Yext Inc.
06/09/2025 | Press release | Distributed by Public on 06/09/2025 14:07
Quarterly Report for Quarter Ending April 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
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, 2025, filed with the Securities and Exchange Commission ("SEC") on March 13, 2025. 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 empowers businesses to manage their knowledge so they can deliver relevant, actionable answers to consumer questions as well as consistent, accurate and engaging experiences to customers throughout the digital ecosystem. Our digital presence platform (also known as the Answers Platform) lets businesses structure and organize information about their brands in our knowledge graph, Yext Content (also known as the Knowledge Graph), which is then delivered across first-and third-party websites and applications through our network of over 200 service and application providers, which we refer to as our Publisher Network. These publishers include, among others, Amazon Alexa, Apple, Bing, Facebook, Google, and Yelp. Our platform powers all of our key products, including Listings, Reviews, Pages and Search, each with robust analytics capabilities for businesses to easily track performance across customer experiences. It is our mission to empower businesses to easily manage every aspect of their digital presence to make meaningful connections with their customers across every digital touchpoint.
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 or capacity purchased by 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.
In August 2024, we acquired Hearsay Social, Inc., a digital client engagement platform for financial services ("Hearsay"). See Note 4 "Business Combinations" to our condensed consolidated financial statements for additional information.
Fiscal Year
Our fiscal year ends on January 31st. References to fiscal 2026, for example, are to the fiscal year ending January 31, 2026.
Macroeconomic Conditions
Our results of operations have been and may continue to be influenced by general macroeconomic conditions, including, but not limited to, the impact of foreign currency fluctuations, interest rates, inflation, recession risks, tariffs and other trade restrictions, geopolitical events and shifts, and changes in government administration policy positions. Fluctuations in foreign exchange rates and rising inflation have had, and may continue to have an adverse impact on our financial condition and operating results in future periods. The extent to which such disruptions will continue in future periods remains uncertain, which has had and may continue to have an adverse impact on our financial condition and operating results in future periods. 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.
Near-term revenues are relatively predictable as a result of our subscription-based business model. However, if the macroeconomic uncertainty continues or further increases, we may continue to experience a negative impact on existing and potential customers, that 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. Therefore, 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.
Recent Developments
On February 7, 2025, we completed an acquisition of KabanaSoft, LLC, doing business as Places Scout ("Places Scout"), for a purchase price of $20.3 million in cash, subject to customary adjustments as set forth in the Unit Purchase Agreement. The acquisition strengthens Yext's ability to provide best-in-class competitive intelligence, benchmarking, and AI-powered insights. In addition, subject to the terms of the Unit Purchase Agreement, we agreed to grant approximately $10.0 million of incentive equity, based on current trading prices of Yext's common stock, to certain key employees of Places Scout.
On May 15, 2025, we entered into a credit agreement with funds and accounts managed by BlackRock as lenders, and Acquiom Agency Services LLC, as Administrative Agent (the "May 2025 Credit Agreement"), which provides for term loan facilities in aggregate principal amounts of up to $200.0 million. In connection with entry into the May 2025 Credit Agreement, we used a portion of the proceeds under the May 2025 Credit Agreement to pay all outstanding principal, interest and other amounts owing under our existing credit facility with Silicon Valley Bank, which was then terminated. See Note 16 "Subsequent Events" to our condensed consolidated financial statements for additional information.
See Part II Item 1A "Risk Factors" for further discussion of the possible impact of the current macroeconomic conditions and recent developments on our business.
Key Metrics
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.
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-size 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 amounts related to usage 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 amounts related to usage above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature.
We calculate usage by annualizing monthly amounts in excess of contractual minimum commitments in the current month.
ARR is independent of historical revenue, unearned revenue, remaining performance obligations or any other accounting principles generally accepted in the United States of America, ("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 fluctuations in billing and contract terms.
The following table provides our ARR for the periods presented:
| April 30, | Variance | ||||||||||||||||
| 2025 | 2024 | Dollars | Percent | ||||||||||||||
| (in thousands) | |||||||||||||||||
|
Direct Customers(1)
|
$ | 371,851 | $ | 312,060 | $ | 59,791 | 19 | % | |||||||||
| Third-Party Reseller Customers | 74,618 | 75,218 | (600) | (1) | % | ||||||||||||
| Total Annual Recurring Revenue | $ | 446,469 | $ | 387,278 | $ | 59,191 | 15 | % | |||||||||
(1) ARR as of April 30, 2025, is inclusive of Hearsay's results.
