			—			(58,140)			—			(58,140)
Balance, October 31, 2022			122,747			$	141		$	886,185		$	(6,751)		$	(668,744)		$	(80,980)		$	129,851

(Unaudited)

			Nine months ended October 31,
			2022						2021
Operating activities:
Net loss			$	(58,140)					$	(70,149)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			13,098						12,490
Bad debt expense			381						826
Stock-based compensation expense			48,990						54,455
Amortization of operating lease right-of-use assets			6,684						6,934
Other, net			1,180						506
Changes in operating assets and liabilities:
Accounts receivable			30,296						34,317
Prepaid expenses and other current assets			(1,747)						965
Costs to obtain revenue contracts			8,173						(8,654)
Other long term assets			1,232						43
Accounts payable, accrued expenses and other current liabilities			3,910						3,841
Unearned revenue			(64,786)						(39,423)
Operating lease liabilities			(8,158)						(4,041)
Other long term liabilities			795						615
Net cash used in operating activities			(18,092)						(7,275)
Investing activities:
Capital expenditures			(5,400)						(12,333)
Net cash used in investing activities			(5,400)						(12,333)
Financing activities:
Proceeds from exercise of stock options			561						15,869
Repurchase of common stock			(68,695)						—
Payments for taxes related to net share settlement of stock-based compensation awards			(1,846)						—
Payments of deferred financing costs			(284)						(263)
Proceeds, net from employee stock purchase plan withholdings			1,947						4,059
Net cash (used in) provided by financing activities			(68,317)						19,665
Effect of exchange rate changes on cash and cash equivalents			(7,133)						(942)
Net decrease in cash and cash equivalents			(98,942)						(885)
Cash and cash equivalents at beginning of period			261,210						230,411
Cash and cash equivalents at end of period			$	162,268					$	229,526

See the accompanying notes to the condensed consolidated financial statements.

Yext, Inc. ("Yext" or the "Company") organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. The Yext platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. The platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which the Company refers to as its Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. The Yext platform powers all of the Company's key features, including Listings, Pages, and Answers, along with its other features and capabilities.

Fiscal Year

The Company's fiscal year ends on January 31st. References to fiscal 2023, for example, are to the fiscal year ending January 31, 2023.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 18, 2022 (the "Form 10-K"). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of January 31, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three and nine months ended October 31, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2023, or any other period.

There have been no material changes to the Company's significant accounting policies as described in the Form 10-K.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of those financial statements and the reported amounts of revenue and expense during the reporting period. These estimates include, but are not limited to, the standalone selling prices of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain revenue contracts, income taxes, and the valuation and assumptions underlying stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.

Segment Information

The Company is the provider of the Yext platform and operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision makers ("CODM"). The Company defines its CODM as its executive officers, and their role is to make decisions about allocating resources and assessing performance. The Company's business operates as one operating segment as all of the Company's offerings operate on the Yext platform and are deployed in an identical way, with its CODM evaluating the Company's financial information, resources and performance of these resources on a consolidated basis. Since the Company operates as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

Concentration of Credit Risk

Certain financial instruments that could be exposed to a concentration of credit risk include cash and cash equivalents and accounts receivable. The Company deposits its cash with financial institutions, and such deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Collateral is not required for accounts receivable. At October 31, 2022 and January 31, 2022, no single customer accounted for more than 10% of the Company's accounts receivable. No single customer accounted for more than 10% of the Company's revenue for the three and nine months ended October 31, 2022 and 2021, respectively.

Marketable Securities

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts, provided such contracts had been appropriately accounted for under ASC 606 by the acquiree, rather than recognizing them at their estimated fair value on the acquisition date as required under the existing guidance. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 on a prospective basis, with early adoption permitted. This standard is effective for the Company in fiscal year 2024. We do not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

3. Revenue

The Company has identified that it has two distinct performance obligations: subscription and associated support to the Yext platform and professional services. The Company's revenue is predominantly related to its subscription and associated support to the Yext platform. Professional services revenue accounted for approximately 9% and 8% of the Company's total revenue for the nine months ended October 31, 2022 and 2021, respectively.

