YEXT, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2022, filed with the SEC on March 18, 2022. As discussed in
the section titled "Special Note Regarding Forward Looking Statements," the
following discussion and analysis contains forward looking statements that
involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward looking statements. Factors that
could cause or contribute to these differences include, but are not limited to,
those discussed in the section titled "Risk Factors" under Part II, Item 1A in
this Quarterly Report on Form 10-Q.

Overview

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.

Revenue is a function of the number of customers, the number of licenses with
each customer, the package to which each customer subscribes, the price of the
package and renewal rates. We offer subscriptions in a discrete range of
packages, with pricing based on specified feature sets and the number of
licenses managed by the customer as well as on a capacity-basis.

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.

Components of Results of Operations

Revenue

We derive our revenue primarily from subscription and associated support to our
Yext platform. Our contracts are typically one year in length, but may be up to
three years or longer in length. Revenue is a function of the number of
customers, the number of licenses or capacity purchased by each customer, the
package to which each customer subscribes, the price of the package and renewal
rates. Revenue is generally recognized ratably over the contract term beginning
on the commencement date of each contract, which is the date our platform is
made available to customers. At the beginning of each subscription term we
invoice our customers, typically in annual installments, but also monthly,
quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable
contracts
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are recorded in accounts receivable and unearned revenue. Unearned revenue is
subsequently recognized as revenue when transfer of control to a customer has
occurred.

Cost of Revenue

Cost of revenue consists primarily of employee-related costs, including
personnel-related costs, which mainly consist of salaries and wages, and
stock-based compensation expense. Cost of revenue also includes fees associated
with our Knowledge Network application provider arrangements, the nature of
which may be unpaid, fixed, or variable, and are unpaid with many of our larger
providers, as well as the costs associated with our data centers. In addition,
cost of revenue includes depreciation expense, including with respect to certain
capitalized software development costs incurred in connection with additional
functionality to our platform. Cost of revenue also includes lease expenses
associated with our office spaces, which are allocated based on employee
headcount. In addition, cost of revenue includes software expense, which relates
to licenses, professional services, and other costs associated with software for
use in the operations of our business, which is also allocated based on employee
headcount.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses consist primarily of
employee-related costs which are comprised of personnel-related costs and
stock-based compensation expense. Personnel-related costs mainly consist of
salaries and wages and costs of obtaining revenue contracts. Sales and marketing
expenses also include lease expenses associated with our office spaces, as well
as software expense, each of which are allocated based on employee headcount. In
addition, sales and marketing expenses include costs related to advertising and
conferences and brand awareness events.

Research and development expenses. Research and development expenses consist
primarily of employee-related costs which are comprised of personnel-related
costs and stock-based compensation expense. Personnel-related costs mainly
consist of salaries and wages. Capitalized software development costs related to
additional functionality to our platform are excluded from research and
development expenses as they are capitalized as a component of property and
equipment, net and depreciated to cost of revenue over the term of their useful
life. Research and development expenses also include lease expenses associated
with our office spaces, as well as software expense, each of which are allocated
based on employee headcount.

General and administrative expenses. General and administrative expenses consist
primarily of employee-related costs which are comprised of personnel-related
costs and stock-based compensation expense for our finance and accounting, human
resources, information technology and legal support departments.
Personnel-related costs mainly consist of salaries and wages. General and
administrative expenses also include lease expenses associated with our office
spaces, as well as software expense, each of which are allocated based on
employee headcount, and other professional related costs.
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Results of Operations

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

                                                      Three months ended April 30,
(in thousands)                                                                2022           2021
Revenue                                                                    $  98,802      $  91,992
Cost of revenue(1)                                                            24,728         21,854
 Gross profit                                                                 74,074         70,138
Operating expenses:
 Sales and marketing(1)                                                       60,779         55,166
 Research and development(1)                                                  17,302         13,857
 General and administrative(1)                                                21,495         18,347
 Total operating expenses                                                     99,576         87,370
Loss from operations                                                         (25,502)       (17,232)
Interest income                                                                   25              6
Interest expense                                                                (143)          (132)
Other expense, net                                                               129            (86)
Loss from operations before income taxes                                     (25,491)       (17,444)
(Provision for) benefit from income taxes                                       (348)          (187)
Net loss                                                                   $ (25,839)     $ (17,631)