Dollar-Based Net Retention Rate
We believe that our ability to retain our customers and expand the ARR they generate for us over time is an important component of our growth strategy and reflects the long term value of our customer relationships. We assess our performance in this area using a metric we refer to as our dollar-based net retention rate, which compares the ARR from a set of subscription customers across comparable periods.
This metric is calculated first by determining the ARR generated 12 months prior to the end of the current period for a cohort of customers who had active contracts at that time. We then calculate ARR from the same cohort of customers at the end of the current period, which includes customer expansion, contraction and churn. The current period ARR is then divided by the prior period ARR to arrive at our dollar-based net retention rate. Any ARR obtained through merger and acquisition transactions does not affect the dollar-based net retention rate until one year from the date on which the transaction closed. The cohorts of customers that we present dollar-based net retention rate for include direct, third-party reseller, and total customers. Direct customers include enterprise, mid-size and small business customers.
The following table provides our dollar-based net retention rate for the periods presented:
| April 30, | ||||||||
| 2025 | 2024 | |||||||
| Direct Customers | 95% | 91% | ||||||
| Third-Party Reseller Customers | 96% | 92% | ||||||
| Total Customers | 95% | 91% | ||||||
Dollar-Based Gross Retention Rate
We also evaluate our ability to retain customers and the ARR they generate for us over time, excluding the impact of expansion. We assess our performance in this area using a metric we refer to as dollar-based gross retention rate. We believe this metric provides insight into the stability of our customer base and our ability to deliver sustained value to customers independent of growth through expansion.
This metric is calculated by first determining the ARR generated 12 months prior to the end of the current period for a cohort of customers who had active contracts at that time. We then calculate ARR from the same cohort of customers at the end of the current period, which includes customer contraction and churn, and excludes customer expansion. The current period ARR is then divided by the prior period ARR to arrive at our dollar-based gross retention rate.
The following table provides our dollar-based gross retention rate for the periods presented:
| April 30, | ||||||||
| 2025 | 2024 | |||||||
| Direct Customers | 87% | 83% | ||||||
| Third-Party Reseller Customers | 88% | 86% | ||||||
| Total Customers | 87% | 83% | ||||||
Components of Results of Operations
Revenue
We derive our revenue primarily from subscription and associated support to our 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 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 Publisher 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, which includes amounts allocated based on employee headcount, as well as amounts related to certain capitalized software development costs incurred in connection with additional functionality to our platform. Cost of revenue also includes amortization expense, which includes amounts related to intangible assets arising from acquisitions and lease expenses associated with our office spaces, which are allocated based on employee headcount. In addition, cost of revenue includes professional related costs and 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 amortization expense, which includes amounts related to intangible assets arising from acquisitions, as well as 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 data centers costs associated with pre-production costs for testing and quality assurance, as well as lease expenses associated with our office spaces, and 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. In addition, general and administrative expenses include other professional related costs which include acquisition-related costs, as well as fair value adjustments related to contingent consideration.
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) | 2025 | 2024 | |||||||||
|
Revenue
|
$ | 109,483 | $ | 95,990 | |||||||
|
Cost of revenue(1)
|
27,105 | 21,546 | |||||||||
|
Gross profit
|
82,378 | 74,444 | |||||||||
|
Operating expenses:
|
|||||||||||
|
Sales and marketing(1)
|
36,209 | 43,254 | |||||||||
|
Research and development(1)
|
21,896 | 17,059 | |||||||||
|
General and administrative(1)
|
23,155 | 19,557 | |||||||||
|
Total operating expenses
|
81,260 | 79,870 | |||||||||
| Income (loss) from operations | 1,118 | (5,426) | |||||||||
| Interest income | 632 | 2,360 | |||||||||
| Interest expense | (642) | (392) | |||||||||
| Other expense, net | (355) | (138) | |||||||||
| Income (loss) from operations before income taxes | 753 | (3,596) | |||||||||
| Benefit from (provision for) income taxes | 17 | (221) | |||||||||
| Net income (loss) | $ | 770 | $ | (3,817) | |||||||
(1)See Note 10 "Stock-Based Compensation", to the condensed consolidated financial statements for amounts included.