Geographic Region

The Company disaggregates its revenue from contracts with customers by geographic region, as it believes this best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors. Revenue by geographic region is determined based on the region of the Company's contracting entity, which may be different than the region of its customers. The following table presents the Company's revenue by geographic region:

						Three months ended October 31,												Nine months ended October 31,
(in thousands)						2022						2021						2022						2021
North America						$	80,826					$	79,083					$	240,617					$	229,782
International						18,454						20,446						58,334						59,863
Total revenue						$	99,280					$	99,529					$	298,951					$	289,645

North America revenue is attributable to the United States. International revenue is predominantly attributable to European countries, but also includes Japan.

The Company's revenue attributable to the United States represented 80% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 18% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2022.

The Company's revenue attributable to the United States represented 79% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 19% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2021.

A contract liability is an obligation to transfer goods or services for which consideration has been received or is due to a customer. The Company's contract liabilities consist primarily of unearned revenue and, to a lesser extent, customer deposits.

As of October 31, 2022, unearned revenue, current was $153.3 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's condensed consolidated balance sheet, was $0.1 million. Revenue recognized of $195.5 million during the nine months ended October 31, 2022 was included in unearned revenue at the beginning of the period.

Customer deposits represent payments received in advance in instances where a revenue contract is cancelable in nature, and therefore the Company does not have an unconditional obligation to transfer control to a customer. As of October 31, 2022 and January 31, 2022, customer deposits of $0.6 million and $0.2 million were included in accounts payable, accrued expenses and other current liabilities on the Company's condensed consolidated balance sheet, respectively.

The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, and contract terms. As of October 31, 2022, the Company had $365.4 million of remaining performance obligations, of which $312.8 million is expected to be recognized as revenue over the next twenty-four months, with the remaining balance expected to be recognized thereafter. As of January 31, 2022, the Company had $404.9 million of remaining performance obligations.

4. Investments in Marketable Securities

The following tables summarize the Company's investments in marketable securities:

			October 31, 2022
(in thousands)			Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
Money market funds			$	83,339					$	—					$	—					$	83,339
U.S. treasury securities			24,495						—						(16)						24,479
Total marketable securities			$	107,834					$	—					$	(16)					$	107,818
			January 31, 2022
(in thousands)			Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value
Money market funds			$	138,470					$	—					$	—					$	138,470
U.S. treasury securities			—						—						—						—
Total marketable securities			$	138,470					$	—					$	—					$	138,470

As of October 31, 2022 and January 31, 2022, the Company's marketable securities have a maturity of 90 days or less and are classified as cash and cash equivalents. During the three and nine months ended October 31, 2022 and 2021, the Company had no material reclassification adjustments from accumulated other comprehensive loss to net loss.

The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, and realized gains and losses on securities available for sale within interest income in the condensed consolidated statements of operations and comprehensive loss.

The Company regularly reviews its debt securities and monitors the surrounding economic conditions to assess the risk of expected credit losses. As of October 31, 2022 and January 31, 2022, the unrealized losses and the related risk of expected credit losses were not significant.

5. Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive (loss) income when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions, and credit risk.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

			October 31, 2022
(in thousands)			Level 1						Level 2						Level 3						Total
Cash equivalents:
Money market funds			$	83,339					$	—					$	—					$	83,339
U.S. treasury securities (1)			—						24,479						—						24,479
Included in cash and cash equivalents			$	83,339					$	24,479					$	—					$	107,818
			January 31, 2022
(in thousands)			Level 1						Level 2						Level 3						Total
Cash equivalents:
Money market funds			$	138,470					$	—					$	—					$	138,470
U.S. treasury securities (1)			—						—						—						—
Included in cash and cash equivalents			$	138,470					$	—					$	—					$	138,470

(1) The Company's U.S. treasury securities purchased with an original maturity of less than three months from the purchase date are classified as cash and cash equivalents on its condensed consolidated balance sheet.

