Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended October 31, 2019



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

For the transition period from to

Commission File Number: 001-38056

YEXT, INC.

(Exact name of registrant as specified in its charter)



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

1 Madison Ave, 5th Floor

New York, NY 10010

(Address of principal executive offices, including zip code)

(212) 994-3900

(Registrant's telephone number, including area code)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	YEXT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 25, 2019, the registrant had 114,812,626 shares of common stock, $0.001 par value per share outstanding.

TABLE OF CONTENTS



			PAGE
PART I.		FINANCIAL INFORMATION
	Item 1	Financial Statements	5
		Condensed Consolidated Balance Sheets (unaudited)	5
		Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)	6
		Condensed Consolidated Statements of Stockholders' Equity (unaudited)	7
		Condensed Consolidated Statements of Cash Flows (unaudited)	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	30
	Item 4	Controls and Procedures	30

PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	32
	Item 1A	Risk Factors	32
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
	Item 3	Defaults Upon Senior Securities	53
	Item 4	Mine Safety Disclosures	53
	Item 5	Other Information	53
	Item 6	Exhibits	53

SIGNATURES

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

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


•	our future revenue, cost of revenue, operating expenses and cash flows;


•	anticipated trends, growth rates and challenges in our business and in the markets in which we operate;


•	our beliefs, objectives and strategies for future operations, including plans to invest in international expansion, research and development, and our sales and marketing teams, and the impact of such investments on our operations;


•	our ability to increase sales of our products;


•	maintaining and expanding our end-customer base and our relationships with our Knowledge Network; and


•	sufficiency of cash to meet cash needs for at least the next 12 months.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A. "Risk Factors" in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether written or oral, except as required by law.

In this Quarterly Report on Form 10-Q, the words "we," "us," "our" and "Yext" refer to Yext, Inc. and its wholly owned subsidiaries, unless the context requires otherwise.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

YEXT, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(unaudited)



	October 31, 2019			January 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	244,754		$	91,755
Marketable securities	—			51,021
Accounts receivable, net of allowances of $202 and $256, respectively	38,837			55,341
Prepaid expenses and other current assets	12,459			14,135
Costs to obtain revenue contracts, current	22,089			17,817
Total current assets	318,139			230,069
Restricted cash	12,100			—
Property and equipment, net	16,545			11,077
Operating lease right-of-use assets	109,995			—
Costs to obtain revenue contracts, non-current	20,255			18,366
Goodwill	4,574			4,660
Intangible assets, net	1,480			1,960
Other long term assets	2,674			996
Total assets	$	485,762		$	267,128
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	45,486		$	44,236
Unearned revenue, current	107,508			135,544
Operating lease liabilities, current	8,064			—
Total current liabilities	161,058			179,780
Operating lease liabilities, non-current	110,396			—
Other long term liabilities	1,952			2,799
Total liabilities	273,406			182,579
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at October 31, 2019 and January 31, 2019; zero shares issued and outstanding at October 31, 2019 and January 31, 2019	—			—
Common stock, $0.001 par value per share; 500,000,000 shares authorized at October 31, 2019 and January 31, 2019; 120,875,972 and 108,678,234 shares issued at October 31, 2019 and January 31, 2019, respectively; 114,370,638 and 102,172,900 shares outstanding at October 31, 2019 and January 31, 2019, respectively	120			109
Additional paid-in capital	616,605			398,882
Accumulated other comprehensive loss	(388		)	(1,428		)
Accumulated deficit	(392,076		)	(301,109		)
Treasury stock, at cost	(11,905		)	(11,905		)
Total stockholders’ equity	212,356			84,549
Total liabilities and stockholders’ equity	$	485,762		$	267,128

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(unaudited)



	Three months ended October 31,						Nine months ended October 31,
	2019			2018			2019			2018
Revenue	$	76,370		$	58,613		$	217,451		$	164,524
Cost of revenue	20,366			14,886			56,108			41,772
Gross profit	56,004			43,727			161,343			122,752
Operating expenses:
Sales and marketing	61,969			43,714			160,738			117,839
Research and development	13,011			9,158			35,603			26,870
General and administrative	23,857			13,867			57,392			37,465
Total operating expenses	98,837			66,739			253,733			182,174
Loss from operations	(42,833		)	(23,012		)	(92,390		)	(59,422		)
Interest income	1,129			465			3,412			1,224
Interest expense	(81		)	(35		)	(213		)	(107		)
Other expense, net	(682		)	(200		)	(1,091		)	(589		)
Loss from operations before income taxes	(42,467		)	(22,782		)	(90,282		)	(58,894		)
(Provision for) benefit from income taxes	(250		)	(158		)	(685		)	(483		)
Net loss	$	(42,717	)	$	(22,940	)	$	(90,967	)	$	(59,377	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.38	)	$	(0.23	)	$	(0.82	)	$	(0.61	)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	113,464,608			99,628,479			110,610,473			97,387,544

