yext-20230731

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 July 31, 2023


☐			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.)

61 Ninth Avenue

New York, NY 10011

(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 August 24, 2023, the registrant had 124,483,298 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 (U naudited)	5
		Condensed Consolidated Statements of Operations and Comprehensive Loss (U naudited)	6
		Condensed Consolidated Statements of Stockholders' Equity (U naudited)	7
		Condensed Consolidated Statements of Cash Flows (U naudited)	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4	Controls and Procedures	34

PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	35
	Item 1A	Risk Factors	35
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	60
	Item 3	Defaults Upon Senior Securities	60
	Item 4	Mine Safety Disclosures	60
	Item 5	Other Information	60
	Item 6	Exhibits	61

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;

•changes in management and anticipated effects thereof;

•our ability to increase sales of our products;

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

•sufficiency and availability 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)


	July 31, 2023		January 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	200,527	$	190,214
Accounts receivable, net of allowances of $1,026 and $868, respectively	54,521		109,727
Prepaid expenses and other current assets	16,307		15,629
Costs to obtain revenue contracts, current	29,206		31,023
Total current assets	300,561		346,593

Property and equipment, net	54,274		62,071
Operating lease right-of-use assets	79,897		85,463
Costs to obtain revenue contracts, non-current	16,679		21,037
Goodwill	4,535		4,477
Intangible assets, net	181		193
Other long term assets	3,225		3,927
Total assets	$	459,352	$	523,761
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	35,031	$	49,017
Unearned revenue, current	169,505		223,706
Operating lease liabilities, current	17,464		18,155
Total current liabilities	222,000		290,878
Operating lease liabilities, non-current	94,476		100,534
Other long term liabilities	3,855		4,326
Total liabilities	320,331		395,738
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at July 31, 2023 and January 31, 2023; zero shares issued and outstanding at July 31, 2023 and January 31, 2023	—		—
Common stock, $0.001 par value per share; 500,000,000 shares authorized at July 31, 2023 and January 31, 2023; 146,229,520 and 142,684,128 shares issued at July 31, 2023 and January 31, 2023, respectively; 124,653,845 and 122,334,515 shares outstanding at July 31, 2023 and January 31, 2023, respectively	146		142
Additional paid-in capital	923,094		897,368
Accumulated other comprehensive loss	(3,475)		(3,617)
Accumulated deficit	(680,391)		(676,542)
Treasury stock, at cost	(100,353)		(89,328)
Total stockholders’ equity	139,021		128,023
Total liabilities and stockholders’ equity	$	459,352	$	523,761

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 July 31,				Six months ended July 31,
	2023		2022		2023		2022
Revenue	$	102,598	$	100,869	$	202,051	$	199,671
Cost of revenue	22,393		27,082		43,743		51,810
Gross profit	80,205		73,787		158,308		147,861
Operating expenses:
Sales and marketing	47,591		54,105		91,587		114,884
Research and development	18,890		18,819		35,643		36,121
General and administrative	17,955		20,384		36,541		41,879
Total operating expenses	84,436		93,308		163,771		192,884
Loss from operations	(4,231)		(19,521)		(5,463)		(45,023)
Interest income	1,840		185		3,374		210
Interest expense	(88)		(129)		(161)		(272)
Other (expense) income, net	(297)		138		(617)		267
Loss from operations before income taxes	(2,776)		(19,327)		(2,867)		(44,818)
(Provision for) benefit from income taxes	(661)		(664)		(982)		(1,012)
Net loss	$	(3,437)	$	(19,991)	$	(3,849)	$	(45,830)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.03)	$	(0.16)	$	(0.03)	$	(0.36)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	124,358,526		124,234,226		123,821,653		127,631,877

Other comprehensive (loss) income:
Foreign currency translation adjustment	$	(196)	$	(2,007)	$	154	$	(5,421)
Unrealized loss on marketable securities, net	(8)		—		(12)		—
Total comprehensive loss	$	(3,641)	$	(21,998)	$	(3,707)	$	(51,251)

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, 2022	131,157	$	137	$	834,429	$	(187)	$	(610,604)	$	(11,905)	$	211,870
Exercise of stock options	259	—		711		—		—		—		711
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes	3,967	4		(5,137)		—		—		—		(5,133)

Issuance of common stock under employee stock purchase plan	796	1		3,814		—		—		—		3,815
Stock-based compensation	—	—		63,551		—		—		—		63,551
Repurchase of common stock	(13,844)	—		—		—		—		(77,423)		(77,423)
Other comprehensive loss	—	—		—		(3,430)		—		—		(3,430)
Net loss	—	—		—		—		(65,938)		—		(65,938)
Balance, January 31, 2023	122,335	142		897,368		(3,617)		(676,542)		(89,328)		128,023
Exercise of stock options	1,514	1		8,582		—		—		—		8,583
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes	1,464	2		(7,754)		—		—		—		(7,752)
Issuance of restricted stock	75	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	492	1		2,119		—		—		—		2,120
Stock-based compensation	—	—		22,779		—		—		—		22,779
Repurchase of common stock	(1,226)	—		—		—		—		(11,025)		(11,025)
Other comprehensive income	—	—		—		142		—		—		142
Net loss	—	—		—		—		(3,849)		—		(3,849)
Balance, July 31, 2023	124,654	$	146	$	923,094	$	(3,475)	$	(680,391)	$	(100,353)	$	139,021