6. Goodwill

(in thousands)			October 31, 2022						January 31, 2022
Computer software			$	20,335					$	18,814
Office equipment			21,155						18,854
Furniture and fixtures			8,368						8,163
Leasehold improvements			62,662						62,784
Construction in progress			35						936
Software in progress			1,075						1,342
Total property and equipment, gross			113,630						110,893
Less: accumulated depreciation			(48,322)						(36,289)
Total property and equipment, net			$	65,308					$	74,604

As of October 31, 2022 and January 31, 2022, the Company's property and equipment, net attributable to the United States was 89% and 90%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $4.4 million and $13.1 million for the three and nine months ended October 31, 2022, respectively and $4.4 million and $12.0 million for the three and nine months ended October 31, 2021, respectively.

8. Accounts Payable, Accrued Expenses and Other Current Liabilities

        Accounts payable, accrued expenses and other current liabilities consisted of the following:

(in thousands)			October 31, 2022						January 31, 2022
Accounts payable			$	4,758					$	9,218
Accrued employee compensation			21,450						17,589
Accrued Knowledge Network application provider fees			3,152						2,885
Accrued professional services and associated costs			2,107						2,663
Accrued employee stock purchase plan withholdings liability			530						2,397
Other current liabilities			16,255						13,680
Total accounts payable, accrued expenses and other current liabilities			$	48,252					$	48,432

9. Stock-Based Compensation

2008 Equity Incentive Plan

Stock Options

       The following table summarizes the activity related to the Company's stock options:

			Outstanding Stock Options						Weighted-Average Exercise Price						Weighted-Average Remaining Contractual Life (in years)						Aggregate Intrinsic Value (in thousands)
Balance, January 31, 2022			6,620,701						$	7.28					4.32						$	11,723
Granted			—						$	—
Exercised			(207,623)						$	2.57
Forfeited or canceled			(1,722,245)						$	10.16
Balance, October 31, 2022			4,690,833						$	6.43					3.35						$	1,708
Vested and expected to vest			4,690,833						$	6.43					3.35						$	1,708
Exercisable at October 31, 2022			4,690,833						$	6.43					3.35						$	1,708

The aggregate intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of October 31, 2022. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

The aggregate intrinsic value of exercised options was $0.7 million and $11.6 million for the nine months ended October 31, 2022 and 2021, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

Restricted Stock and Restricted Stock Units

        The following table summarizes the activity related to the Company's restricted stock and restricted stock units:

			Outstanding						Weighted-Average Grant Date Fair Value
Balance as of January 31, 2022			10,184,214						$	14.38
Granted			7,955,218						$	6.33
Vested and converted to shares			(3,398,302)						$	14.00
Forfeited or canceled			(3,073,625)						$	12.86
Balance as of October 31, 2022			11,667,505						$	8.84

The estimated weighted-average grant date fair value of restricted stock and restricted stock units granted was $6.33 and $13.22 per share for the nine months ended October 31, 2022 and 2021, respectively. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

Employee Stock Purchase Plan

In March 2017, the Company's Board of Directors adopted, and its stockholders approved, the 2017 Employee Stock Purchase Plan ("ESPP"), which became effective on the date it was adopted. The number of shares of the Company's common stock that will be available for sale to employees under the ESPP increases annually on the first day of each fiscal year in an amount equal to the lesser of: (i) 2,500,000 shares; (ii) 1% of the outstanding shares of the Company's common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the administrator may determine. On February 1, 2022, the number of shares of common stock available for issuance under the ESPP was automatically increased according to its terms by 1,311,569 shares. As of October 31, 2022, a total of 4,058,651 shares of the Company's common stock are available for sale to employees under the ESPP.

A new offering period began on September 15, 2022 and will end on March 15, 2023. As of October 31, 2022, 478,607 shares are estimated to be purchased at the end of the offering period and $0.5 million has been withheld on behalf of employees for these future purchases under the ESPP and is included in accounts payable, accrued expenses and other current liabilities.