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, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenue | 100 | % | 100 | % | |||||||
| Cost of revenue | 25 | 22 | |||||||||
| Gross profit | 75.2 | 77.6 | |||||||||
| Operating expenses: | |||||||||||
| Sales and marketing | 33 | 45 | |||||||||
| Research and development | 20 | 18 | |||||||||
| General and administrative | 21 | 20 | |||||||||
| Total operating expenses | 74 | 83 | |||||||||
| Income (loss) from operations | 1 | (6) | |||||||||
| Interest income | 1 | 2 | |||||||||
| Interest expense | (1) | - | |||||||||
| Other expense, net | - | - | |||||||||
| Income (loss) from operations before income taxes | 1 | (4) | |||||||||
| Benefit from (provision for) income taxes | - | - | |||||||||
| Net income (loss) | 1 | % | (4) | % | |||||||
Note: Numbers rounded for presentation purposes and may not sum.
Three Months Ended April 30, 2025 Compared to Three Months Ended April 30, 2024
Revenue
| Three months ended April 30, | Variance | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | Dollars | Percent | |||||||||||||||||||
| Revenue | $ | 109,483 | $ | 95,990 | $ | 13,493 | 14 | % | |||||||||||||||
| Cost of revenue | 27,105 | 21,546 | 5,559 | 26 | % | ||||||||||||||||||
| Gross profit | $ | 82,378 | $ | 74,444 | $ | 7,934 | 11 | % | |||||||||||||||
| Gross margin | 75.2 | % | 77.6 | % | |||||||||||||||||||
Total revenue was $109.5 million for the three months ended April 30, 2025, compared to $96.0 million for the three months ended April 30, 2024, an increase of $13.5 million or 14%. The increase was entirely driven by the inclusion of Hearsay's revenue as a result of the acquisition which was completed on August 1, 2024. For both the three months ended April 30, 2025 and 2024, revenue recognized from subscription and associated support to our platform was 93%, while revenue recognized from professional services was 7%.
Revenue for the three months ended April 30, 2025, included a positive impact from foreign currency exchange rates of approximately $0.5 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than U.S. Dollars ("USD") into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.
The following table summarizes our revenue by sales channel for the periods presented:
| Three months ended April 30, | Variance | ||||||||||||||||
| 2025 | 2024 | Dollars | Percent | ||||||||||||||
| (in thousands) | |||||||||||||||||
| Direct Customers | $ | 91,433 | $ | 77,435 | $ | 13,998 | 18 | % | |||||||||
| Third-Party Reseller Customers | 18,050 | 18,555 | (505) | (3) | % | ||||||||||||
| Total Revenue | $ | 109,483 | $ | 95,990 | $ | 13,493 | 14 | % | |||||||||
Revenue attributable to direct customers was $91.4 million for the three months ended April 30, 2025, compared to $77.4 million for the three months ended April 30, 2024, an increase of $14.0 million, or 18%. The increase was entirely driven by the inclusion of Hearsay's revenue as a result of the acquisition which was completed on August 1, 2024. Revenue attributable to third-party reseller customers was $18.1 million for the three months ended April 30, 2025, compared to $18.6 million for the three months ended April 30, 2024, a decrease of $0.5 million or 3%, primarily due to customer attrition.
Cost of Revenue and Gross Margin
Cost of revenue was $27.1 million for the three months ended April 30, 2025, compared to $21.5 million for the three months ended April 30, 2024, an increase of $5.6 million or 26%. The increase was primarily driven by a $2.4 million increase in amortization expense from acquired intangible assets largely related to the acquisition of Hearsay, as well as a $0.8 million increase in royalties and integration fees. In addition, personnel-related costs increased $0.9 million and professional related costs increased $0.4 million.
Gross margin was 75.2% for the three months ended April 30, 2025, compared to 77.6% for the three months ended April 30, 2024 as reflected in the discussion above.