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six months ended July 31,
	2023		2022
Operating activities:
Net loss	$	(3,849)	$	(45,830)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	9,089		8,702
Bad debt expense	602		491
Stock-based compensation expense	22,577		34,168







Amortization of operating lease right-of-use assets	4,611		4,547
Other, net	184		975
Changes in operating assets and liabilities:
Accounts receivable	54,943		45,808
Prepaid expenses and other current assets	(538)		(4,716)
Costs to obtain revenue contracts	6,554		7,583
Other long term assets	726		956
Accounts payable, accrued expenses and other current liabilities	(14,158)		242
Unearned revenue	(55,324)		(54,154)
Operating lease liabilities	(5,848)		(5,991)
Other long term liabilities	141		(86)
Net cash provided by (used in) operating activities	19,710		(7,305)
Investing activities:



Capital expenditures	(1,567)		(3,875)
Net cash used in investing activities	(1,567)		(3,875)
Financing activities:



Proceeds from exercise of stock options	8,610		525
Repurchase of common stock	(10,996)		(58,722)

Payments for taxes related to net share settlement of stock-based compensation awards	(7,750)		—
Payments of deferred financing costs	(301)		(283)
Proceeds, net from employee stock purchase plan withholdings	2,176		1,912
Net cash used in financing activities	(8,261)		(56,568)
Effect of exchange rate changes on cash and cash equivalents	431		(5,556)
Net increase (decrease) in cash and cash equivalents	10,313		(73,304)
Cash and cash equivalents at beginning of period	190,214		261,210
Cash and cash equivalents at end of period	$	200,527	$	187,906

See the accompanying notes to the condensed consolidated financial statements.

YEXT, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Description of Business

Description of Business

Yext, Inc. ("Yext" or the "Company") organizes a business's facts so it can deliver relevant, actionable answers to consumer questions throughout the digital ecosystem. The Answers platform lets businesses structure the facts about their brands in a database called Yext Content, formerly known as the Knowledge Graph. The platform is built to leverage the structured data stored in Yext Content to deliver a modern search experience on a business's or organization's own website, as well as across over 200 service and application providers, which the Company refers to as its Publisher Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. The Answers platform powers all of the Company's key features, including Listings, Pages, and Search, along with its other features and capabilities.

Fiscal Year

The Company's fiscal year ends on January 31st. References to fiscal 2024, for example, are to the fiscal year ending January 31, 2024.

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, 2023, filed with the SEC on March 17, 2023 (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, 2023, 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 six months ended July 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2024, or any other period.

There have been no material changes to the Company's significant accounting policies as described in the Form 10-K.

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 of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain revenue contracts, income taxes, and the valuation and assumptions underlying 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 Answers 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 as one operating segment as all of the Company's offerings operate on the Answers 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 as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts, provided such contracts had been appropriately accounted for under ASC 606 by the acquiree, rather than recognizing them at their estimated fair value on the acquisition date as required under the existing guidance. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 on a prospective basis, with early adoption permitted. In February 2023, the Company adopted this standard on a prospective basis and there was no material impact on the Company's consolidated financial statements.

3. Revenue

Performance Obligations

The Company has identified that it has two distinct performance obligations: subscription and associated support to the Answers platform and professional services. The Company's revenue is predominantly related to its subscription and associated support to the Answers platform. Professional services revenue accounted for approximately 8% and 9% of the Company's total revenue for the six months ended July 31, 2023 and 2022, respectively.

Geographic Region

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. The following table presents the Company's revenue by geographic region:


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2023		2022		2023		2022
North America	$	80,819	$	81,082	$	159,319	$	159,791
International	21,779		19,787		42,732		39,880
Total revenue	$	102,598	$	100,869	$	202,051	$	199,671

North America revenue is attributable to the United States. International revenue is predominantly attributable to European countries, but also includes Japan.

The Company's revenue attributable to the United States represented 79% of total revenue, revenue attributable to the United Kingdom, which serves as the Company's main contracting entity for Europe, represented 20% of total revenue, and no other individual country represented more than 10% of total revenue for the six months ended July 31, 2023.

The Company's revenue attributable to the United States represented 80% of total revenue, revenue attributable to the United Kingdom, which serves as the Company's main contracting entity for Europe, represented 18% of total revenue, and no other individual country represented more than 10% of total revenue for the six months ended July 31, 2022.

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 July 31, 2023, unearned revenue, current was $169.5 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's condensed consolidated balance sheet, was not significant. Revenue recognized of $152.3 million during the six months ended July 31, 2023 was included in unearned revenue at the beginning of the period.

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 July 31, 2023 and January 31, 2023, customer deposits of $1.2 million and $0.3 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 amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, and contract terms. As of July 31, 2023, the Company had $424.5 million of remaining performance obligations, of which $370.7 million is expected to be recognized as revenue over the next twenty-four months, with the remaining balance expected to be recognized thereafter. As of January 31, 2023, the Company had $447.7 million of remaining performance obligations.