The Black-Scholes option pricing model assumptions used to calculate the fair value of shares, estimated at commencement, to be purchased during an ESPP offering period were as follows:

			Three months ended October 31,												Nine months ended October 31,
			2022						2021						2022						2021
Expected life (years)			0.50						0.50						0.50						0.50
Expected volatility			63.52%						45.54%						48.87% - 63.52%						45.54% - 59.24%
Dividend yield			—						—						—						—
Risk-free rate			3.78%						0.05%						0.86% - 3.78%						0.05% - 0.06%

The expected life assumptions were based on each offering period's respective purchase date. The Company estimated the expected volatility assumption based on the historical volatility of its stock price. The risk-free rate assumptions were based on the U.S. treasury yield curve in effect at commencement of the offering period. The dividend yield assumption was zero as the Company has not historically paid any dividends and does not expect to declare or pay any dividends in the foreseeable future.

During the three and nine months ended October 31, 2022, the Company recorded stock-based compensation expense associated with the ESPP of $0.3 million and $1.0 million, respectively and $0.5 million and $1.6 million for the three and nine months ended October 31, 2021, respectively. As of October 31, 2022, total unrecognized compensation cost related to ESPP was $0.6 million, net of estimated forfeitures, which will be amortized over a weighted-average remaining period of 0.37 years.

A new offering period commences on the first trading day on or after March 15th and September 15th each year, or on such other date as the administrator will determine, and will end on the first trading day, approximately six months later, on or after September 15th and March 15th, respectively. Participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation. Unless changed by the administrator, the purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first trading day of the applicable offering period or the fair market value per share on the last trading day of the applicable offering period.

In March 2022, the Company made a grant to an executive in the form of 2,000,000 performance-based restricted stock units. This grant was outside of the Company’s 2016 Equity Incentive Plan. These performance-based restricted stock units are subject to the achievement of certain stock price targets. The Company uses a Monte Carlo simulation model to determine the fair value of this award and recognizes expense using the accelerated attribution method over the requisite service period.

The Company's stock-based compensation expense for the periods presented was as follows:

			Three months ended October 31,												Nine months ended October 31,
(in thousands)			2022						2021						2022						2021
Cost of revenue			$	1,176					$	1,840					$	3,899					$	5,597
Sales and marketing			5,432						6,757						17,957						19,635
Research and development			3,946						5,469						12,668						15,285
General and administrative			4,268						5,389						14,466						13,938
Total stock-based compensation expense			$	14,822					$	19,455					$	48,990					$	54,455

The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2022:

																		Accumulated
												Additional			Other									Total
						Common Stock						Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
(in thousands)									Shares			Amount			Capital			(Loss)			Deficit			Stock			Equity
Balance, January 31, 2022									131,157			$	137		$	834,429		$	(187)		$	(610,604)		$	(11,905)		$	211,870
Exercise of stock options									123			—			302			—			—			—			302
Vested restricted stock units converted to common shares									1,165			1			(1)			—			—			—			—
Issuance of common stock under employee stock purchase plan									457			1			2,353			—			—			—			2,354
Stock-based compensation									—			—			18,201			—			—			—			18,201
Repurchase of common stock									(4,838)			—			—			—			—			(30,554)			(30,554)
Other comprehensive loss									—			—			—			(3,414)			—			—			(3,414)
Net loss									—			—			—			—			(25,839)			—			(25,839)
Balance, April 30, 2022									128,064			$	139		$	855,284		$	(3,601)		$	(636,443)		$	(42,459)		$	172,920
Exercise of stock options									74			—			191			—			—			—			191
Vested restricted stock units converted to common shares									1,081			1			(1)			—			—			—			—
Stock-based compensation									—			—			16,226			—			—			—			16,226
Repurchase of common stock									(5,386)			—			—			—			—			(28,393)			(28,393)
Other comprehensive loss									—			—			—			(2,007)			—			—			(2,007)
Net loss									—			—			—			—			(19,991)			—			(19,991)
Balance, July 31, 2022									123,833			140			871,700			(5,608)			(656,434)			(70,852)			138,946
Exercise of stock options									11			—			33			—			—			—			33
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes (1)									746			1			(1,958)			—			—			—			(1,957)
Issuance of common stock under employee stock purchase plans									339			—			1,461			—			—			—			1,461
Stock-based compensation									—			—			14,949			—			—			—			14,949
Repurchase of common stock									(2,182)			—			—			—			—			(10,128)			(10,128)
Other comprehensive loss									—			—			—			(1,143)			—			—			(1,143)
Net loss									—			—			—			—			(12,310)			—			(12,310)
Balance, October 31, 2022									122,747			$	141		$	886,185		$	(6,751)		$	(668,744)		$	(80,980)		$	129,851