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

                                                     Three months ended April 30,
(in thousands)                                                                2022          2021
Cost of revenue                                                            $  1,382      $  1,445
Sales and marketing                                                           6,376         5,501
Research and development                                                      4,520         3,988
General and administrative                                                    5,808         3,664
Total stock-based compensation expense                                     

$ 18,086 $ 14,598

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 April 30,
                                                                                 2022                      2021
Revenue                                                                                100  %                    100  %
Cost of revenue                                                                         25                        24
 Gross profit                                                                         75.0                      76.2
Operating expenses:
 Sales and marketing                                                                    62                        60
 Research and development                                                               17                        15
 General and administrative                                                             22                        20
 Total operating expenses                                                              101                        95
Loss from operations                                                                   (26)                      (19)
Interest income                                                                          -                         -
Interest expense                                                                         -                         -
Other expense, net                                                                       -                         -
Loss from operations before income taxes                                               (26)                      (19)
(Provision for) benefit from income taxes                                                -                         -
Net loss                                                                               (26) %                    (19) %

Note: Numbers rounded for presentation purposes and may not sum.

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Three Months Ended April 30, 2022 Compared to Three Months Ended April 30, 2021

Revenue and Cost of Revenue

                          Three months ended April 30,                  Variance
(in thousands)           2022                        2021         Dollars      Percent
 Revenue           $      98,802                  $ 91,992       $ 6,810           7  %
 Cost of revenue          24,728                    21,854       $ 2,874          13  %
 Gross profit      $      74,074                  $ 70,138       $ 3,936           6  %
 Gross margin               75.0   %                  76.2  %


Total revenue was $98.8 million for the three months ended April 30, 2022,
compared to $92.0 million for the three months ended April 30, 2021, an increase
of $6.8 million or 7%, primarily driven by new customer subscriptions to our
platform, as well as expanded subscriptions for existing customers. For the
three months ended April 30, 2022 and 2021, revenue recognized from
subscriptions and associated support to our platform was 91% and revenue
recognized from professional services was 9%, compared to 92% and 8%,
respectively.

Cost of revenue was $24.7 million for the three months ended April 30, 2022,
compared to $21.9 million for the three months ended April 30, 2021, an increase
of $2.9 million or 13%. The increase was driven by a $2.0 million increase in
personnel-related costs, reflecting higher headcount, and a $0.8 million
increase in depreciation expense.

Gross margin was 75.0% for the three months ended April 30, 2022, compared to
76.2% for the three months ended April 30, 2021 as reflected in the discussion
above.

Operating Expenses
                                     Three months ended April 30,                   Variance
(in thousands)                            2022                    2021        Dollars      Percent
 Sales and marketing          $        60,779                  $ 55,166      $ 5,613          10  %
 Research and development     $        17,302                  $ 13,857      $ 3,445          25  %
 General and administrative   $        21,495                  $ 18,347      $ 3,148          17  %


Sales and marketing expense was $60.8 million for the three months ended April
30, 2022, compared to $55.2 million for the three months ended April 30, 2021,
an increase of $5.6 million or 10%. The increase was primarily due to
employee-related costs, including a $2.7 million increase in personnel-related
costs and a $0.9 million increase stock-based compensation expense. In addition,
conferences and events increased $1.9 million and employee travel increased $1.6
million due to increased in-person events compared to the prior period. These
increases were partially offset by a $0.8 million decrease in advertising costs
due to certain brand media campaigns in the prior period.

Research and development expense was $17.3 million for the three months ended
April 30, 2022, compared to $13.9 million for the three months ended April 30,
2021, an increase of $3.4 million or 25%. The increase was primarily due to by
employee-related costs, including a $2.3 million increase in personnel-related
costs and a $0.5 million increase in stock-based compensation expense.

General and administrative expense was $21.5 million for the three months ended
April 30, 2022, compared to $18.3 million for the three months ended April 30,
2021, an increase of $3.1 million or 17%. The increase was primarily due to
employee-related costs, including a $2.1 million increase in stock-based
compensation expense, as well as a $1.5 million increase in personnel-related
costs which reflected higher headcount. This was partially offset by a $0.8
million decrease in bad debt expense, which reflects a lower allowance for
doubtful accounts in comparison to the prior period, which had been more
strongly impacted by COVID-19.