Other comprehensive income (loss):
Foreign currency translation adjustment	$	1,585		$	127		$	1,000		$	22
Unrealized (loss) gain on marketable securities, net	(2		)	55			40			166
Total comprehensive loss	$	(41,134	)	$	(22,758	)	$	(89,927	)	$	(59,189	)

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands)

(unaudited)



							Accumulated
				Additional			Other									Total
	Common Stock			Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
	Shares	Amount		Capital			Loss			Deficit			Stock			Equity
Balance, January 31, 2018	93,977	$	100	$	328,344		$	(1,636	)	$	(233,450	)	$	(11,905	)	$	81,453
Cumulative effect adjustment in connection with the adoption of ASU 2014-09	—	—		—			3			7,178			—			7,181
Exercise of stock options	5,901	5		18,857			—			—			—			18,862
Vested restricted stock units converted to common shares	1,585	3		(3		)	—			—			—			—
Issuance of restricted stock	16	—		—			—			—			—			—
Issuance of common stock under employee stock purchase plan	694	1		6,777			—			—			—			6,778
Stock-based compensation	—	—		44,907			—			—			—			44,907
Other comprehensive income	—	—		—			205			—			—			205
Net loss	—	—		—			—			(74,837		)	—			(74,837		)
Balance, January 31, 2019	102,173	109		398,882			(1,428		)	(301,109		)	(11,905		)	84,549
Common stock offering, net of issuance costs of $530	7,000	7		146,463			—			—			—			146,470
Exercise of stock options	2,573	2		12,537			—			—			—			12,539
Vested restricted stock units converted to common shares	2,222	2		(2		)	—			—			—			—
Issuance of restricted stock	11	—		—			—			—			—			—
Issuance of common stock under employee stock purchase plan	392	—		6,627			—			—			—			6,627
Stock-based compensation	—	—		52,098			—			—			—			52,098
Other comprehensive income	—	—		—			1,040			—			—			1,040
Net loss	—	—		—			—			(90,967		)	—			(90,967		)
Balance, October 31, 2019	114,371	$	120	$	616,605		$	(388	)	$	(392,076	)	$	(11,905	)	$	212,356

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



	Nine months ended October 31,
	2019			2018
Operating activities:
Net loss	$	(90,967	)	$	(59,377	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,836			5,028
Provision for bad debts	297			302
Stock-based compensation expense	50,917			31,943
Deferred income taxes	(58		)	(54		)
Amortization of deferred financing costs	187			98
Amortization of (discount) premium on marketable securities	(136		)	(61		)
Amortization of operating lease right-of-use assets	8,039			—
Changes in operating assets and liabilities:
Accounts receivable	15,908			10,986
Prepaid expenses and other current assets	888			(3,325		)
Costs to obtain revenue contracts	(6,196		)	(6,860		)
Other long term assets	(1,681		)	(509		)
Accounts payable, accrued expenses and other current liabilities	3,161			4,329
Unearned revenue	(27,531		)	(6,985		)
Operating lease liabilities	(1,576		)	—
Other long term liabilities	478			(1,095		)
Net cash used in operating activities	(42,434		)	(25,580		)
Investing activities:
Purchases of marketable securities	—			(52,916		)
Maturities of marketable securities	51,197			58,420
Capital expenditures	(7,347		)	(4,321		)
Net cash provided by investing activities	43,850			1,183
Financing activities:
Proceeds from common stock offering, net of underwriting discounts and commissions	147,000			—
Payments of deferred common stock offering issuance costs	(530		)	—
Proceeds from exercise of stock options	12,513			15,044
Payments of deferred financing costs	(260		)	(159		)
Proceeds, net from employee stock purchase plan withholdings	5,078			3,947
Net cash provided by financing activities	163,801			18,832
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(118		)	(465		)
Net increase in cash, cash equivalents and restricted cash	165,099			(6,030		)
Cash, cash equivalents and restricted cash at beginning of period	91,755			34,367
Cash, cash equivalents and restricted cash at end of period	$	256,854		$	28,337

Supplemental reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:



(in thousands)	October 31, 2019		October 31, 2018
Cash and cash equivalents	$	244,754	$	28,337
Restricted cash	12,100		—
Total cash, cash equivalents and restricted cash	$	256,854	$	28,337

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Description of Business

Yext, Inc. (the "Company") is the platform that puts businesses in control of their facts online with brand-verified answers in search. The Yext platform allows companies to control the facts about their business and sync it to the Company's Knowledge Network of more than 150 third-party service and application providers, including Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp, that end consumers around the globe use to discover new businesses, read reviews and find accurate answers to their queries. The Yext platform powers all of the Company's key features, including Listings, Pages, Reviews and Answers, along with its other features and capabilities.

Fiscal Year

The Company's fiscal year ends on January 31^st. References to fiscal 2020, for example, are to the fiscal year ending January 31, 2020.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2019, filed with the SEC on March 15, 2019 (the "Form 10-K"). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of January 31, 2019, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three and nine months ended October 31, 2019 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2020, or any other period.

Except as described elsewhere in this Note 2 under the heading “Recent Accounting Pronouncements”, there have been no material changes to the Company's significant accounting policies as described in the Form 10-K.

Certain prior period amounts have been reclassified to conform to the current period presentation. Amounts classified as deferred rent, current and deferred rent, non-current in the Form 10-K as of January 31, 2019, are now included in accounts payable, accrued expenses and other current liabilities and other long term liabilities, respectively, on the Company's condensed consolidated balance sheet. Amounts previously within Interest expense, net, in the Form 10-Q for the three and nine months ended October 31, 2018, are now classified separately as Interest income and Interest expense, and amounts previously classified as Investment income in the Form 10-Q for the three and nine months ended October 31, 2018, are included within Interest income on the Company's condensed consolidated statement of operations and comprehensive loss. All periods presented in this Form 10-Q are accounted for under "Revenue from Contracts with Customers" Accounting Standard Codification ("ASC") 606, which the Company adopted in its Form 10-K for the fiscal year ended January 31, 2019, the effects of which were recognized effective February 1, 2018. The statement of cash flows for the nine months ended October 31, 2018 reflects this adoption, which did not result in any changes to the classification among the total operating, investing or financing activity line items.

Use of Estimates

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

Segment Information

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

Revenue Recognition

The Company derives its revenue primarily from its subscriptions and associated support to the Yext platform. The Company's subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts. The Company recognizes revenue upon transfer of control of services to its customers, including third-party resellers, in an amount that reflects the consideration it expects to receive in exchange for those services. The recognition of revenue is determined through application of the following five-step model:

•Identification of the contract(s) with customers;

•Identification of the performance obligation(s) in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligation(s) in the contract; and

•Recognition of revenue when or as the performance obligation(s) are satisfied

The Company identifies the performance obligations in a contract with a customer and determines whether they are distinct, or distinct within the context of the contract. When there is more than one distinct performance obligation in a contract, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. The Company estimates the amount of consideration expected to be received in exchange for transferring services if the consideration promised in a contract includes a variable amount.

Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date the Yext platform is made available to customers. Contracts are typically one year in length, but may be up to three years or longer in length. At the beginning of each subscription term the Company invoices its 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 in unearned revenue or revenue, depending on when the transfer of control to customers has occurred. The Company reports revenue net of sales tax and other taxes collected from customers to be remitted to government authorities.

Costs Capitalized to Obtain Revenue Contracts

The Company capitalizes incremental costs of obtaining revenue contracts. Incremental costs capitalized primarily include sales commissions for new and renewal revenue contracts, certain related incentives, and associated payroll tax and fringe benefit costs. Capitalized amounts are recoverable through future revenue streams under all customer contracts.

Costs capitalized to obtain new revenue contracts are amortized on a straight-line basis over three years, which reflects the average benefit period, and may be longer than the initial contract period. The Company determined the average benefit period having considered both qualitative and quantitative factors, most notably the estimated life of capitalized software development costs resulting from additional functionality to the Yext platform. The Company amortizes costs capitalized for contract renewals over the renewal term, reflecting the average benefit period for such renewals, which is typically one year. Amortization of costs capitalized to obtain revenue contracts is included in sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss.

The Company periodically evaluates whether there have been any changes in its business, market conditions, or other events which would indicate that its amortization period should be changed, or if there are potential indicators of impairment.