The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2021:

																		Accumulated
												Additional			Other									Total
						Common Stock						Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
(in thousands)									Shares			Amount			Capital			Income			Deficit			Stock			Equity
Balance, January 31, 2021									123,989			$	130		$	733,933		$	2,422		$	(517,345)		$	(11,905)		$	207,235
Exercise of stock options									1,069			1			12,110			—			—			—			12,111
Vested restricted stock units converted to common shares									871			1			(1)			—			—			—			—
Issuance of restricted stock									4			—			—			—			—			—			—
Issuance of common stock under employee stock purchase plan									282			—			3,817			—			—			—			3,817
Stock-based compensation									—			—			15,288			—			—			—			15,288
Other comprehensive income									—			—			—			355			—			—			355
Net loss									—			—			—			—			(17,631)			—			(17,631)
Balance, April 30, 2021									126,215			132			765,147			2,777			(534,976)			(11,905)			221,175
Exercise of stock options									402			1			2,273			—			—			—			$	2,274
Vested restricted stock units converted to common shares									1,172			1			(1)			—			—			—			$	—
Issuance of restricted stock									11			—			—			—			—			—			$	—
Stock-based compensation									—			—			20,730			—			—			—			$	20,730
Other comprehensive loss									—			—			—			(8)			—			—			$	(8)
Net loss									—			—			—			—			(27,592)			—			$	(27,592)
Balance, July 31, 2021									127,800			134			788,149			2,769			(562,568)			(11,905)			216,579
Exercise of stock options									357			—			2,641			—			—			—			$	2,641
Vested restricted stock units converted to common shares									1,267			1			(1)			—			—			—			$	—
Issuance of common stock under employee stock purchase plan									249			1			2,667			—			—			—			$	2,668
Stock-based compensation									—			—			19,637			—			—			—			$	19,637
Other comprehensive loss									—			—			—			(1,586)			—			—			$	(1,586)
Net loss									—			—			—			—			(24,926)			—			$	(24,926)
Balance, October 31, 2021									129,673			$	136		$	813,093		$	1,183		$	(587,494)		$	(11,905)		$	215,013

Common Stock

Treasury Stock

 As of October 31, 2022, the Company had 18,911,129 shares of treasury stock carried at its cost basis of $81.0 million. As of January 31, 2022, the Company had 6,505,334 shares of treasury stock carried at its cost basis of $11.9 million.

Share Repurchase Program

In March 2022, the Company's Board of Directors authorized a $100.0 million share repurchase program of the Company’s common stock. As of October 31, 2022, a total of 12,405,795 shares have been purchased at an average price of $5.57 per share for a total cost of $69.1 million since the commencement of the share repurchase program. As of October 31, 2022, there was approximately $30.9 million that remained available to be purchased under this share repurchase program.

On March 11, 2020, the Company entered into a credit agreement with Silicon Valley Bank (the “Credit Agreement”). No significant debt issuance costs were incurred in association with the Credit Agreement. In January 2021, the Company amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors.

The Credit Agreement provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

Under the Credit Agreement, loans bear interest, at the Company's option, at an annual rate based on LIBOR or a base rate. Loans based on LIBOR shall bear interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on the Company's average daily usage of the revolving loan facility. Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on the Company's average daily usage of the revolving loan facility.