Net Loss

Net loss was $25.8 million and $17.6 million for the three months ended April
30, 2022 and 2021, respectively.

Non-GAAP Net Loss

In addition to our financial results determined in accordance with GAAP, we
believe that non-GAAP net loss is useful in evaluating our operating performance
and our business.

Non-GAAP net loss is a financial measure that is not calculated in accordance
with GAAP. We define non-GAAP net loss as our GAAP net loss as adjusted to
exclude the effects of stock-based compensation expense. We believe non-GAAP net
loss provides investors and other users of our financial information consistency
and comparability with our past financial performance and facilitates
period-to-period comparisons of our results of operations. We also believe
non-GAAP net loss is useful in evaluating our operating performance compared to
that of other companies in our industry, as it eliminates the effects of
stock-based compensation, which may vary for reasons unrelated to overall
operating performance.
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We use non-GAAP net loss in conjunction with traditional GAAP net loss as part
of our overall assessment of our performance, including the preparation of our
annual operating budget and quarterly forecasts, and to evaluate the
effectiveness of our business strategies. Our definition may differ from the
definitions used by other companies and therefore comparability may be limited.
In addition, other companies may not publish this or similar metrics. Thus, our
non-GAAP net loss should be considered in addition to, not as a substitute for,
nor superior to or in isolation from, measures prepared in accordance with GAAP.

Non-GAAP net loss may be limited in its usefulness because it does not present
the full economic effect of our use of stock-based compensation expense. We
compensate for these limitations by providing a reconciliation of non-GAAP net
loss to the most closely related GAAP financial measure. We encourage investors
and others to review our financial information in its entirety, not to rely on
any single financial measure and to view non-GAAP net loss in conjunction with
GAAP net loss.

The following table provides a reconciliation of GAAP net loss to non-GAAP net
loss:
                                                    Three months ended April 30,
(in thousands)                                                              2022           2021
Net loss                                                                 $ (25,839)     $ (17,631)
Plus: Stock-based compensation expense                                      18,086         14,598
Non-GAAP net loss                                                        $  (7,753)     $  (3,033)

Liquidity and Capital Resources

As of April 30, 2022, our principal sources of liquidity were cash and cash
equivalents of $247.8 million. We believe our existing cash and cash equivalents
will be sufficient to meet our projected operating requirements for at least the
next 12 months. Our cash flows, including net cash used in or provided by
operating activities, may vary significantly from quarter to quarter, due to the
timing of billings, cash collections and lease payments, significant marketing
events and related expenses, and the potential effects of the COVID-19 pandemic,
among other factors.

Our future capital requirements will depend on many factors, including those set
forth under "Risk Factors." We may in the future enter into arrangements to
acquire or invest in complementary businesses, services, technologies, and
intellectual property rights. In addition, we may be required to seek additional
equity or debt financing. In the event that additional financing is required
from outside sources, we may not be able to raise it on terms acceptable to us
or at all. If we are unable to raise additional capital when desired, our
business, operating results and financial condition would be adversely affected.

Credit Arrangements

On March 11, 2020, we 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, we 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 our 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 our 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 our average daily usage of the revolving loan facility. See
Part II Item 1A "Risk Factors - Our credit facility contains restrictive
covenants that may limit our operating flexibility" for discussion of LIBOR
being phased out.

The obligations under the Credit Agreement are secured by a lien on
substantially all of our tangible and intangible property and by a pledge of all
of our equity interests of 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 us 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 April 30, 2022, we were in compliance with all debt covenants. As of
such date, the $50.0 million revolving loan facility had $35.7 million available
and $14.3 million in letters of credit allocated as security in connection with
office space.

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Share Repurchase Program

In March 2022, our Board of Directors authorized a $100.0 million share
repurchase program of our common stock. As of April 30, 2022, a total of
4,838,184 shares have been purchased at an average price of $6.32 per share for
a total cost of $30.6 million since the commencement of the share repurchase
program. As of April 30, 2022, there was approximately $69.4 million that
remained available to be purchased under this share repurchase program.
Subsequent to April 30, 2022, an additional approximately $24 million has been
repurchased, bringing the total amount repurchased under the program to
approximately $55 million, and therefore, as of June 9, 2022, approximately
$45 million remains available to be purchased under the program.