Operating Expenses
| Three months ended April 30, | Variance | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | Dollars | Percent | |||||||||||||||||||
| Sales and marketing | $ | 36,209 | $ | 43,254 | $ | (7,045) | (16) | % | |||||||||||||||
| Research and development | $ | 21,896 | $ | 17,059 | $ | 4,837 | 28 | % | |||||||||||||||
| General and administrative | $ | 23,155 | $ | 19,557 | $ | 3,598 | 18 | % | |||||||||||||||
Sales and marketing expense was $36.2 million for the three months ended April 30, 2025, compared to $43.3 million for the three months ended April 30, 2024, a decrease of $7.0 million or 16%. The decrease was primarily driven by personnel-related costs which decreased $4.1 million, reflecting lower headcount. In addition, conferences and events decreased $1.5 million, and advertising costs decreased $0.7 million. These decreases were offset by a $1.7 million increase in amortization expense related to acquired intangible assets primarily from the Hearsay acquisition.
Research and development expense was $21.9 million for the three months ended April 30, 2025, compared to $17.1 million for the three months ended April 30, 2024, an increase of $4.8 million or 28%. The increase was primarily driven by employee-related
costs as personnel-related costs increased $3.2 million, reflecting higher headcount, and stock-based compensation expense increased $0.4 million.
General and administrative expense was $23.2 million for the three months ended April 30, 2025, compared to $19.6 million for the three months ended April 30, 2024, an increase of $3.6 million or 18%. The increase was primarily driven by changes in the fair value of contingent consideration pertaining to the Hearsay acquisition of $1.8 million recognized during the three months ended April 30, 2025. In addition, professional related costs increased $1.1 million and stock-based compensation expense increased $0.6 million mainly due to performance-based restricted stock units granted in fiscal year 2025.
See Note 12" Income Taxes" to our condensed consolidated financial statements for additional information on our benefit from (provision for) income taxes.
Net Income (Loss)
Net income was $0.8 million and net loss was $3.8 million for the three months ended April 30, 2025 and 2024, respectively.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe that certain non-GAAP financial measures are useful in evaluating our operating performance and our business.
Non-GAAP net income (loss) is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net income (loss) as our GAAP net income (loss) as adjusted to exclude the effects of stock-based compensation expense, acquisition-related costs, amortization of acquired intangibles, and the related income tax effect of these adjustments. Acquisition-related costs include transaction and related costs, subsequent fair value movements in contingent consideration, and compensation arrangements. We believe non-GAAP net income (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 income (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, acquisition-related costs, and amortization of acquired intangibles, which may vary for reasons unrelated to overall operating performance.
Beginning in fiscal year 2026, we utilize a projected tax rate of 23.5% in our computation of the non-GAAP income tax provision, which was updated from 25% in fiscal year 2025. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
We use non-GAAP net income (loss) in conjunction with traditional GAAP net income (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.
Adjusted EBITDA is a non-GAAP financial measure that we believe offers a useful view of overall operations used to assess the performance of core business operations and for planning purposes. We define Adjusted EBITDA as GAAP net income (loss) before (1) interest income (expense), net, (2) (provision for) benefit from income taxes, (3) depreciation and amortization, (4) other income (expense), net, (5) stock-based compensation expense, and (6) acquisition-related costs. The most directly comparable GAAP financial measure to Adjusted EBITDA is GAAP net income (loss). Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to GAAP net income (loss) as a measure of operating performance.
The definitions of our non-GAAP financial measures 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 financial measures should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.
Our non-GAAP financial measures may be limited in their usefulness because they do not present the full economic effect of the expenses mentioned above. We compensate for these limitations by providing a reconciliation of our non-GAAP financial measures to the most closely related GAAP financial measures. 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 income (loss) and Adjusted EBITDA in conjunction with GAAP net income (loss).
Recent Changes in Non-GAAP Metrics
Beginning with the three months ended July 31, 2024, we revised our definitions of Non-GAAP net income (loss) and Adjusted EBITDA to adjust for the effects of certain acquisition-related costs prompted by our recent acquisition of Hearsay. We believe these changes provide investors with a view of continuing core operations without the effects of unusual activity specific to acquisition-related accounting. These adjustments do not omit or adjust for the inclusion of ongoing operations of acquisitions.
