Yext - Earnings Call - Q1 2026

Executive Summary

• Q1 FY26 delivered a clean top-line and EPS beat with revenue of $109.5M (+14% YoY) and non-GAAP diluted EPS of $0.12; adjusted EBITDA hit a record $24.7M (22.5% margin), reflecting disciplined cost execution and Hearsay integration benefits. Versus S&P Global consensus, revenue beat by ~$1.9M and EPS was modestly above the ~$0.11 mean estimate (see Estimates Context).*
• Management raised full-year FY26 adjusted EBITDA guidance to $103–$105M (from $100–$103M previously) and introduced FY26 non-GAAP EPS guidance of $0.52–$0.54; Q2 guidance implies revenue in line with consensus and EPS at/above consensus.
• Key KPIs inflected positively: ARR rose to $446.5M (+15% YoY) with Direct ARR +19% YoY; NRR improved to 95% (total/direct) and 96% (reseller); GRR rose to 87% total/direct and 88% reseller.
• Product and pipeline catalysts: early traction for AI-driven Scout (1,000+ waitlist, 37 new beta customers; high value perception), momentum in Social and Hearsay, and a $200M BlackRock facility increasing strategic flexibility for M&A and buybacks.

What Went Well and What Went Wrong

What Went Well

• Record profitability and guidance raise: Adjusted EBITDA reached $24.7M (22.5% margin) and full-year AEBITDA guidance was raised to $103–$105M, signaling durable operating leverage.
• ARR/retention acceleration: ARR hit $446.5M (+15% YoY), with Direct ARR +19% YoY; NRR improved to 95% total/direct and 96% reseller; GRR improved to 87% total/direct and 88% reseller.
• Scout resonance and sales enablement: CEO: “0% disinterest rate… very high value perception… demonstrates value of our Listings, Reviews, Pages and Social products,” underscoring anti-commoditization tailwind and upsell/retention support. CEO: “We exceeded guidance on both revenue and profitability, delivered record Adjusted EBITDA”.

What Went Wrong

• Gross margin compression: GAAP gross margin declined YoY to 75.2% (from 77.6%), reflecting mix/acquisition amortization despite non-GAAP gross margin improvement to 78.6%.
• Reseller softness: Reseller ARR declined ~1% YoY; management cited bankruptcies offsetting progress; channel remains a focus for usage-based models and second-half initiatives.
• FX lift not structural: CFO noted a Q1 FX tailwind (GBP) benefiting ARR (~$6.4M) and revenue (~$0.6M); this is not a controllable growth driver and could reverse.

Transcript

Operator (participant)

Good afternoon, and Welcome to Yext's first quarter fiscal 2026 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Nils Erdman. Please go ahead.

Nils Erdmann (SVP)

Thank you, Operator, and good afternoon, everyone. Welcome to Yext's First Quarter Fiscal 2026 Earnings Conference Call. With me today are CEO and Chair of the Board, Michael Walrath, and CFO, Darryl Bond. During this call, we will make forward-looking statements, including statements related to our future financial performance, statements regarding the expected effects of our recent acquisitions, expectations regarding the growth of our business, our outlook for the second quarter and full year fiscal 2026, our strategy, and estimates of financial and operating metrics, capital expenditures, and other indications of future opportunities, as further described in our first quarter shareholder letter, which is available at investors.yext.com.

These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, our ability to integrate acquired businesses with ours, our management performance, and general economic and business conditions. These forward-looking statements represent our beliefs and assumptions only as of the date made, and we undertake no obligation to revise or update any statements to reflect changes that occur after this call. Further information on factors and other risks that could cause actual results to materially differ from these forward-looking statements is included in our reports filed with the SEC, including in the sections titled Special Note Regarding Forward-Looking Statements and Risk Factors, in our most recent annual report on Form 10-K for the year ended January 31, 2025, and in our earnings release and our shareholder letter that were both issued this afternoon.

During the call, we refer to certain metrics, including non-GAAP financial measures. Definitions of these non-GAAP metrics and other operating metrics, as well as reconciliations with the most comparable historical GAAP measures, are available in the shareholder letter. I will now turn the call over to Mike.