The obligations under the Credit Agreement are secured by a lien on substantially all of the tangible and intangible property of the Company and by a pledge of all of the equity interests of the Company's material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.

The Credit Agreement contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require the Company to maintain the year-over-year growth rate of its ordinary course recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.

As of October 31, 2022, the Company was in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.9 million available and $14.1 million in letters of credit allocated as security in connection with office space.

The Company calculates its year-to-date (provision for) benefit from income taxes by applying the estimated annual effective tax rate ("AETR") to year-to-date income or loss from operations before income taxes and adjusts for discrete tax items recorded in the period. During the three and nine months ended October 31, 2022, the Company recorded a (provision for) benefit from income taxes of $(0.4) million and $(1.4) million, respectively. During the three and nine months ended October 31, 2021, the Company recorded a (provision for) benefit from income taxes of $(0.3) million and $(0.7) million, respectively.

The Company's effective tax rate generally differs from the U.S. federal statutory tax rate primarily due to a full valuation allowance related to the Company's net deferred tax assets in the U.S. and in certain foreign jurisdictions, partially offset by the foreign tax rate differential on non-U.S. income. The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance on a jurisdictional basis if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. To the extent sufficient positive evidence becomes available, a portion of the valuation allowance against certain net deferred tax assets could be released in the future and would result in a non-cash income tax benefit in the period of release.

The Company's operating lease arrangements are principally for office space. As of October 31, 2022, the Company had $17.8 million of operating lease liabilities, current, $102.6 million of operating lease liabilities, non-current, $86.6 million of operating lease right-of-use assets, and no financing leases, on its condensed consolidated balance sheet. The operating lease arrangements included in the measurement of lease liabilities do not include short-term leases, and had a weighted-average remaining lease term of 8.1 years and a weighted-average discount rate of 6.1%, as of October 31, 2022. During the nine months ended October 31, 2022, the Company paid $13.7 million for amounts included in the measurement of lease liabilities and did not enter into any new lease arrangements.

During the nine months ended October 31, 2022 and 2021 the Company recognized $20.1 million and $19.9 million, of lease expense, respectively, which consisted of the following:

									Nine months ended October 31,
(in thousands)															2022						2021
Operating lease expense															$	12,260					$	12,723
Short-term lease expense															606						545
Variable lease expense															7,278						6,663
Total lease expense															$	20,144					$	19,931

Operating lease expense is recognized on a straight-line basis over the term of the arrangement beginning on the lease commencement date for lease arrangements that have an initial term greater than twelve months and therefore are recorded on the balance sheet. Short-term lease expense is recognized on a straight-line basis over the lease term for lease arrangements that have an initial term of 12 months or less and therefore are not recorded on the balance sheet. Variable lease expense is recognized as incurred and includes real estate taxes and utilities, among other office space related expenses.

14. Commitments and Contingencies

Contractual Obligations

        As of October 31, 2022, the Company's contractual obligations are as follows (in thousands):

Fiscal year ending January 31:						Operating Leases						Other
2023 (remainder of fiscal year)						$	4,730					$	16,012
2024						18,521						17,418
2025						18,039						9,752
2026						18,979						1,833
2027						19,073						1,537
2028 and thereafter						74,700						387
Total						$	154,042					$	46,939

Legal Proceedings

Menzione v. Yext, Inc., et al., No. 1:22-cv-05127 (S.D.N.Y.)

In addition to the litigation described above, the Company is and may be involved in various legal proceedings arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, currently, in the opinion of the Company, the likelihood of any material adverse impact on the Company's results of operations, cash flows or the Company's financial position for any such litigation or claims is deemed to be remote. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors.

Warranties and Indemnifications

The Yext platform is in some cases warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company's product specifications.

The Company's arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party's intellectual property rights and/or if the Company breaches its contractual agreements with a customer or in instances of negligence, fraud or willful misconduct by the Company. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the accompanying condensed consolidated financial statements.