During the three and nine months ended October 31, 2019, the Company capitalized $9.7 million and $22.3 million of costs to obtain revenue contracts and amortized $6.0 million and $16.2 million to sales and marketing expense, respectively. Costs capitalized to obtain revenue contracts on the Company's consolidated balance sheet totaled $42.3 million at October 31, 2019.

Concentration of Credit Risk

Certain financial instruments that could be exposed to a concentration of credit risk may include cash and cash equivalents, marketable securities and accounts receivable. The Company deposits its cash with financial institutions, and such deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Collateral is not required for accounts receivable. At October 31, 2019 and January 31, 2019, no single customer accounted for more than 10% of the Company's accounts receivable. No single customer accounted for more than 10% of the Company's revenue for the three and nine months ended October 31, 2019 and 2018, respectively.

Recent Accounting Pronouncements

Adoption of New Accounting Standard - ASU 2016-02

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases" ("ASU 2016-02"), which introduced and codified new lease accounting guidance under ASC 842. This standard requires lessees to record a lease liability, initially measured at the present value of future lease payments, and a right-of-use asset, associated with operating leases, on its balance sheet. The standard also requires a single lease expense to be recognized within the statement of operations on a straight-line basis over the lease term.

The Company adopted the new standard on February 1, 2019, which resulted in the Company recording lease liabilities and right-of-use assets associated with its operating leases on its balance sheet, and did not have a material effect on the statement of operations and comprehensive loss. The Company utilized the modified retrospective adoption approach, whereby all prior periods continue to be reported under previous lease accounting guidance. The Company elected the package of practical expedients to not reassess prior conclusions related to lease identification, classification and initial direct costs, and did not elect the hindsight practical expedient which would have permitted the use of hindsight in determining the lease term and assessing impairment. See Note 13 "Leases" for further discussion on the Company's accounting for leases under ASC 842.

Adoption of New Accounting Standard - ASU 2018-07

The Company prospectively adopted ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting" on February 1, 2019. The Company will not apply a forfeiture rate assumption to value stock-based awards issued to non-employees, given the nature of the services provided. The adoption of this standard did not have a material effect on the Company's condensed consolidated financial statements.

Adoption of New Accounting Standard - ASU 2018-15

The Company prospectively adopted ASU 2018-15, "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract" on February 1, 2019. As a result, eligible implementation costs capitalized in a cloud computing arrangement are included in the Prepaid expenses and other current assets on the balance sheet. Such costs are recognized on a straight-line basis over the estimated useful life in the statement of operations and comprehensive loss in the same line item as the fees for the associated arrangement, and the related activity is generally classified as an operating activity in the statement of cash flows. The adoption of this standard did not have a material effect on the Company's condensed consolidated financial statements as of and for the three and nine months ended October 31, 2019.

New Accounting Standard To Be Adopted - ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments." This standard changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which may result in earlier recognition of allowances for losses, and require expected credit losses to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. The Company plans to adopt this standard on February 1, 2020 and based on its evaluation as of October 31, 2019, does not currently expect it to have a material effect on the Company's condensed consolidated financial statements.

3. Revenue

Disaggregation of Revenue

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



	Three months ended October 31,				Nine months ended October 31,
(in thousands)	2019		2018		2019		2018
North America	$	62,815	$	50,510	$	179,268	$	143,353
International	13,555		8,103		38,183		21,171
Total revenue	$	76,370	$	58,613	$	217,451	$	164,524

Significant Judgments

Significant judgments and estimates may be required to determine the appropriate application of accounting related to revenue, including whether performance obligations are distinct and assessments regarding the transaction price.

The Company has identified that it has two distinct performance obligations. The Company predominantly recognizes revenue through its performance obligation of a subscription and associated support to the Yext platform. The performance obligation is

distinct because a customer's use of the Yext platform is fully functional upon access, does not require any additional development, modification or customization, and is often sold separately. In certain instances, the Company enters into a contract with a customer that includes a promise to provide certain technical or customized professional services, in addition to a promise to provide its subscriptions and associated support. The Company's professional services performance obligation is distinct as it does not significantly change or enhance the functionality of the Yext platform.

In those instances when a contract includes more than one performance obligation, the Company must allocate the transaction price to the performance obligations on a relative standalone selling price basis. SSP represents the price at which a company would sell a promised product or service separately to a customer.

The Company determines the SSP based on a series of complex factors. The Company's selling prices associated with its subscription and associated support are considered highly variable based on discounting practices, customer geography, customer size, and other such factors. In contrast, the Company's selling prices associated with its professional services are more observable, predictable and consistent. Accordingly, the Company uses the residual method, under which the total transaction price and observable SSP of the professional services performance obligation is used to arrive at the estimated SSP of the subscription and associated support performance obligation.