Michael Walrath (CEO and Chair of the Board)

Thanks, Nils, and thank you all for joining us today. As I hope you've read in our shareholder letter and earnings release, we had a very strong Q1, outperforming our guidance on all metrics, and we see continued strength into Q2. A few things I'd like to highlight before we dive into your questions. First, fragmentation of the consumer search market continues to accelerate with the advancement of AI search. This trend elevates the importance for brands of managing digital visibility, and it differentiates Yext's core products and provides fertile ground for our latest product release, Yext Scout. Second, our core business health is improving. We're seeing improvement in both gross and net retention, customer satisfaction, and overall value perception across our platform. Third, the pace of innovation is advancing rapidly at Yext.

We are speeding up our execution, even as our profitability and efficiency grow, setting the table for a growth flywheel well into the future. Finally, we have the balance sheet and cash flow to further accelerate our growth while maintaining flexibility. This enables us to strategically reinvest in organic initiatives and pursue opportunistic investments, whether through M&A or partnerships that extend and enhance our business. I'm thrilled with the execution of our global team, who are bringing strong commitment to driving value for our customers, even as the pace of change in our industry accelerates. Now we're happy to take any questions that you may have for us.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question is from Naved Khan with B. Riley Securities. Please go ahead.

Naved Khan (Managing Director)

Right. Thank you very much. A couple of questions for me. Maybe just one on the Scout update. It's good to see the waitlist up to 1,000 customers. I'm curious about the mix here in terms of, besides the interest from existing customers, are you also seeing a good number of new customers sign up for this product? Maybe as a related question, as you start to see sort of more sales traction, how are you thinking about increasing sales headcount for the rest of the year?

Michael Walrath (CEO and Chair of the Board)

Great. Hey, Navid. As far as the customers go, I think what we're seeing on the waitlist is a mix. We see existing customers, we also see new prospects, and we also see end customers. It is sort of all of the above there, and that is driven by some of the demonstrations that we have had available for Scout since early April. As far as the sales headcount goes, I think we have room to run with our current headcount. I think we have opportunities to grow productivity, but we are going to continue to look at the demand universe, the market, and determine when the right time is to add additional headcount. We'll be opportunistic there because we're seeing plenty of positive signal, but we want to make sure that all of our sales folks have plenty of opportunity and that we don't get ahead of ourselves on that front.

Naved Khan (Managing Director)

Got it. Maybe just staying on Scout, maybe just talk about the velocity in terms of customers, kind of the sales cycle, maybe shortening or not. How should we be thinking about the product kind of becoming generally available to all the customers? How are you thinking about the timeline? Thanks.

Michael Walrath (CEO and Chair of the Board)

Yeah. I think it's too early to say with any sort of certainty what the sales cycle will look like for this product. From what I can tell so far, I would expect that, if anything, the sales cycle will be a bit shorter. It's an easier implementation. The core data is publicly available. I think the value that our customers see, especially in light of what's going on in the market and the need to really understand the visibility around their brand with the rapid fragmentation that we're seeing, all of those things encourage me that this could be a shorter sales cycle product for most customers. As far as the role, I think that's reflected in the speed with which we've rolled the product out. Just as a reminder, we launched this product officially at our analyst day on April 2nd.

That initial cohort was less than 10 development partners who we've been working with in advance of what I would call a more open beta as of yesterday. There were an incremental, I believe it was 37 customers rolled out over the course of the last 48 hours or so. I would describe where we are today with the product as an open beta that will be incrementally rolling out additional customers as we get those beta customers lined up. We do not have a date yet for when we will go full general availability, but I am really confident that we have the capacity to roll out a lot of customers here.

Naved Khan (Managing Director)

Great. Thanks, Mike. I'll get back in the queue.

Michael Walrath (CEO and Chair of the Board)

Thanks, Navid.

Operator (participant)

The next question is from Ryan MacDonald with Needham & Company. Please go ahead.