We have recast our results on the same basis for the prior comparative periods presented, although the effects in those periods remain unchanged notwithstanding as no such acquisition-related activity had occurred. The following table reconciles our GAAP net income (loss) to non-GAAP net income (loss):
| Three months ended April 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| GAAP net income (loss) | $ | 770 | $ | (3,817) | |||||||
| Plus: Stock-based compensation expense | 12,659 | 12,065 | |||||||||
| Plus: Acquisition-related costs | 4,048 | - | |||||||||
| Plus: Amortization of acquired intangibles | 4,141 | - | |||||||||
|
Less: Tax adjustment(1)
|
(5,093) | (1,896) | |||||||||
| Non-GAAP net income | $ | 16,525 | $ | 6,352 | |||||||
(1) For fiscal year 2026, we utilize a projected tax rate of 23.5% in our computation of the non-GAAP income tax provision.
The following table reconciles our GAAP net income (loss) to Adjusted EBITDA:
| Three months ended April 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| GAAP net income (loss) | $ | 770 | $ | (3,817) | |||||||
| Interest expense (income), net | 10 | (1,968) | |||||||||
| (Benefit from) provision for income taxes | (17) | 221 | |||||||||
| Depreciation and amortization | 6,855 | 2,963 | |||||||||
| Other expense (income), net | 355 | 138 | |||||||||
| Stock-based compensation expense | 12,659 | 12,065 | |||||||||
| Acquisition-related costs | 4,048 | - | |||||||||
| Adjusted EBITDA | $ | 24,680 | $ | 9,602 | |||||||
Constant Currency
We provide revenue, including year-over-year growth rates, adjusted to remove the impact of foreign currency rate fluctuations, which we refer to as constant currency. We believe providing revenue on a constant currency basis helps our investors to better understand our underlying performance, given the current macroeconomic environment. We calculate constant currency by using the current period results for entities reporting in currencies other than USD, which are then converted into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our revenue on a constant currency basis should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP. We provide a reconciliation of revenue on a constant currency basis to the most closely related GAAP financial measure. We encourage investors and others to review our financial information in its entirety and to view revenue on a constant currency basis in conjunction with revenue on a GAAP basis.
The following table provides a reconciliation of revenue on a GAAP basis to revenue on a constant currency basis:
| Three months ended April 30, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | Growth Rates | ||||||||||||||
| Revenue (GAAP) | $ | 109,483 | $ | 95,990 | 14 | % | |||||||||||
| Effects of foreign currency rate fluctuations | (533) | ||||||||||||||||
| Revenue on a constant currency basis (Non-GAAP) | $ | 108,950 | 14 | % | |||||||||||||
Free Cash Flow
We also provide free cash flow, which is a non-GAAP measure defined as net cash provided by (used in) operating activities, less cash used for purchases of capital expenditures, inclusive of capitalized software development costs. Free cash flow margin is calculated as free cash flow divided by total revenue. We believe this is meaningful to investors because it is a measure of liquidity that provides useful information in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business.
The following table provides a reconciliation of GAAP Cash flow provided by (used in) operating activities to free cash flow:
| Three months ended April 30, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Net cash provided by operating activities | $ | 37,725 | $ | 38,309 | ||||||||||
| Less: Capital expenditures inclusive of capitalized software development costs | (562) | (647) | ||||||||||||
| Free cash flow | $ | 37,163 | $ | 37,662 | ||||||||||
| Operating cash flow margin | 34 | % | 40 | % | ||||||||||
| Free cash flow margin | 34 | % | 39 | % | ||||||||||
Liquidity and Capital Resources
As of April 30, 2025, our principal sources of liquidity were cash and cash equivalents of $115.0 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, acquisitions, and 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
Silicon Valley Bank
On March 11, 2020, we entered into a credit agreement (the "Credit Agreement") with Silicon Valley Bank ("SVB"). In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors. On December 22, 2022, we entered into a second amendment ("Amendment No. 2") to the Credit Agreement, dated March 11, 2020, and on July 26, 2024, we entered into a third amendment ("Amendment No. 3") to the Credit Agreement, collectively referred to as the Credit Facility. No significant debt issuance costs were incurred in association with Amendment No.2 and Amendment No.3.