The Company's revenue is predominantly related to its subscription and associated support to the Yext platform. Professional services revenue accounted for 5% and less than 5% of the Company's total revenue for the nine months ended October 31, 2019 and 2018, respectively.

Contract Liabilities

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

As of October 31, 2019, unearned revenue, current was $107.5 million and unearned revenue, non-current was $0.1 million and included within Other long term liabilities on the Company's condensed consolidated balance sheet. Unearned revenue represents amounts billed, or payments received, in advance of revenue recognition for which the Company has an unconditional obligation to transfer goods or services associated with a non-cancelable contract. Unearned revenue is subsequently recognized as revenue when transfer of control to a customer has occurred. $118.4 million of revenue recognized during the nine months ended October 31, 2019 was included in unearned revenue at the beginning of the period. The unearned revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, and invoice duration, timing and size. The portion of unearned revenue expected to be recognized during the succeeding twelve-month period is classified as unearned revenue, current, and the remaining portion is classified within Other long term liabilities in the Company’s condensed consolidated balance sheet.

Customer deposits represent payments received in advance in instances where a revenue contract is cancelable in nature, and therefore the Company does not have an unconditional obligation to transfer control to a customer. As of October 31, 2019 and January 31, 2019, customer deposits of $1.4 million and $1.1 million were included in Accounts payable, accrued expenses and other current liabilities on the Company's condensed consolidated balance sheet, respectively.

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents contracted revenue which is expected to be recognized as revenue in future periods, and includes unearned revenue and non-cancelable unbilled amounts. As of October 31, 2019, the Company has approximately $251.8 million of remaining performance obligations from revenue contracts, of which $237.5 million is expected to be recognized as revenue over the next twenty-four months, with the balance recognized thereafter.

4. Investments in Marketable Securities

As of October 31, 2019, the Company had no marketable securities on its condensed consolidated balance sheet. The following table summarize the Company's investments in marketable securities as of January 31, 2019:



(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate bonds	$	16,949	$	—	$	(28	)	$	16,921
U.S. treasury securities	34,112		—		(12		)	34,100
Total marketable securities	$	51,061	$	—	$	(40	)	$	51,021

The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, realized gains and losses and other-than-temporary declines in fair value on securities available for sale within Interest income in the statement of operations and comprehensive loss. The Company had no material reclassification adjustments out of accumulated other comprehensive loss into net loss in any of the periods presented.

5. Fair Value of Financial Instruments

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

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

Level 1 inputs are based on quoted prices in active markets for identical assets or liabilities.

Level 2 inputs are based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 inputs are based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

The Company's assets measured at fair value on a recurring basis, by level, within the fair value hierarchy are as follows:



	October 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds⁽¹⁾	$	189,124	$	—	$	—	$	189,124
Restricted cash:
Money market funds	12,100		—		—		12,100
Total assets	$	201,224	$	—	$	—	$	201,224



	January 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds⁽¹⁾	$	42,021	$	—	$	—	$	42,021
Marketable securities:
Corporate bonds	—		16,921		—		16,921
U.S. treasury securities ⁽²⁾	—		34,100		—		34,100
Total assets	$	42,021	$	51,021	$	—	$	93,042

(1) Included in cash and cash equivalents on the condensed consolidated balance sheets.

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

The Company’s cash equivalents and marketable securities for the periods presented were valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs and accordingly were classified as Level 1 or Level 2.

6. Goodwill and Intangible Assets

Goodwill

As of October 31, 2019 and January 31, 2019, the Company had goodwill of $4.6 million and $4.7 million, respectively. Goodwill represents the excess of cost over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level, which is at or one level below the operating segment level. The Company operates as one operating segment, which represents its one reporting unit. The test for impairment is conducted annually each November 1^st, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company determined that no events occurred or circumstances changed during the nine months ended October 31, 2019 and 2018 that would more likely than not reduce the fair value of the Company's reporting unit below its carrying amount. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.

Intangible Assets

As of October 31, 2019 and January 31, 2019, the Company had intangible assets, net of $1.5 million and $2.0 million, respectively. The Company's intangible assets are amortized on a straight‑line basis over their estimated useful lives. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company has no indefinite-lived intangible assets.

The Company determined that no events occurred or circumstances changed during the nine months ended October 31, 2019 and 2018 that would indicate that its intangible assets with finite lives may not be recoverable. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.