4. Investments in Marketable Securities

The following tables summarize the Company's investments in marketable securities:


	July 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	50,912		$	—	$	—	$	50,912
U.S. treasury securities	94,788		—		(22)		94,766
Total marketable securities	$	145,700	$	—	$	(22)	$	145,678

	January 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	68,165	$	—	$	—	$	68,165
U.S. treasury securities	40,372		—		(9)		40,363
Total marketable securities	$	108,537	$	—	$	(9)	$	108,528

As of July 31, 2023 and January 31, 2023, the Company's marketable securities have a maturity of 90 days or less and are classified as cash and cash equivalents. During the six months ended July 31, 2023 and 2022, the Company had no material reclassification adjustments from accumulated other comprehensive loss to net loss.

The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, and realized gains and losses on securities available for sale within interest income in the condensed consolidated statements of operations and comprehensive loss.

The Company regularly reviews its debt securities and monitors the surrounding economic conditions to assess the risk of expected credit losses. As of July 31, 2023 and January 31, 2023, the unrealized losses and the related risk of expected credit losses were not significant.

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:


	July 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	50,912	$	—	$	—	$	50,912
U.S. treasury securities	—		94,766		—		94,766
Included in cash and cash equivalents	$	50,912	$	94,766	$	—	$	145,678

	January 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	68,165	$	—	$	—	$	68,165
U.S. treasury securities	—		40,363		—		40,363
Included in cash and cash equivalents	$	68,165	$	40,363	$	—	$	108,528

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 were classified as Level 1 or Level 2, accordingly.

6. Property and Equipment, Net

Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property and equipment, net consisted of the following:


(in thousands)	July 31, 2023		January 31, 2023
Computer software	$	22,171	$	21,049
Office equipment	22,161		21,533
Furniture and fixtures	8,522		8,523
Leasehold improvements	62,716		63,371
Construction in progress	189		107
Software in progress	325		699
Total property and equipment, gross	116,084		115,282
Less: accumulated depreciation	(61,810)		(53,211)
Total property and equipment, net	$	54,274	$	62,071

As of July 31, 2023 and January 31, 2023, the Company's property and equipment, net attributable to the United States was 90% and 88%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $4.4 million and $9.1 million for the three and six months ended July 31, 2023, respectively and $4.3 million and $8.7 million for the three and six months ended July 31, 2022, respectively.

7. Accounts Payable, Accrued Expenses and Other Current Liabilities

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


(in thousands)	July 31, 2023		January 31, 2023
Accounts payable	$	4,503	$	7,264
Accrued employee compensation	13,242		23,621

Accrued Publisher Network fees	3,088		3,220
Accrued professional services and associated costs	2,172		2,328


Accrued employee stock purchase plan withholdings liability	1,794		1,736

Other current liabilities	10,232		10,848
Total accounts payable, accrued expenses and other current liabilities	$	35,031	$	49,017

8. 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 since the 2008 Plan termination the Company has not granted and 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, 2023, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 4,893,381 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 July 31, 2023, the number of shares available for future award under the 2016 Plan is 6,612,524.

Stock Options

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


	Outstanding Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Balance, January 31, 2023	4,593,704	$	6.45	3.09	$	5,020
Granted	—	$	—
Exercised	(1,514,046)	$	5.67
Forfeited or canceled	—	$	—
Balance, July 31, 2023	3,079,658	$	6.83	2.66	$	10,100
Vested and expected to vest	3,079,658	$	6.83	2.66	$	10,100
Exercisable at July 31, 2023	3,079,658	$	6.83	2.66	$	10,100

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 July 31, 2023. 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 $6.0 million and $0.7 million for the six months ended July 31, 2023 and 2022, 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.

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, 2023	11,564,867	$	8.00
Granted	2,846,756	$	9.46
Vested and converted to shares	(2,173,102)	$	9.80
Forfeited or canceled	(1,070,755)	$	8.77
Balance as of July 31, 2023	11,167,766	$	7.94

The estimated weighted-average grant date fair value of restricted stock and restricted stock units granted was $9.46 and $6.43 per share for the six months ended July 31, 2023 and 2022, respectively. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

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, 2023, the number of shares of common stock available for issuance under the ESPP was automatically increased according to its terms by 1,223,345 shares. As of July 31, 2023, a total of 4,790,396 shares of the Company's common stock are available for sale to employees under the ESPP.

A new offering period commences on the first trading day on or after March 15th and September 15th 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 15th and March 15th, 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.

In connection with the offering period which ended on March 15, 2023, 491,600 shares of common stock were purchased under the ESPP at a purchase price of $4.31 per share for total proceeds of $2.1 million.

A new offering period began on March 15, 2023 and will end on September 15, 2023. As of July 31, 2023, 225,903 shares are estimated to be purchased at the end of the offering period and $1.8 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 estimated at the commencement of the new offering period and used to calculate the fair value of shares to be purchased during an ESPP offering period included expected lives of 0.5 years, expected volatility of 55.12% and 48.87%, and risk-free rates of 4.73% and 0.86%, for the six months ended July 31, 2023 and 2022, respectively.

The expected life assumptions were based on each offering period's respective purchase date. The Company 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 commencement of the offering period. 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 six months ended July 31, 2023 and 2022, the Company recorded stock-based compensation expense associated with the ESPP of $0.3 million and $0.7 million, respectively for each period. As of July 31, 2023, total unrecognized compensation cost related to the ESPP was $0.2 million, net of estimated forfeitures, which will be amortized over a weighted-average remaining period of 0.13 years.