The Company has also agreed to indemnify certain of its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person's service as a director or officer, including any action by the Company, arising out of that person's services as the Company's director or officer or that person's services provided to any other company or enterprise at the Company's request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

15. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders:

						Three months ended October 31,												Nine months ended October 31,
(in thousands, except share and per share data)						2022						2021						2022						2021
Numerator:
Net loss attributable to common stockholders						$	(12,310)					$	(24,926)					$	(58,140)					$	(70,149)
Denominator:
Weighted-average common shares outstanding						123,500,961						128,570,237						126,239,773						126,967,336
Net loss per share attributable to common stockholders, basic and diluted						$	(0.10)					$	(0.19)					$	(0.46)					$	(0.55)

        Since the Company was in a net loss position for all periods presented, net loss per share attributable to common stockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive. Anti-dilutive common equivalent shares were as follows:

						As of October 31,
						2022						2021
Options to purchase common stock						4,690,833						7,031,266
Restricted stock and restricted stock units						11,667,505						10,912,675
Shares estimated to be purchased under ESPP						478,607						282,162
Performance-based restricted stock units						2,000,000						—
Total anti-dilutive common equivalent shares						18,836,945						18,226,103

Yext organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. Our platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. Our platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which we refer to as our Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. Our platform powers all of our key features, including Listings, Pages, and Answers, along with its other features and capabilities.

We sell our platform throughout the world to customers of all sizes, including our enterprise, mid-size, and third-party reseller customers. In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.

Fiscal Year

Our fiscal year ends on January 31st. References to fiscal 2023, for example, are to the fiscal year ending January 31, 2023.

COVID-19 Update

The COVID-19 pandemic has significantly disrupted business operations for us and our customers, as well as suppliers, and other parties with whom we do business. Such disruptions are expected to continue for an indefinite period of time.

We have adopted several measures in response to the COVID-19 pandemic and continue to monitor regional developments to inform our operational decisions. Our offices have been open on a voluntary basis in accordance with guidance provided by government agencies, although currently the majority of our employees are still working remotely. While we continue to hold virtual events, we have also resumed in-person marketing events. The uncertain duration of these measures have had and may continue to have negative effects on our sales efforts and revenue growth rates. We continue to be committed to our business, the strength of our platform, our ability to continue to execute on our strategy, and our efforts to support our customers.

We may continue to see some existing and potential customers, in particular customers in industries and geographies that have been highly impacted by the pandemic, may reduce, suspend or delay technology spending, request to renegotiate contracts to obtain concessions such as, extended billing and payment terms; shorten the duration of contracts; or elect not to renew their subscriptions which could materially adversely impact our business, financial condition and results of operations in future periods. The ultimate extent of the impact of the pandemic will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and its variants, vaccination rates and efficacy and the actions taken to contain and address the impact of the pandemic, among others. However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be fully reflected in our results of operations and overall financial performance until future periods. See Part II Item 1A “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business.

We monitor the following key operational and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

Customer Count

Annual Recurring Revenue ("ARR")

Annual recurring revenue, or ARR, for Direct customers is defined as the annualized recurring amount of all contracts in our enterprise, mid-market and small business customer base as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. Contracts include portions of professional services contracts that are recurring in nature.

ARR for Third-party Reseller customers is defined as the annualized recurring amount of all contracts with Third-party Reseller customers as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. The calculation includes the annualized contractual minimum commitment and excludes amounts related to overages above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature. See Part II Item 1A “Risk Factors" for further discussion of Third-party reseller customers.

Total ARR is defined as the annualized recurring amount of all contracts executed as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription, and where relevant, includes the annualized contractual minimum commitment and excludes amounts related to overages above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature.

ARR is independent of historical revenue, unearned revenue, remaining performance obligations or any other GAAP financial measure over any period. It should be considered in addition to, not as a substitute for, nor superior to or in isolation from, these measures and other measures prepared in accordance with GAAP. We believe ARR-based metrics provides insight into the performance of our recurring revenue business model while mitigating for fluctuations in billing and contract terms.