Amortization expense related to intangible assets totaled $0.1 million and $0.4 million for the three and nine months ended October 31, 2019, respectively and $0.2 million and $0.5 million for the three and nine months ended October 31, 2018, respectively.

7. Property and Equipment, net

Property and equipment, net consisted of the following:



(in thousands)	October 31, 2019			January 31, 2019
Furniture and fixtures	$	1,316		$	719
Office equipment	9,507			7,662
Leasehold improvements	15,062			13,090
Computer software	9,752			6,461
Construction in progress	3,241			144
Software in progress	732			697
Total property and equipment	39,610			28,773
Less: accumulated depreciation	(23,065		)	(17,696		)
Total property and equipment, net	$	16,545		$	11,077

Construction in progress consists primarily of leasehold improvements related to operating lease arrangements. Software in progress consists of costs incurred in connection with additional functionality to the Yext Platform. Depreciation expense was $1.9 million and $5.4 million for the three and nine months ended October 31, 2019, respectively, and $1.6 million and $4.5 million for the three and nine months ended October 31, 2018, respectively.

8. Accounts Payable, Accrued Expenses and Other Current Liabilities

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



(in thousands)	October 31, 2019		January 31, 2019
Accounts payable	$	10,252	$	8,025
Accrued employee compensation	15,111		19,029
Accrued Knowledge Network application provider fees	2,634		2,508
Accrued professional services and associated costs	3,064		2,198
Accrued employee stock purchase plan withholdings liability	1,085		2,635
Customer deposits	1,417		1,144
Other current liabilities	11,923		8,697
Total accounts payable, accrued expenses and other current liabilities	$	45,486	$	44,236

Capital expenditures included in accounts payable, accrued expenses and other current liabilities were $2.2 million and $0.3 million as of October 31, 2019 and 2018, respectively.

9. Stock-Based Compensation

2008 Equity Incentive Plan

The Company's 2008 Equity Incentive Plan (the "2008 Plan"), as amended on March 10, 2016, allowed for the issuance of up to 25,912,531 shares of common stock. Awards granted under the 2008 Plan may be incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), restricted stock and restricted stock units. The 2008 Plan is administered by the Company's Board of Directors, which determines the terms of the options granted, the exercise price, the number of shares subject to option and the option vesting period. No ISO or NQSO is exercisable after 10 years from the date of grant, and option awards will typically vest over a four-year period.

The 2008 Plan was terminated in connection with the adoption of the Company's 2016 Equity Incentive Plan (the "2016 Plan") in December 2016, and the Company will not grant any additional awards under the 2008 Plan. However, the 2008 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.

2016 Equity Incentive Plan

In December 2016, the Company's Board of Directors adopted, and its stockholders approved, the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will increase on the first day of each fiscal year during the term of the 2016 Plan by the lesser of: (i) 10,000,000 shares, (ii) 4% of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company's Board of Directors may determine. On February 1, 2019, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 4,086,916 shares. In addition, the shares reserved for issuance under the 2016 Plan also include shares returned to the 2008 Plan as the result of expiration or termination of options or other awards. As of October 31, 2019, the number of shares available for future award under the 2016 Plan is 1,146,856.

Stock Options

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



	Options Outstanding
	Outstanding Stock Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Balance, January 31, 2019	15,977,235		$	6.54	6.40	$	144,934
Granted	—		$	—
Exercised	(2,572,241	)	$	4.87
Forfeited or canceled	(195,388	)	$	8.02
Balance, October 31, 2019	13,209,606		$	6.84	5.70	$	127,117
Vested and expected to vest	13,197,393		$	6.84	5.70	$	127,003
Exercisable at October 31, 2019	10,418,445		$	6.33	5.27	$	105,577

The aggregate intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of October 31, 2019. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

The aggregate intrinsic value of exercised options was $38.8 million and $69.3 million for the nine months ended October 31, 2019 and 2018, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

No options were granted during the nine months ended October 31, 2019 and 2018.