Performance-Based Restricted Stock Units

In March 2022, the Company made a grant to an executive in the form of 2,000,000 performance-based restricted stock units ("PSUs"). This grant was outside of the Company’s 2016 Equity Incentive Plan, and will vest over approximately a four-year period following the achievement of certain stock price targets. During the six months ended July 31, 2023, the Company granted additional PSUs to certain executives under the Company’s 2016 Equity Incentive Plan, which vest over approximately a one-year period following the achievement of certain stock price targets. The Company uses a Monte Carlo simulation model to determine the fair value of PSUs and recognizes expense using the accelerated attribution method over the requisite service period.

The following table summarizes the activity related to the Company’s PSUs:


	Number of PSUs	Weighted-Average Grant Date Fair Value
Balance as of January 31, 2023	2,000,000	$	5.72
Granted	280,000	$	7.49
Vested	—	$	—
Forfeited or canceled	—	$	—
Balance as of July 31, 2023	2,280,000	$	5.94

As of July 31, 2023, the market conditions accompanying the PSUs were not satisfied and therefore, no shares vested. During the three and six months ended July 31, 2023, the Company recognized stock-based compensation expense related to PSUs of approximately $1.1 million and $2.0 million, respectively, and $0.9 million and $1.2 million for the three and six months ended July 31, 2022, respectively. As of July 31, 2023, the total unrecognized stock-based compensation expense related to unvested PSUs was $8.6 million, which will be amortized over a weighted-average remaining period of 2.48 years.

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, net of estimated forfeitures, over the requisite service period of the applicable award generally using the straight-line method or accelerated attribution method.

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


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2023		2022		2023		2022
Cost of revenue	$	768	$	1,341	$	1,412	$	2,723
Sales and marketing	4,067		6,149		7,886		12,525
Research and development	2,768		4,202		5,563		8,722
General and administrative	3,962		4,390		7,716		10,198
Total stock-based compensation expense	$	11,565	$	16,082	$	22,577	$	34,168

During the three and six months ended July 31, 2023, the Company capitalized $0.1 million and $0.2 million, respectively of stock-based compensation expense related to software development, and $0.2 million and $0.3 million for the three and six months ended July 31, 2022, respectively.

As of July 31, 2023, there was approximately $90.3 million of total unrecognized compensation cost related to unvested stock-based awards, which is expected to be recognized over an estimated remaining weighted-average period of approximately 2.70 years.

9. Equity

The following table summarizes the changes in stockholders' equity during the six months ended July 31, 2023:


							Accumulated
			Additional		Other						Total
	Common Stock		Paid-In		Comprehensive		Accumulated		Treasury		Stockholders’
(in thousands)		Shares	Amount		Capital		Loss		Deficit		Stock		Equity
Balance, January 31, 2023		122,335	$	142	$	897,368	$	(3,617)	$	(676,542)	$	(89,328)	$	128,023
Exercise of stock options		1,256	1		7,243		—		—		—		7,244
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes		682	1		(3,241)		—		—		—		(3,240)
Issuance of restricted stock		13	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan		492	1		2,119		—		—		—		2,120
Stock-based compensation		—	—		11,119		—		—		—		11,119
Repurchase of common stock		(564)	—		—		—		—		(4,613)		(4,613)
Other comprehensive income		—	—		—		346		—		—		346
Net loss		—	—		—		—		(412)		—		(412)
Balance, April 30, 2023		124,214	145		914,608		(3,271)		(676,954)		(93,941)		140,587
Exercise of stock options		258	—		1,339		—		—		—		1,339
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes		782	1		(4,513)		—		—		—		(4,512)
Issuance of restricted stock		62	—		—		—		—		—		—

Stock-based compensation		—	—		11,660		—		—		—		11,660
Repurchase of common stock		(662)	—		—		—		—		(6,412)		(6,412)
Other comprehensive loss		—	—		—		(204)		—		—		(204)
Net loss		—	—		—		—		(3,437)		—		(3,437)
Balance, July 31, 2023		124,654	$	146	$	923,094	$	(3,475)	$	(680,391)	$	(100,353)	$	139,021

The following table summarizes the changes in stockholders' equity during the six months ended July 31, 2022:


							Accumulated
			Additional		Other						Total
	Common Stock		Paid-In		Comprehensive		Accumulated		Treasury		Stockholders’
(in thousands)		Shares	Amount		Capital		Loss		Deficit		Stock		Equity
Balance, January 31, 2022		131,157	$	137	$	834,429	$	(187)	$	(610,604)	$	(11,905)	$	211,870
Exercise of stock options		123	—		302		—		—		—		302
Vested restricted stock units converted to common shares		1,165	1		(1)		—		—		—		—

Issuance of common stock under employee stock purchase plan		457	1		2,353		—		—		—		2,354
Stock-based compensation		—	—		18,201		—		—		—		18,201
Repurchase of common stock		(4,838)	—		—		—		—		(30,554)		(30,554)
Other comprehensive loss		—	—		—		(3,414)		—		—		(3,414)
Net loss		—	—		—		—		(25,839)		—		(25,839)
Balance, April 30, 2022		128,064	139		855,284		(3,601)		(636,443)		(42,459)		172,920
Exercise of stock options		74	—		191		—		—		—		191
Vested restricted stock units converted to common shares		1,081	1		(1)		—		—		—		—