Amendment No. 2 amended the Credit Facility to, among other things (i) extend the maturity date of the Credit Facility to December 22, 2025, (ii) amend the interest rate provisions to replace LIBOR with SOFR as the interest rate benchmark, and (iii) amend the recurring revenue growth rate financial covenant.
Amendment No. 3 amended the Credit Facility to, among other things (i) amend the interest rate applicable to loans under the Credit Facility, and (ii) replace the consolidated quick ratio and recurring revenue growth rate financial covenants with consolidated total leverage ratio and minimum liquidity financial covenants.
The Credit Facility provides for a senior secured revolving loan facility of up to $50.0 million that matures on December 22, 2025, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The 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.
As amended, the revolving loans bear interest, at our election, at an annual rate based on SOFR or a base rate. Loans based on SOFR shall bear interest at a rate between SOFR plus 1.75% and SOFR plus 2.25%, depending on our consolidated total leverage ratio and subject to a SOFR floor of 1.00%. Loans based on the base rate shall bear interest at a rate between the base rate minus 1.25% and the base rate minus 0.75%, depending on our consolidated total leverage ratio. We are also obligated to pay a commitment fee on the unused portion of the facility at a rate of 0.25% per annum.
The obligations under the Credit Facility 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 Facility contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain minimum liquidity of $35.0 million at all times and a consolidated total leverage ratio of no greater than 3.00 to 1.00, tested on a quarterly basis.
As of April 30, 2025, we were in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $36.8 million available and $13.2 million in letters of credit allocated as security in connection with office space.
BlackRock
On May 15, 2025 we entered into the May 2025 Credit Agreement which provides for (i) a senior secured initial term loan facility (the "Initial Term Loan Facility") in an aggregate principal amount of up to $100,000,000, (ii) a secured delayed draw term loan facility in an aggregate principal amount of up to $50,000,000 (the "Delayed Draw Term Loan Facility"), and (iii) an uncommitted secured discretionary delayed draw term loan facility in an aggregate principal amount of up to $50,000,000 (the "Discretionary Delayed Draw Term Loan Facility", and together with the Initial Term Loan Facility and the Delayed Draw Term Loan Facility, the "Term Loan Facilities"). The Term Loan Facilities mature on May 15, 2030. We will use the proceeds of the term loans made under the Initial Term Loan Facility (the "Initial Term Loans") to repay existing debt and related fees and expenses associated with Term Loan Facilities, with the remainder available for general corporate purposes. The proceeds of the term loans made under the Delayed Draw Term Loan Facility (the "Delayed Draw Term Loans") may be used for general corporate purposes. We borrowed $100,000,000 of Initial Term Loans on the Closing Date. The Delayed Draw Term Loans may be borrowed by us, subject to the satisfaction of certain conditions, during the period from the Closing Date through November 15, 2026.
Under the May 2025 Credit Agreement, the Term Loan Facilities bear interest, at our option, at an annual rate based on an adjusted term SOFR rate or a base rate. Term Loans based on the adjusted term SOFR rate shall bear interest at a per annum rate equal to term SOFR plus 5.25% (subject to a 1.00% floor). Term Loans based on the base rate shall bear interest at a per annum rate equal to the greatest of (i) the prime rate then in effect, (ii) the greater of the federal funds effective rate then in effect, plus 0.50% per annum, (iii) an adjusted term SOFR rate determined on the basis of a one-month interest period, plus 1.00% per annum, and (iv) 2.00%, in each case, plus a margin of 4.25%. Interest is due and payable in arrears quarterly for Term Loans bearing interest at the base rate and at the end of an interest period (or quarterly, in the case of any interest period longer than 3 months) in the case of Term Loans bearing interest at the adjusted term SOFR rate.
The obligations under the May 2025 Credit Agreement are guaranteed by certain subsidiaries and secured by a lien on substantially all of our property and certain subsidiary guarantors.
The May 2025 Credit Agreement contains customary affirmative and negative covenants and restrictions typical for a financing of this type that, among other things, restricts our and our subsidiaries' ability to incur additional debt, pay dividends and make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, enter into sale-leaseback transactions, transfer and sell material assets and merge or consolidate. The May 2025 Credit Agreement also contains financial covenants that require us to maintain minimum qualified cash of at least $35,000,000 at all times and minimum consolidated EBITDA for relevant test periods, tested on a quarterly basis. The May 2025 Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. Non-compliance with one or more of the covenants and restrictions or the occurrence of an event of default could result in the full or partial principal balance of the May 2025 Credit Agreement becoming immediately due and payable and termination of the commitments.