Restricted Stock and Restricted Stock Units

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



	Outstanding		Weighted-Average Grant Date Fair Value
Balance as of January 31, 2019	7,703,705		$	16.07
Granted	5,539,182		$	19.83
Vested and converted to shares	(2,238,010	)	$	15.93
Forfeited or canceled	(1,183,162	)	$	19.11
Balance as of October 31, 2019	9,821,715		$	17.86

Employee Stock Purchase Plan

In March 2017, the Company's Board of Directors adopted, and its stockholders approved, the 2017 Employee Stock Purchase Plan ("ESPP"), which became effective on the date it was adopted. The number of shares of the Company's common stock that will be available for sale to employees under the ESPP increases annually on the first day of each fiscal year in an amount equal to the lesser of: (i) 2,500,000 shares; (ii) 1% of the outstanding shares of the Company's common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the administrator may determine. On February 1, 2019, the number of shares of common stock available for issuance under the ESPP was automatically increased according to its terms by 1,021,729 shares. As of October 31, 2019, a total of 2,375,320 shares of the Company's common stock are available for sale to employees under the ESPP.

In connection with the offering period which ended on March 15, 2019, 170,450 shares of common stock were purchased under the ESPP at a purchase price of $19.26 per share for total proceeds of $3.3 million. In connection with the offering period which ended on September 16, 2019, 222,044 shares of common stock were purchased under the ESPP at a purchase price of $15.06 per share for total proceeds of $3.3 million.

A new offering period began on September 16, 2019 and will end on March 16, 2020. As of October 31, 2019, 284,942 shares are estimated to be purchased at the end of the offering period and $1.1 million has been withheld on behalf of employees for these future purchases under the ESPP and is included in accounts payable, accrued expenses and other current liabilities.

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



	Three months ended October 31,		Nine months ended October 31,
	2019	2018	2019	2018
Expected life (years)	0.50	0.50	0.50	0.50
Expected volatility	42.41%	45.09%	42.41% - 60.86%	34.41% - 45.09%
Dividend yield	—	—	—	—
Risk-free rate	1.93%	2.35%	1.93% - 2.52%	1.95% - 2.35%

The expected life assumptions were based on each offering period's respective purchase date. The Company estimated the expected volatility assumptions based on the average of the historical volatility for a sample of comparable companies for the offering periods during the three and nine months ended October 31, 2018. Effective with the offering period beginning September 17, 2018, the Company determined it had sufficient historical information and estimated the expected volatility assumption based on the historical volatility of its stock price. The risk-free rate assumptions were based on the U.S. treasury yield curve in effect at the time of grants. The dividend yield assumption was zero as the Company has not historically paid any dividends and does not expect to declare or pay any dividends in the foreseeable future.

During the three and nine months ended October 31, 2019, the Company recorded stock-based compensation expense associated with the ESPP of $0.7 million and $2.0 million, respectively and $0.5 million and $1.5 million for the three and nine months ended October 31, 2018, respectively. As of October 31, 2019, total unrecognized compensation cost related to ESPP was $1.0 million, net of estimated forfeitures, which will be amortized over a weighted-average remaining period of 0.38 years.

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

Stock-Based Compensation Expense

Stock-based compensation represents the cost related to stock-based awards granted in lieu of monetary payment. The Company measures stock-based compensation associated with stock-based awards issued to employees at the grant date, based on the estimated fair value of the award, and recognizes expense on a straight-line basis, net of estimated forfeitures, over the requisite service period in the condensed consolidated statements of operations and comprehensive loss.

The Company prospectively adopted ASU 2018-07 on February 1, 2019. As a result, the Company measures stock-based compensation associated with stock-based awards issued to non-employees at the grant date, based on the estimated fair value of the award, and recognizes expense on a straight-line basis over the requisite service period. The Company will not apply a forfeiture rate assumption to value such awards, given the nature of the services provided. Prior to adoption, during the fiscal years ended January 31, 2019 and prior, stock-based compensation associated with stock-based awards issued to non-employees was re-measured each period until fully vested.

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



	Three months ended October 31,				Nine months ended October 31,
(in thousands)	2019		2018		2019		2018
Cost of revenue	$	1,176	$	820	$	2,982	$	2,032
Sales and marketing	8,604		6,891		23,673		16,330
Research and development	3,630		2,369		9,260		6,011
General and administrative	7,682		2,842		15,002		7,570
Total stock-based compensation expense	$	21,092	$	12,922	$	50,917	$	31,943

General and administrative stock-based compensation expense for the three and nine months ended October 31, 2019 included a $3.6 million one-time RSU cancellation-related expense.

As of October 31, 2019, there was approximately $173.0 million of total unrecognized compensation cost related to unvested stock-based awards. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average vesting period of approximately 3.06 years. During the three and nine months ended October 31, 2019, the Company capitalized $0.5 million and $1.2 million, respectively, of stock-based compensation related to software development of additional functionality to the Yext platform, and $0.3 million and $0.4 million for the three and nine months ended October 31, 2018, respectively.