Stock-based compensation		—	—		16,226		—		—		—		16,226
Repurchase of common stock		(5,386)	—		—		—		—		(28,393)		(28,393)
Other comprehensive loss		—	—		—		(2,007)		—		—		(2,007)
Net loss		—	—		—		—		(19,991)		—		(19,991)
Balance, July 31, 2022		123,833	$	140	$	871,700	$	(5,608)	$	(656,434)	$	(70,852)	$	138,946

Preferred Stock

Effective April 2017, the Company’s Board of Directors is authorized to issue up to 50,000,000 shares of preferred stock, $0.001 par value, in one or more series without stockholder approval. The Company's Board of Directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. The issuance of preferred stock could have the effect of restricting dividends on the Company’s common stock, diluting the voting power of its common stock, impairing the liquidation rights of its common stock, or delaying or preventing changes in control or management of the Company. As of July 31, 2023 and January 31, 2023, no shares of preferred stock were issued or outstanding.

Common Stock

As of July 31, 2023 and January 31, 2023, the Company had authorized 500,000,000 shares of voting $0.001 par value common stock. Each holder of the Company's common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative rights. Subject to any preferential rights of any outstanding preferred stock, holders of the Company's common stock are entitled to receive ratably the dividends, if any, as may be declared from time to time by the Company's Board of Directors out of legally available funds. If there is a liquidation, dissolution or winding up of the Company, holders of the Company's common stock would be entitled to share in the Company's assets remaining after the payment of liabilities and any preferential rights of any outstanding preferred stock.

Holders of the Company's common stock have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of the Company's common stock will be fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company's common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which the Company may designate and issue in the future.

Treasury Stock

As of July 31, 2023, the Company had 21,575,675 shares of treasury stock carried at its cost basis of $100.4 million. As of January 31, 2023, the Company had 20,349,613 shares of treasury stock carried at its cost basis of $89.3 million.

Share Repurchase Program

In March 2022, the Company's Board of Directors authorized a $100.0 million share repurchase program of the Company’s common stock. During the six months ended July 31, 2023, 1,226,062 shares were purchased for a total cost of $11.0 million. As of July 31, 2023, 15,070,341 shares have been purchased for a total cost of $88.4 million since the commencement of the program and approximately $11.6 million remained available for future purchases. In September 2023, the Board of Directors authorized an additional $50.0 million to the share repurchase program.

As part of the share repurchase program, shares may be purchased in open market transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing, manner, price and amount of any repurchases will be determined at the Company’s discretion, and the share repurchase program may be suspended, terminated or modified at any time for any reason. The repurchase program does not obligate the Company to acquire any specific number of shares, and all open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases.

10. Debt

On March 11, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Silicon Valley Bank (“SVB”). In January 2021, the Company amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors. On December 22, 2022, the Company entered into a second amendment (“Amendment No. 2”) to the Credit Agreement, dated March 11, 2020, collectively referred to as the Credit Facility. No significant debt issuance costs were incurred in association with the December 2022 Credit Facility.

Amendment No. 2 amends 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.

The Credit Facility provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

As amended, the revolving loans bear interest, at the Company's 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 2.50% and SOFR plus 3.00%, depending on the Company's average daily usage of the revolving loan facility, 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 0.50% and the base rate plus 0.00%, depending on the Company's average daily usage of the revolving loan facility.

The obligations under the Credit Facility are secured by a lien on substantially all of the tangible and intangible property of the Company and by a pledge of all of the equity interests of the Company's 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 the Company to maintain a year-over-year growth rate of its recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.

As of July 31, 2023, the Company was in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $36.0 million available and $14.0 million in letters of credit allocated as security in connection with office space.

Following the closure of SVB by the California Department of Financial Protection and Innovation on March 10, 2023, and its subsequent receivership by the Federal Deposit Insurance Corporation (“FDIC”), the FDIC announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank N.A. (“SVBB”). On March 27, 2023, First Citizens Bank & Trust Company (“First Citizens”) acquired substantially all of the loans and certain other assets of SVBB, and assumed all customer deposits and certain other liabilities of SVBB. As such, First Citizens assumed SVB’s obligations under the Credit Facility.

11. Income Taxes

The Company calculates its year-to-date (provision for) benefit from income taxes by applying the estimated annual effective tax rate ("AETR") to year-to-date income or loss from operations before income taxes and adjusts for discrete tax items recorded in the period. During the three and six months ended July 31, 2023 and 2022, the Company recorded a (provision for) benefit from income taxes of $(0.7) million and $(1.0) million, respectively for each period.

The Company's effective tax rate generally differs from the U.S. federal statutory tax rate primarily due to full valuation allowances related to the Company's net deferred tax assets in the U.S. and certain foreign jurisdictions, U.S. state income taxes, and foreign rate differential on profitable jurisdictions. The Company regularly evaluates the realizability of its deferred tax assets and

establishes a valuation allowance on a jurisdictional basis if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. To the extent sufficient positive evidence becomes available, a portion of the valuation allowance against certain net deferred tax assets could be released in the future and would result in a non-cash income tax benefit in the period of release.