Ryan MacDonald (Senior Analyst)

Hi. Congrats on a great quarter, really strong results, and a lot of positive momentum. Mike, it seems like that from reading the shareholder letter and hearing you speak right now, there is a lot of good things going on in the business, great Q1, good momentum to Q2. Scout is obviously seeing some really nice demand, Hearsay, Social, etc. Yet we still do not have sort of a full year top line outlook yet. I am just curious, can you help us understand sort of how you are balancing sort of the enthusiasm and the momentum in the business right now versus maybe what you are seeing in the macro and sort of what is kind of creating the lingering caution, if you will?

Michael Walrath (CEO and Chair of the Board)

Yeah. No, look, I think the lingering caution is two things would probably primarily the macro, right. It was interesting. I think I listened to all the software calls, and I thought it was interesting to listen to how the March quarters and the April quarters potentially sound a little bit different. While we do not have any direct impact in our business from tariffs and things like that, we are obviously well aware that businesses who do are thinking carefully about how they are expending dollars. At the same time, I think there is a competing tailwind here, which is it is not really deniable anymore that the brand discovery landscape is shifting enormously. We saw Google dip below 90% market share recently for the first time in a very long time. Candidly, that is not the best measure for two reasons.

One is that's really only measuring traditional search, and the second is that the fragmentation that's happening here isn't a zero-sum game. We think the fragmentation drives more search, not less search. All of those things, I think, factor into the puts and takes around feeling really positive on the fact that this environment is very fertile for us. The commoditization pressure that we've talked about for years in our product abates in a market where having the best digital visibility, brand visibility products is going to drive value perception. We're always going to be mindful of the fact that there's a lot of uncertainty around the macroeconomic landscape. I think our overall outlook will remain conservative as long as that uncertainty exists.

Ryan MacDonald (Senior Analyst)

Helpful, color. Maybe on Scout in the beta program, I'm just curious what you're looking for within customers that have launched in the beta or from the development customers thus far. Are there any sample data points in terms of ROI generation that you can talk about? Maybe perhaps based on what you're seeing or based on maybe the value you're seeing being delivered in the early days of Scout, is this evolving how you're thinking about monetization of the product when it eventually is generally available later this year or next year?

Michael Walrath (CEO and Chair of the Board)

Yeah. So I mean, look, I think a development partner relationship is a little different than these initial beta launches. The development partners are signing up for a product to experiment with a product that is not ready for a public launch. The launch that we've had over the last 48 hours is really a public beta launch. We have been gating that, and we're controlling how many customers are launched. Sitting today with something like 45 live customers, we're getting amazing feedback from the customers. I've personally sat through many dozens of customer interviews and customer meetings, both demonstrations, but then also customers who are actively using the product.

I can tell you that so far there's a 0% disinterest rate in the product, and there's very high value perception both around the product, but also around how it demonstrates value of our other core existing products. We talk a lot about Scout has over 150 non-performance metrics that we're able to gather. Big chunks of those metrics are things around how are you distributing your listings information to create citations both for traditional search and AI search, your page performance, your review performance, reputation performance.

When we start demonstrating at the location level to our customers how those metrics are contributing, any questions about the value of our Listings product or our Reviews product or our Pages product or our Social product start to fall by the wayside because you can see that that is the thing that differentiates you, and you can see how you are outperforming your competition because of those things. When I talk about kind of maybe the earliest benefit of the product, it is the anti-commoditization pressure of our core products against what we have seen is pressure from a lot of small competitors with less capable products. That is probably the earliest benefit. The secondary, or maybe the more important benefits over the long run, are the TAM expansion and the attachment opportunity with Scout as a standalone product.

Ryan MacDonald (Senior Analyst)

Great. It's exciting to hear and can't wait to hear more. Thanks. We'll stop.

Michael Walrath (CEO and Chair of the Board)

Thanks, Ryan.

Operator (participant)

The next question is from Tom White with D.A. Davidson. Please go ahead.