10. Equity

Common Stock Offering

On March 20, 2019, the Company closed a common stock offering (the “Offering”), in which it issued and sold 7,000,000 shares of common stock, inclusive of the fully exercised underwriters’ option to purchase additional shares. The price per share to the public was $21.50. The Company received aggregate proceeds of $147.0 million from the Offering, net of underwriters’ discounts and commissions, before deducting offering costs of approximately $0.5 million, which were recorded in additional paid in capital in its condensed consolidated statements of stockholders' equity.

The following table summarizes the changes in stockholders' equity during the three and nine months ended October 31, 2019:



							Accumulated
				Additional			Other									Total
	Common Stock			Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
(in thousands)	Shares	Amount		Capital			Loss			Deficit			Stock			Equity
Balance, January 31, 2019	102,173	$	109	$	398,882		$	(1,428	)	$	(301,109	)	$	(11,905	)	$	84,549
Common stock offering, net of issuance costs of $530	7,000	7		146,463			—			—			—			146,470
Exercise of stock options	1,096	1		4,995			—			—			—			4,996
Vested restricted stock units converted to common shares	557	—		—			—			—			—			—
Issuance of restricted stock	4	—		—			—			—			—			—
Issuance of common stock under employee stock purchase plan	170	—		3,283			—			—			—			3,283
Stock-based compensation	—	—		13,472			—			—			—			13,472
Other comprehensive income	—	—		—			349			—			—			349
Net loss	—	—		—			—			(18,959		)	—			(18,959		)
Balance, April 30, 2019	111,000	117		567,095			(1,079		)	(320,068		)	(11,905		)	234,160
Exercise of stock options	830	1		4,136			—			—			—			4,137
Vested restricted stock units converted to common shares	845	1		(1		)	—			—			—			—
Issuance of restricted stock	7	—		—			—			—			—			—
Stock-based compensation	—	—		17,025			—			—			—			17,025
Other comprehensive loss	—	—		—			(892		)	—			—			(892		)
Net loss	—	—		—			—			(29,291		)	—			(29,291		)
Balance, July 31, 2019	112,682	119		588,255			(1,971		)	(349,359		)	(11,905		)	225,139
Exercise of stock options	647	—		3,406			—			—			—			3,406
Vested restricted stock units converted to common shares	820	1		(1		)	—			—			—			—
Issuance of common stock under employee stock purchase plans	222	—		3,344			—			—			—			3,344
Stock-based compensation	—	—		21,601			—			—			—			21,601
Other comprehensive income	—	—		—			1,583			—			—			1,583
Net loss	—	—		—			—			(42,717		)	—			(42,717		)
Balance, October 31, 2019	114,371	$	120	$	616,605		$	(388	)	$	(392,076	)	$	(11,905	)	$	212,356

The following table summarizes the changes in stockholders' equity during the three and nine months ended October 31, 2018:



							Accumulated
				Additional			Other									Total
	Common Stock			Paid-In			Comprehensive			Accumulated			Treasury			Stockholders’
(in thousands)	Shares	Amount		Capital			Loss			Deficit			Stock			Equity
Balance, January 31, 2018	93,977	$	100	$	328,344		$	(1,636	)	$	(233,450	)	$	(11,905	)	$	81,453
Cumulative effect adjustment in connection with the adoption of ASU 2014-09	—	—		—			3			7,178			—			7,181
Exercise of stock options	1,678	2		4,908			—			—			—			4,910
Vested restricted stock units converted to common shares	141	—		—			—			—			—			—
Issuance of restricted stock	4	—		—			—			—			—			—
Issuance of common stock under employee stock purchase plans	438	1		4,090			—			—			—			4,091
Stock-based compensation	—	—		8,066			—			—			—			8,066
Other comprehensive loss	—	—		—			(95		)	—			—			(95		)
Net loss	—	—		—			—			(17,041		)	—			(17,041		)
Balance, April 30, 2018	96,238	103		345,408			(1,728		)	(243,313		)	(11,905		)	88,565
Exercise of stock options	1,833	1		5,231			—			—			—			5,232
Vested restricted stock units converted to common shares	378	1		(1		)	—			—			—			—
Issuance of restricted stock	12	—		—			—			—			—			—
Stock-based compensation	—	—		11,081			—			—			—			11,081
Other comprehensive income	—	—		—			101			—			—			101
Net loss	—	—		—			—			(19,396		)	—			(19,396		)
Balance, July 31, 2018