12. Leases

The Company's operating lease arrangements are principally for office space. As of July 31, 2023, the Company had $17.5 million of operating lease liabilities, current, $94.5 million of operating lease liabilities, non-current, $79.9 million of operating lease right-of-use assets, and no financing leases, on its condensed consolidated balance sheet. The operating lease arrangements included in the measurement of lease liabilities had a weighted-average remaining lease term of 7.4 years and a weighted-average discount rate of 6.1%, as of July 31, 2023. During the six months ended July 31, 2023, the Company paid $9.3 million for amounts included in the measurement of lease liabilities and did not enter into any new lease arrangements.

During the six months ended July 31, 2023 and 2022, the Company recognized $13.5 million and $13.6 million of lease expense, respectively, which consisted of the following:


	Six months ended July 31,
(in thousands)		2023		2022
Operating lease expense		$	8,119	$	8,315
Short-term lease expense		319		424
Variable lease expense		5,026		4,873
Total lease expense		$	13,464	$	13,612

Operating lease expense is recognized on a straight-line basis over the term of the arrangement beginning on the lease commencement date for lease arrangements that have an initial term greater than twelve months and therefore are recorded on the balance sheet. Short-term lease expense is recognized on a straight-line basis over the lease term for lease arrangements that have an initial term of 12 months or less and therefore are not recorded on the balance sheet. Variable lease expense is recognized as incurred and includes real estate taxes and utilities, among other office space related expenses.

13. Commitments and Contingencies

Contractual Obligations

The Company is obligated to make payments under certain non-cancelable contractual obligations in the normal course of business. The Company's contractual obligations primarily relate to its operating lease arrangements for office space. Its other contractual obligations include contracts with its Publisher Network application providers, which generally have a term of one year, although some have a term of several years, and its software vendors, among others. These obligations represent minimum contractual payments, or the Company's best estimate for variable elements based on historical payments. The Company's contractual obligations have various expiry dates between fiscal years 2024 and 2035.

As of July 31, 2023, the Company's contractual obligations are as follows (in thousands):


Fiscal year ending January 31:	Operating Leases		Other
2024 (remainder of fiscal year)	$	9,495	$	18,784
2025	17,350		14,567
2026	19,215		4,370
2027	19,309		1,611
2028	19,406		288
2029 and thereafter	55,749		112
Total	$	140,524	$	39,732

Legal Proceedings

The Company is and may be involved in various legal proceedings arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, currently, in the opinion of the Company, the likelihood of any material adverse impact on the Company's results of operations, cash flows or the Company's financial position for any such litigation or claims is deemed to be remote. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors.

Warranties and Indemnifications

The Answers platform is in some cases warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company's product specifications.

The Company's arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party's intellectual property rights and/or if the Company breaches its contractual agreements with a customer or in instances of negligence, fraud or willful misconduct by the Company. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any significant liabilities related to such obligations in the accompanying condensed consolidated financial statements.

The Company has also agreed to indemnify certain of its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person's service as a director or officer, including any action by the Company, arising out of that person's services as the Company's director or officer or that person's services provided to any other company or enterprise at the Company's request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

14. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders:


	Three months ended July 31,				Six months ended July 31,
(in thousands, except share and per share data)	2023		2022		2023		2022
Numerator:
Net loss attributable to common stockholders	$	(3,437)	$	(19,991)	$	(3,849)	$	(45,830)
Denominator:
Weighted-average common shares outstanding	124,358,526		124,234,226		123,821,653		127,631,877
Net loss per share attributable to common stockholders, basic and diluted	$	(0.03)	$	(0.16)	$	(0.03)	$	(0.36)

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Unvested restricted stock, restricted stock units, and performance-based restricted stock units where the market conditions have not been met are excluded from the denominator of basic net loss per share. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares plus common equivalent shares for the period, including any dilutive effect from such shares.

Since the Company was in a net loss position for all periods presented, net loss per share attributable to common stockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been antidilutive. Anti-dilutive common equivalent shares were as follows:


	As of July 31,
	2023	2022
Options to purchase common stock	3,079,658	4,746,845
Restricted stock and restricted stock units	11,167,766	12,230,836
Shares estimated to be purchased under ESPP	225,903	341,970
Performance-based restricted stock units	2,280,000	2,000,000
Total anti-dilutive common equivalent shares	16,753,327	19,319,651

Item 2. 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, 2023, filed with the SEC on March 17, 2023. As discussed in the section titled "Special Note Regarding Forward Looking Statements," the following discussion and analysis contains forward looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part II, Item 1A in this Quarterly Report on Form 10-Q.

Overview

Yext organizes a business's facts so it can deliver relevant, actionable answers to consumer questions throughout the digital ecosystem. Our Answers platform lets businesses structure the facts about their brands in a database called Yext Content. Our platform is built to leverage the structured data stored in Yext Content to deliver a modern search experience on a business's or organization's own website, as well as across over 200 service and application providers, which we refer to as our Publisher Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. Our Answers platform powers all of our key features, including Listings, Pages, and Search, along with its other features and capabilities.

We sell our platform throughout the world to customers of all sizes, including our enterprise, mid-size, and third-party reseller customers. In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.

Revenue is a function of the number of customers, the number of licenses 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.

Fiscal Year

Our fiscal year ends on January 31st. References to fiscal 2024, for example, are to the fiscal year ending January 31, 2024.