Tom White (Managing Director and Senior Equity Analyst)

Great. Thanks for taking my questions. Two, if I could, I was hoping you guys could just give a bit more color on the drivers of the revenue outperformance in the first quarter. I guess specifically, the direct ARR improved sequentially there by a few million bucks, I think. Maybe talk a little bit about the extent to which it was sort of legacy product-driven versus some of your newer offerings versus maybe some of the recent M&A like Hearsay. Just secondly on the buyback, I think that kind of the pace of buybacks ticked up in the quarter versus kind of the cadence of the past couple. Maybe you might just talk about your appetite to focus on reducing the share count here potentially just given the strong cash flow, the improved liquidity after this debt deal. Where is the buyback kind of ranking with your other kind of opportunities or things you're thinking about? Thanks.

Darryl Bond (CFO)

Thanks, Tom, Darryl. On the revenue and the ARR performance in Q1, it was a couple of things. One, we did see a bit of a tailwind from FX rates. If you recall, for the last few quarters, we've been talking about FX headwinds, particularly as it relates to the pound, and that sort of abated and came back. I think the rates at the end of Q1 this year are kind of roughly in line with where they were Q1 of last year. That drove some of the improvement on both the revenue and on the ARR side. We called it out in the shareholder letter in the back pages after the remarks. We also continue to see improvements in retention. We disclosed gross retention and net retention on the basis of ARR.

Our customer success motion and our ability to retain customers and drive value to customers continues to show improvement. That also helps with, obviously, the revenue, but also the ARR picture. On the buybacks, I'll make a couple of comments, but obviously, you saw where the stock traded throughout Q1 and even at the levels that we're at today. We continue to believe it's a great investment when you look at it from an EBITDA multiple perspective. It becomes a really important tool in our capital allocation belt. I'm sure Mike will have some additional comments.

Michael Walrath (CEO and Chair of the Board)

Yeah. I think we're going to look at the buyback as an opportunity to, I think since over the last three years, I think we've reduced the overall share count. I think we'll continue to look to drive that type of anti-dilution through the business, especially with what we think is the stock price being very attractive. As far as our optionality around buyback versus M&A, it's not necessarily an either/or situation. We have a really strong balance sheet. We have cash. We have cash flow. Now we have a great partner with BlackRock and a debt facility that would enable us to look at the opportunistic about highly accretive acquisitions. It does feel like it's going to continue to be a good time to look at M&A opportunities. Again, I just don't really think that that's necessarily an either/or situation.

You can see we did buy a lot of shares in Q1, and we continued to buy shares in May because we gave you the year-to-date or I guess through the 5/30 number there. We feel great about that investment just as we feel great about the M&A transactions we've had with Hearsay and Yext Scout.

Tom White (Managing Director and Senior Equity Analyst)

Got it. Appreciate that. Thanks, Darryl. Thanks, Mike.

Operator (participant)

Again, if you have a question, please press star, then one. The next question is from Rohit Kulkarni with ROTH Capital Partners. Please go ahead.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

Hey, thanks. Nice call, guys. Just on the organic part of the business, net ARR, net retention rate is up. That is a very healthy sign. Any color as to what is driving that with regards to upsell or any improvements in GTM that you may have implemented? I know both companies are now fully integrated, but anything that you can share with regards to the core Yext growth rate, excluding Hearsay and Scout?

Michael Walrath (CEO and Chair of the Board)

Yeah. I think the first question was a little hard to hear you right, but I think it was net retention and what's driving it. I think the good news is we're seeing gross retention and net retention both up. To me, what I observe in the business is I observe that, and it's no secret that we've been fighting a lot of sort of good enough at half price for a long time in the business on a lot of our core products, certainly on the listings products primarily. I think in this, and I've mentioned this a few times, in this world where it's getting harder and harder to manage brand visibility because you have to go so far beyond just sort of the core GMB page at this point, that is having an impact in customer value perception across our product.

