Equities

Yext Stock Dips 13%, Lowers Sales Forecast to $394M

Yext shares drop 13% after lowering FY 2025 sales forecast to $394-$396 million and announcing 12% staff layoffs.

By Barry Stearns

6/11, 08:07 EDT
Yext, Inc.
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Key Takeaway

  • Yext's stock dropped 13% after lowering its FY2025 sales outlook to $394-$396 million, down from $400-$402 million.
  • Despite reduced revenue forecasts, Yext raised its profit guidance to 35-36 cents per share and announced a $125 million acquisition of Hearsay Systems.
  • The company reported a Q1 net loss of $3.8 million and missed revenue expectations, citing cautious IT spending and longer deal cycles.

Yext Lowers Sales Outlook

Shares of Yext Inc. fell sharply on Monday after the company revised its full-year sales outlook downward and provided a second-quarter forecast that fell short of Wall Street's expectations. The online-marketing platform, which aids businesses in enhancing their search result prominence and online promotion, cited a "challenged" environment characterized by tighter customer spending as the primary reason for the revised outlook.

Yext now anticipates full-year fiscal 2025 sales to be between $394 million and $396 million, a reduction from the $400 million to $402 million forecasted in March. Despite the lower sales outlook, the company raised its profit forecast, expecting full-year adjusted earnings per share to be between 35 and 36 cents, up from the previous guidance of 30 to 31 cents.

For the second quarter, Yext projected revenue between $98 million and $98.4 million, with the midpoint falling below FactSet analyst forecasts of $98.4 million. The company also forecasted adjusted earnings per share of 2 to 3 cents, which is below analyst expectations of 9 cents. Following these announcements, Yext's shares dropped 13% in after-hours trading.

Strategic Moves and Layoffs

In an effort to boost profitability and revive its stock price, Yext has undertaken significant staff reductions and leadership changes. Earlier this month, the company announced it would lay off approximately 12% of its full-time staff. This follows a series of layoffs last year and several executive departures in 2022, including one of the company's co-founders.

Despite these cost-cutting measures, Yext revealed plans to acquire Hearsay Systems, a platform that assists the financial-services industry in customer engagement, for at least $125 million. This acquisition is part of Yext's strategy to enhance its service offerings and expand its market presence.

"We are all aware of the challenging macro environment that we are currently operating in, which is creating headwinds in the technology industry," said Chief Executive Michael Walrath. "This has translated into longer deal cycles and tougher negotiations as our customers also face difficulties in this environment."

Financial Performance

Yext reported a first-quarter net loss of $3.8 million, or 3 cents per share. Adjusted earnings per share came in at 5 cents, falling short of FactSet estimates of 6 cents per share. Revenue for the quarter decreased by 3% year over year to $96 million, slightly below analyst expectations of $96.3 million.

Walrath noted that the company has been focusing on customer support and restructuring its partnerships to navigate the challenging environment. "We also see deals pushed out of Q1 and into either Q2 or, in some cases, the second half of the year," he said. "Many of our peers have recently noted that enterprise IT buyers remain cautious in their spending, and we are seeing the same trends impact our business."

Yext has also entered into a new relationship with a large discount retailer operating over 15,000 stores in North America and has onboarded four major healthcare providers, indicating some positive developments amid the broader challenges.

Street Views

  • Tom White, D.A. Davidson (Neutral on Yext):

    "The company is trying to improve sales and customer satisfaction."

Management Quotes

  • Michael Walrath, CEO of Yext:

    "We are all aware of the challenging macro environment that we are currently operating in, which is creating headwinds in the technology industry. This has translated into longer deal cycles and tougher negotiations as our customers also face difficulties in this environment."
    "We also see deals pushed out of Q1 and into either Q2 or, in some cases, the second half of the year. Many of our peers have recently noted that enterprise IT buyers remain cautious in their spending, and we are seeing the same trends impact our business."