Macroeconomic Conditions

Our results of operations may be influenced by general macroeconomic conditions, including, but not limited to, the impact of foreign currency fluctuations, interest rates, inflation, recession risks and the COVID-19 pandemic. 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 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. See Part II Item 1A “Risk Factors” for further discussion of the possible impact of the current macroeconomic conditions 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.

Customer Count

Customer count is defined as the total number of customers with contracts executed as of the last day of the reporting period and a unique administrative account identifier on our platform. Generally, we assign unique administrative accounts to each separate and distinct entity (such as a company or government institution) or a business unit of a large corporation, that has its own separate contract with us to access our platform. We believe that customer count provides insight into our ability to grow our enterprise and mid-size customer base. As such, customer count excludes third-party reseller customers and small business customers as well as customers only receiving free trials. From time to time, some customers previously characterized as small business customers may transition to mid-size customers, and customer count includes these changes resulting from any recharacterization. As of July 31, 2023, customer count was approximately 2,980.

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 excludes amounts related to overages 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 excludes amounts related to overages above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature.

ARR is independent of historical revenue, unearned revenue, remaining performance obligations or any other 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 tables provide our ARR for the periods presented:


	July 31,				Variance
	2023		2022		Dollars		Percent
(in thousands)
Direct Customers	$	327,212	$	312,129	$	15,083	5	%
Third-Party Reseller Customers	70,502		74,857		(4,355)		(6)	%
Total Annual Recurring Revenue	$	397,714	$	386,986	$	10,728	3	%


	Jul. 31, 2023		Apr. 30, 2023		Jan. 31, 2023		Oct. 31, 2022		Jul. 31, 2022
(in thousands)
Direct Customers	$	327,212	$	326,058	$	327,017	$	317,280	$	312,129
Third-Party Reseller Customers	70,502		72,232		73,343		72,258		74,857
Total Annual Recurring Revenue	$	397,714	$	398,290	$	400,360	$	389,538	$	386,986

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. 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 six months ended July 31, 2023 and 2022:


	July 31,
	2023	2022
Direct Customers	98%	98%
Third-Party Reseller Customers	92%	90%
Total Customers	97%	96%

Components of Results of Operations

Revenue

We derive our revenue primarily from subscription and associated support to our Answers 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 lease expenses associated with our office spaces, which are allocated based on employee headcount. In addition, cost of revenue includes software expense, which relates to licenses, professional services, and other costs associated with software for use in the operations of our business, which is also allocated based on employee headcount.

Operating Expenses

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

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

Results of Operations

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


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2023		2022		2023		2022
Revenue	$	102,598	$	100,869	$	202,051	$	199,671
Cost of revenue(1)	22,393		27,082		43,743		51,810
Gross profit	80,205		73,787		158,308		147,861
Operating expenses:
Sales and marketing(1)	47,591		54,105		91,587		114,884
Research and development(1)	18,890		18,819		35,643		36,121
General and administrative(1)	17,955		20,384		36,541		41,879
Total operating expenses	84,436		93,308		163,771		192,884
Loss from operations	(4,231)		(19,521)		(5,463)		(45,023)
Interest income	1,840		185		3,374		210
Interest expense	(88)		(129)		(161)		(272)
Other (expense) income, net	(297)		138		(617)		267
Loss from operations before income taxes	(2,776)		(19,327)		(2,867)		(44,818)
(Provision for) benefit from income taxes	(661)		(664)		(982)		(1,012)
Net loss	$	(3,437)	$	(19,991)	$	(3,849)	$	(45,830)

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


	Three months ended July 31,				Six months ended July 31,
(in thousands)	2023		2022		2023		2022
Cost of revenue	$	768	$	1,341	$	1,412	$	2,723
Sales and marketing	4,067		6,149		7,886		12,525
Research and development	2,768		4,202		5,563		8,722
General and administrative	3,962		4,390		7,716		10,198
Total stock-based compensation expense	$	11,565	$	16,082	$	22,577	$	34,168

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 July 31,				Six months ended July 31,
	2023		2022		2023		2022
Revenue	100	%	100	%	100	%	100	%
Cost of revenue	22		27		22		26
Gross profit	78.2		73.2		78.4		74.1
Operating expenses:
Sales and marketing	46		54		45		58
Research and development	18		18		18		18
General and administrative	18		20		18		21
Total operating expenses	82		92		81		97
Loss from operations	(4)		(19)		(3)		(23)
Interest income	2		—		2		—
Interest expense	—		—		—		1
Other (expense) income, net	—		—		—		—
Loss from operations before income taxes	(2)		(19)		(1)		(22)
(Provision for) benefit from income taxes	(1)		(1)		(1)		(1)
Net loss	(3)	%	(20)	%	(2)	%	(23)	%

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

Three Months Ended July 31, 2023 Compared to Three Months Ended July 31, 2022

Revenue


	Three months ended July 31,						Variance
(in thousands)	2023			2022			Dollars		Percent
Revenue	$	102,598		$	100,869		$	1,729	2	%
Cost of revenue	22,393			27,082			$	(4,689)	(17)	%
Gross profit	$	80,205		$	73,787		$	6,418	9	%
Gross margin	78.2		%	73.2		%

Total revenue was $102.6 million for the three months ended July 31, 2023, compared to $100.9 million for the three months ended July 31, 2022, an increase of $1.7 million or 2%, primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. During the three months ended July 31, 2023 and 2022, revenue recognized from subscription and associated support to our platform was 92%, while revenue recognized from professional services was 8%, compared to 91% and 9%, respectively.