That is going to be an anti-churn metric for us, both in terms of logo churn, but also in terms of downgrade churn because it is really not going to be an environment where you can afford, where a brand can afford to be missing out on opportunities to generate visibility through proper citation building, through listings, through reputation, social, and all those products. We are really encouraged to see that the market and our customers are very focused on this. I think it is helping a lot that we have best-in-class products here and that the perception of value of those best-in-class products is, I think, they are getting the attention that they deserve because of the fragmented search environment. I forgot what your second question was. I am sorry.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

Just any other color on the growth in the underlying core Yext business, excluding Hearsay and Scout?

Michael Walrath (CEO and Chair of the Board)

Yeah. I mean, I think we're in a similar place in terms of the stability of that ARR. What's going to help us, there are two things that are going to help us there, obviously. One is going to be better retention, which we're seeing. The other is going to be more upsell. That comes from the opportunity to attach more products. The way I look at this is we have, I just described the whole sort of, I think, value perception of our core. That's going to help a lot with the gross retention situation, especially as we get into our heavier renewal periods, which are always in the back half of the year.

You can move the needle a little bit earlier in the first half of the year, but because most of the book winds up being up for renewal in the second half of the year, it becomes really, that's where you have the opportunity to really change that math. On the upsell, what you need is you need innovative products that customers value in order to get the upsell and the boomerang customers that drive ultimately the ARR growth. We are encouraged on both of those fronts. We are really excited about the customer reception for Scout. Our customers are watching AI disrupt the landscape in which they try to manage their digital visibility, and they need AI products like Scout that are going to help them to combat the challenges and take advantage of the opportunities of fragmenting digital search landscape.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

Okay. Great. I guess just maybe a why or why now around this kind of loan facility that you have from BlackRock. Maybe just talk about kind of, there are kind of obvious conclusions one can draw, but would love to hear kind of why and why now. Are you seeing any specific kind of urgency in pursuing some growth initiatives that led you to doing it now?

Darryl Bond (CFO)

Yeah. Hey, Rohit, Darryl. One of the primary reasons was that our credit facility with SVB was expiring at the end of the calendar year. We needed to do something because we do leverage that for some availability to collateralize letters of credit with leases and things like that. As we got into the conversations with BlackRock, we realized, obviously, they're a really great partner. They're well-known. They felt really good about our business. We looked at the opportunity. As Mike mentioned, with our point of view on the M&A outlook and the opportunities that may arise, it just made sense for us to do something a little bit bigger. The SVB facility was written years ago, right around the time we did our IPO. Some of the covenants were meant for a smaller company.

As we got into the conversations, we felt pretty good about the terms we were getting, about the covenants we were getting, and the flexibility it provides us with some of the things we want to do to continue to invest and grow the business.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

Yeah. Okay. Thank you.

Michael Walrath (CEO and Chair of the Board)

The only thing I would add to that, Rohit, is, Mike, is I think we've done two acquisitions in the last year, basically. One of those was what we think is a highly accretive strategic acquisition in Hearsay. Obviously, Place to Scout was a smaller but very strategic, I think, product-led acquisition. We're really happy with both of those. We'd think that the opportunity for more of those exists. We're going to be super diligent and, I think, very disciplined buyers. This environment is definitely creating opportunities. Just as it's creating organic growth opportunities, it's also creating opportunities for us to consider different assets. Having a facility in place with a partner like BlackRock is just going to make it easier for us to be really, really smart and agile when it comes to those opportunities.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

Okay. Okay. Anything with the word agentic in the PR would definitely help. Anyway, I'll go back to the team. Thanks.

Michael Walrath (CEO and Chair of the Board)

I'm sorry. Anything what?

Rohit Kulkarni (Managing Director and Senior Research Analyst)

In the word.

Michael Walrath (CEO and Chair of the Board)

Sorry.

Rohit Kulkarni (Managing Director and Senior Research Analyst)

The word having agentic. Agentic in your PR would help.

Michael Walrath (CEO and Chair of the Board)

Oh, yeah. Yep.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Mike Walrath for any closing remarks.

Michael Walrath (CEO and Chair of the Board)

I'd just like to thank everyone for joining and for all of your support and look forward to speaking with you again next quarter.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.