In addition, the Term Loans are subject to certain mandatory prepayment events, including an excess cash flow sweep of up to 30% for excess cash flow periods in which our annualized recurring revenue is less than $350,000,000.
Termination of SVB Credit Facility
On May 15, 2025, in connection with entry into the May 2025 Credit Agreement, we used a portion of the proceeds of the Initial Term Loans under the May 2025 Credit Agreement to pay all outstanding principal, interest and other amounts owing under our existing Credit Facility which was then terminated.
Share Repurchase Program
In March 2022, our Board of Directors authorized a $100.0 million share repurchase program of our common stock which was increased by an additional $50.0 million in September 2023 and an additional $50.0 million in March 2025. During the three months ended April 30, 2025, 4,473,633 shares were purchased and as of April 30, 2025, approximately $54.2 million remains available for future purchases, exclusive of commissions paid on the repurchase of shares.
Cash Flows
The following table summarizes our cash flows:
| Three months ended April 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
|
Net cash provided by operating activities
|
$ | 37,725 | $ | 38,309 | |||||||
|
Net cash used in investing activities
|
$ | (19,363) | $ | (647) | |||||||
|
Net cash used in financing activities
|
$ | (29,023) | $ | (1,174) | |||||||
Operating Activities
Net cash provided by operating activities of $37.7 million for the three months ended April 30, 2025 reflected our net income of $0.8 million, adjusted by non-cash charges including stock-based compensation expense of $12.7 million, depreciation and amortization expense of $6.9 million, including $4.1 million related to the amortization of acquired intangibles, as well as $2.3 million related to the amortization of operating lease right-of-use assets and $1.8 million related to adjustments in contingent consideration. In addition, there were positive adjustments resulting from changes in accounts receivable of $43.1 million, mainly due to the timing of billing and cash collections during the period, as well as changes in other long term assets of $5.9 million, costs to obtain revenue contracts of $3.2 million and $0.8 million in accounts payable, accrued expenses and other current liabilities. These increases were offset by changes in unearned revenue of $21.7 million, other long term liabilities of $10.3 million, prepaid expenses and other current assets of $5.0 million and operating lease liabilities of $3.5 million.
Net cash provided by operating activities of $38.3 million for the three months ended April 30, 2024 reflected our net loss of $3.8 million, adjusted by non-cash charges including stock-based compensation expense of $12.1 million, depreciation and amortization expense of $3.0 million, and amortization of operating lease right-of-use assets of $2.1 million. In addition, there were positive adjustments resulting from changes in accounts receivable of $54.3 million, mainly due to the timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $4.3 million. These increases were offset by changes in unearned revenue of $26.7 million, as well as changes in accounts payable, accrued expenses and other current liabilities of $4.0 million, and operating lease liabilities of $2.8 million.
Investing Activities
Net cash used in investing activities of $19.4 million for the three months ended April 30, 2025 reflected cash outflows of $18.8 million related to cash paid, net of cash acquired, in the acquisition of Places Scout, as well as capital expenditures of $0.6 million.
Net cash used in investing activities of $0.6 million for the three months ended April 30, 2024 reflected capital expenditures.
Financing Activities
Net cash used in financing activities of $29.0 million for the three months ended April 30, 2025 was primarily related to cash outflows of $27.6 million associated with repurchases of common stock as part of our share repurchase program, as well as $2.1 million associated with payments for taxes related to the net share settlement of stock-based compensation awards.
Net cash used in financing activities of $1.2 million for the three months ended April 30, 2024 was primarily related to $2.0 million in cash outflows associated with payments for taxes related to the net share settlement of stock-based compensation awards. This was offset by net proceeds from employee stock purchase plan withholdings of $0.9 million.
Contractual Obligations
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.
Except as described in Note 2 "Summary of Significant Accounting Policies- Recent Accounting Pronouncements", to the condensed consolidated financial statements, 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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