Revenue for the three months ended July 31, 2023, included a positive impact from foreign currency exchange rates of approximately $0.4 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 July 31,				Variance
	2023		2022		Dollars		Percent
(in thousands)
Direct Customers	$	82,826	$	79,813	$	3,013	4	%
Third-Party Reseller Customers	19,772		21,056		(1,284)		(6)	%
Total Revenue	$	102,598	$	100,869	$	1,729	2	%

Revenue attributable to direct customers was $82.8 million for the three months ended July 31, 2023, compared to $79.8 million for the three months ended July 31, 2022. The increase of $3.0 million or 4%, was primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. Revenue attributable to third-party reseller customers was $19.8 million for the three months ended July 31, 2023, compared to $21.1 million for the three months ended July 31, 2022, a decrease of $1.3 million or 6%, primarily due to customer attrition.

Cost of Revenue and Gross Margin

Cost of revenue was $22.4 million for the three months ended July 31, 2023, compared to $27.1 million for the three months ended July 31, 2022, a decrease of $4.7 million or 17%. The decrease was primarily driven by employee-related costs, as personnel-related costs decreased $3.3 million and stock-based compensation expense decreased $0.6 million, reflecting lower headcount.

Gross margin was 78.2% for the three months ended July 31, 2023, compared to 73.2% for the three months ended July 31, 2022 as reflected in the discussion above.

Operating Expenses


	Three months ended July 31,				Variance
(in thousands)	2023		2022		Dollars		Percent
Sales and marketing	$	47,591	$	54,105	$	(6,514)	(12)	%
Research and development	$	18,890	$	18,819	$	71	—	%
General and administrative	$	17,955	$	20,384	$	(2,429)	(12)	%

Sales and marketing expense was $47.6 million for the three months ended July 31, 2023, compared to $54.1 million for the three months ended July 31, 2022, a decrease of $6.5 million or 12%. The decrease was primarily driven by employee-related costs, as personnel-related costs decreased $3.7 million and stock-based compensation expense decreased $2.1 million, reflecting lower headcount.

Research and development expense was $18.9 million for the three months ended July 31, 2023, relatively consistent compared to $18.8 million for the three months ended July 31, 2022, an increase of $0.1 million or less than 1%. The increase was primarily driven by personnel-related costs, which increased $0.9 million, as well as smaller increases in depreciation expense, among others. This was partially offset by a $1.4 million decrease in stock-based compensation expense largely due to decreases in the fair value of awards granted.

General and administrative expense was $18.0 million for the three months ended July 31, 2023, compared to $20.4 million for the three months ended July 31, 2022, a decrease of $2.4 million or 12%. The decrease was primarily driven by a $1.5 million decrease in bad debt expense, as well as employee-related costs, as personnel-related costs decreased $0.5 million and stock-based compensation expense decreased $0.4 million, reflecting lower headcount.

Six Months Ended July 31, 2023 Compared to Six Months Ended July 31, 2022

Revenue


	Six months ended July 31,						Variance
(in thousands)	2023			2022			Dollars		Percent
Revenue	$	202,051		$	199,671		$	2,380	1	%
Cost of revenue	43,743			51,810			$	(8,067)	(16)	%
Gross profit	$	158,308		$	147,861		$	10,447	7	%
Gross margin	78.4		%	74.1		%

Total revenue was $202.1 million for the six months ended July 31, 2023, compared to $199.7 million for the six months ended July 31, 2022, an increase of $2.4 million or 1%, primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. During the six months ended July 31, 2023 and 2022, revenue recognized from subscription and associated support to our platform was 92%, while revenue recognized from professional services was 8%, compared to 91% and 9%, respectively.

Revenue for the six months ended July 31, 2023, included a negative impact from foreign currency exchange rates of approximately $1.0 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than 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:


	Six months ended July 31,				Variance
	2023		2022		Dollars		Percent
(in thousands)
Direct Customers	$	162,871	$	157,046	$	5,825	4	%
Third-Party Reseller Customers	39,180		42,625		(3,445)		(8)	%
Total Revenue	$	202,051	$	199,671	$	2,380	1	%

Revenue attributable to direct customers was $162.9 million for the six months ended July 31, 2023, compared to $157.0 million for the six months ended July 31, 2022. The increase of $5.8 million or 4%, was primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. Revenue attributable to third-party reseller customers was $39.2 million for the six months ended July 31, 2023, compared to $42.6 million for the six months ended July 31, 2022, a decrease of $3.4 million or 8%, primarily due to customer attrition.

Cost of Revenue and Gross Margin

Cost of revenue was $43.7 million for the six months ended July 31, 2023, compared to $51.8 million for the six months ended July 31, 2022, a decrease of $8.1 million or 16%. The decrease was primarily driven by employee-related costs, as personnel-related costs decreased $6.1 million and stock-based compensation expense decreased $1.3 million, reflecting lower headcount.

Gross margin was 78.4% for the six months ended July 31, 2023, compared to 74.1% for the six months ended July 31, 2022 as reflected in the discussion above.

Operating Expenses