Cash Flows

The following table summarizes our cash flows:

                                                                      Three months ended April 30,
(in thousands)                                                          2022                   2021
 Net cash provided by operating activities                       $         

17,861 $ 35,063

 Net cash used in investing activities                           $         

(1,644) $ (7,457)

 Net cash (used in) provided by financing activities             $        

(26,293) $ 13,607

Operating Activities

Net cash provided by operating activities of $17.9 million for the three months
ended April 30, 2022 was primarily due to positive adjustments in reconciling
our net loss of $25.8 million to net cash provided by operating activities,
including changes in accounts receivable of $42.7 million, mainly due to timing
of billing and cash collections during the period, as well as changes in
accounts payable, accrued expenses and other current liabilities of $5.0 million
and changes in costs to obtain revenue contracts of $4.4 million. In addition,
there were positive non-cash adjustments related to stock-based compensation
expense of $18.1 million, depreciation and amortization expense of $4.4 million,
and amortization of operating lease right-of-use assets of $2.4 million. These
increases were partially offset by changes in unearned revenue of $24.5 million,
prepaid expenses and other current assets of $5.7 million, and operating lease
liabilities of $3.2 million.

Net cash provided by operating activities of $35.1 million for the three months
ended April 30, 2021 was primarily due to positive adjustments in reconciling
our net loss of $17.6 million to net cash provided by operating activities,
including changes in accounts receivable of $41.9 million, mainly due to timing
of billing and cash collections during the period, stock-based compensation
expense of $14.6 million, depreciation and amortization expense of $3.7 million,
and amortization of operating lease right-of-use assets of $2.3 million. These
increases were partially offset by changes in costs to obtain revenue contracts
of $5.5 million and unearned revenue of $5.2 million.

Investing Activities

Net cash used in investing activities of $1.6 million for the three months ended
April 30, 2022 reflected capital expenditures.

Net cash used in investing activities of $7.5 million for the three months ended
April 30, 2021 reflected capital expenditures associated with our new office
spaces, primarily our new corporate headquarters in New York, NY, among others.

Financing Activities

Net cash used in financing activities of $26.3 million for the three months
ended April 30, 2022 was primarily related to $27.1 million in cash outflows
associated with repurchases of common stock as part of our share repurchase
program. This was partially offset by net proceeds from employee stock purchase
plan withholdings of $0.6 million and proceeds from exercise of stock options of
$0.3 million.

Net cash provided by financing activities of $13.6 million for the three months
ended April 30, 2021 was primarily related to proceeds from exercise of stock
options of $12.2 million and net proceeds from employee stock purchase plan
withholdings of $1.5 million.
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Contractual Obligations

We are obligated to make payments under certain non-cancelable contractual
obligations in the normal course of business. Our contractual obligations
primarily relate to our operating lease arrangements for office space. Our other
contractual obligations include contracts with our Knowledge Network application
providers, which generally have a term of one year, although some have a term of
several years, as well as contracts with our software vendors, among others.
These obligations represent minimum contractual payments, or our best estimate
for variable elements based on historical payments. Our contractual obligations
have various expiry dates between fiscal years 2023 and 2035.

    As of April 30, 2022, future minimum payments under these contractual
obligations are as follows (in thousands):
Fiscal year ending January 31:        Operating Leases        Other
2023 (remainder of fiscal year)      $          14,248      $ 27,556
2024                                            18,788        17,161
2025                                            18,324         9,186
2026                                            19,177         1,834
2027                                            19,273         1,538
2028 and thereafter                             75,160           394
Total                                $         164,970      $ 57,669

See Note 13 “Commitments and Contingencies”, to our condensed consolidated
financial statements for further discussion on contractual obligations.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"). The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about items that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

There have been no material changes to our critical accounting policies and
estimates as compared to those disclosed in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 2 “Summary of Significant Accounting Policies- Recent Accounting
Pronouncements”, to the condensed consolidated financial statements for our
discussion about adopted and pending recent accounting pronouncements.

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