			October 31,									Variance
			2022			2021						Dollars			Percent
Annual Recurring Revenue
Direct Customers			$	317,280		$	308,197					$	9,083		3		%
Third-Party Reseller Customers			72,258			78,457						(6,199)			(8)		%
Total Annual Recurring Revenue			$	389,538		$	386,654					$	2,884		1		%

			Oct. 31, 2022			Jul. 31, 2022			Apr. 30, 2022			Jan. 31, 2022			Oct. 31, 2021
Annual Recurring Revenue Trend
Direct Customers			$	317,280		$	312,129		$	310,312		$	312,132		$	308,197
Third-Party Reseller Customers			72,258			74,857			76,671			78,353			78,457
Total Annual Recurring Revenue			$	389,538		$	386,986		$	386,983		$	390,485		$	386,654

The following table sets forth selected condensed consolidated statement of operations data for each of the periods indicated:

			Three months ended October 31,												Nine months ended October 31,
(in thousands)			2022						2021						2022						2021
Revenue			$	99,280					$	99,529					$	298,951					$	289,645
Cost of revenue(1)			25,663						25,255						77,473						73,724
Gross profit			73,617						74,274						221,478						215,921
Operating expenses:
Sales and marketing(1)			49,360						58,548						164,244						172,292
Research and development(1)			17,649						17,986						53,770						50,343
General and administrative(1)			18,740						22,094						60,619						61,284
Total operating expenses			85,749						98,628						278,633						283,919
Loss from operations			(12,132)						(24,354)						(57,155)						(67,998)
Interest income			587						5						797						15
Interest expense			(211)						(113)						(483)						(403)
Other (expense) income, net			(156)						(191)						111						(1,018)
Loss from operations before income taxes			(11,912)						(24,653)						(56,730)						(69,404)
(Provision for) benefit from income taxes			(398)						(273)						(1,410)						(745)
Net loss			$	(12,310)					$	(24,926)					$	(58,140)					$	(70,149)

(1)Amounts include stock-based compensation expense as follows:

			Three months ended October 31,												Nine months ended October 31,
(in thousands)			2022						2021						2022						2021
Cost of revenue			$	1,176					$	1,840					$	3,899					$	5,597
Sales and marketing			5,432						6,757						17,957						19,635
Research and development			3,946						5,469						12,668						15,285
General and administrative			4,268						5,389						14,466						13,938
Total stock-based compensation expense			$	14,822					$	19,455					$	48,990					$	54,455

The following table sets forth selected condensed consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:

			Three months ended October 31,												Nine months ended October 31,
			2022						2021						2022						2021
Revenue			100		%				100		%				100		%				100		%
Cost of revenue			26						25						26						26
Gross profit			74.2						74.6						74.1						74.5
Operating expenses:
Sales and marketing			50						59						55						60
Research and development			17						18						18						17
General and administrative			19						22						20						21
Total operating expenses			86						99						93						98
Loss from operations			(12)						(24)						(19)						(24)
Interest income			—						—						—						—
Interest expense			—						—						—						—
Other (expense) income, net			—						(1)						—						—
Loss from operations before income taxes			(12)						(25)						(19)						(24)
(Provision for) benefit from income taxes			—						—						—						—
Net loss			(12)		%				(25)		%				(19)		%				(24)		%

Revenue

			Three months ended October 31,												Variance
(in thousands)			2022						2021						Dollars						Percent
Revenue			$	99,280					$	99,529					$	(249)					—		%
Cost of revenue			25,663						25,255						$	408					2		%
Gross profit			$	73,617					$	74,274					$	(657)					(1)		%
Gross margin			74.2		%				74.6		%

			Three months ended October 31,									Variance
			2022			2021						Dollars			Percent
(in thousands)
Direct Customers			$	78,900		$	77,316					$	1,584		2		%
Third-Party Reseller Customers			20,380			22,213						(1,833)			(8)		%
Total Revenue			$	99,280		$	99,529					$	(249)		—		%