Yext, Inc.
Q3 2021 Earnings Call Transcript
Published:
- Operator:
- Good day, and welcome to the Yext, Inc. Third Quarter Fiscal 2021 Financial Results Call. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Yuka Broderick, Head of Investor Relations. Please go ahead.
- Yuka Broderick:
- Thank you, Paul, and good afternoon, everyone. Welcome to Yext's fiscal third quarter 2021 conference call. With me today are CEO, Howard Lerman; CFO, Steve Cakebread; and Chief Revenue Officers, David Rudnitsky and Patrick Blair.
- Howard Lerman:
- Well, thank you, Yuka. We had a solid third quarter. We closed 86 Answers-led deals in Q3, driving over 30% of our new and upsell ACV in the quarter and that compares to 20% of new and upsell ACV in Q2. It also includes our conversion of the states of New Jersey and Alabama to paid customers that represents our first customers in the government vertical, and we're seeing fast traction in another new vertical, higher education, with Bucknell University, Texas Christian University, and Adelphi University adding Answers to their Web sites. Our Knowledge Graph continues to grow with over 405 million facts now contained in it, growing 58% year-over-year. While we're focused laserly on revenue growth driven by our Land with Answers sales motion, we're also simultaneously focused on greater efficiency, particularly in GAAP sales and marketing as a percentage of sales, and we dramatically improved that metric this quarter, from 81% in the third quarter of fiscal '20 to 64% in the third quarter of fiscal '21. This helped drive our Q3 non-GAAP loss per share to $0.02, well above our guidance of $0.07 to $0.09 loss. We don't believe these are temporary improvements. We are committed to driving sustainable increases in operating margins and will continue to take action on cost efficiencies in the coming quarters. Land with Answers is efficient.
- David Rudnitsky:
- Thanks, Howard, and I will further review of Q3. The sales org had a solid Q3, new customer activity continues to improve and gross retention was in our historical range. In Q3, overall close 107 new and renewal deals with at least $100,000 of total contract value. This includes 10 deals with more than $1 million of total contract value. The total number of ex-mid-market and enterprise customers increased 28% year-over-year to nearly 2300. This excludes our SMB and third party reseller customers. Our quota-carrying sales rep count at the end of Q3 was nearly 240. We're on track to reach our target of 255 quota-carrying sales reps by the end of the fiscal year, consistent with our original plan.
- .:
- Steve Cakebread:
- Thank you, David. Hey, our third quarter revenue grew 17% year-over-year to $89.1 million and unearned revenue increased 20% year-over-year to $129 million. Annual recurring revenue, our ARR metric at the end of Q3 was $346 million. That's up 18% year-over-year from the 293 we reported a year ago quarter. Our trailing 12 months net dollar based retention, which excludes our SMB customers was 103%, and our trailing 12-month net dollar based retention for direct enterprise, which also excludes our SMB and third-party resellers was 104%, while our gross retention was solid within historical levels, what we saw was muted upsells, particularly in our customers with retail footprint, and in EMEA, where there's another round of lockouts. In the near-term, we continue to see customers be conservative with expansions, given the volatile macro-economic environment, but in the long run, we expect our upsell rate to return to historical levels, as we continue to grow after since the existing customer base and expand with other products and services as well.
- Yuka Broderick:
- Thank you, Steve. Before we move along to Q&A, we would like to invite you to our analyst day, which we plan to hold on Wednesday, March 17, 2021. Joining the Q&A session will be CEO, Howard Lerman; CFO, Steve Cakebread; and Chief Revenue Officers, David Rudnitsky and Patrick Blair. Paul, can we please open to questions.
- Operator:
- We will now begin the question-and-answer session. And our first question today will come from Arjun Bhatia with William Blair. Please go ahead.
- Arjun Bhatia:
- Great, thank you. Steve, if can maybe just start off with you on the guidance for Q4. We typically see that being a seasonally strong quarter for you, where I think the guidance implies a pretty meaningful slowdown in growth and a step down in revenue. Can you just maybe dig into those dynamics a little bit more, and the assumptions that you have baked in there? And is there an uptick in turn or new logos slowing down in Q4, so maybe help us understand those dynamics a little bit?
- Steve Cakebread:
- Yes, that's a great question. I mean, as I said in the scripted comments, we're trying to be realistic here. We're looking at lockdowns coming and going, and we think this quarter is probably going to be more challenging than that we saw in Q1 and part of Q2. So we're just being realistic. Like I said on the call, our gross retention is doing quite well, but we need upsells as well from our customers, and I think just given uncertainty around the world that we're seeing, we're going to sit and say, look, we're going to deliver these results. We're still focused on improving operational activities as well, but I think on the revenue side, we just really -- Q4 is a big quarter. It doesn't necessarily add to revenue in the quarter, it'll set us up for next year, but I just think the uncertainty in the global macroeconomics right now, we're just going to be realistic about what we can do, and deliver those results.
- Arjun Bhatia:
- Got it, thank you, and Howard, I saw an announcement that you guys made that you had a new WordPress integration with Answers. There's obviously a pretty big WordPress footprint out there. Can you just help us understand that opportunity, what it means for Answers adoption? And should we think of that as being similar to the Adobe partnership that you have or is there a different dynamic at play there?
- Howard Lerman:
- The WordPress differs -- thanks for the question. The WordPress integration addresses a little bit of a different segment. The bigger enterprises tend to use an Adobe -- the Adobe Experience Cloud. The WordPress integration really is targeting more of some of our CBU customers. The biggest bottleneck for us is often getting the Answers integration live on a Web site, and so, the WordPress integration makes it so that anybody using WordPress can do it without code. They can just easily plug it in, turn it on. So that has been a nice little way to get faster with a bunch of sort of mid-sized customers that want to use Answers.
- Arjun Bhatia:
- Perfect, thank you.
- Operator:
- And our next question will come from Stan Zlotsky with Morgan Stanley. Please go ahead.
- Unidentified Analyst:
- Hi, this is . I was wondering if you could give us some more context on some of the success you've had with Answers versus other areas of the business, and kind of when we can start to think about uptick in there offsetting some of the uncertainty that you're seeing in this and just kind of the timing of when we can see that kind of move the needle? Thank you.
- Howard Lerman:
- Yes, thanks for the question. First off, in Q3 we closed 86 Answers deals, and I just want to be clear, that's not free trials, that's closed business in the quarter, and that represented 30% of our new ACV, new in upsell globally, and by the way, that compares to 20% is what we saw in Q2. So we are seeing tremendous momentum in Answers. In addition to that, Land with Answers, it is clear, is a more efficient sales motion. I think we've been talking about this for the past couple quarters, of landing light with Answers, and it's not a new strategy, it's a new sales motion to land with the product that addresses 100% of the world that every client needs, every business needs in their Web site. We can get out there, we can land with this product, and we can upsell it. And so you've seen us be able to penetrate new markets like government, new markets like higher education, go check it out on Bucknell.edu or TCU.edu, you can -- or even the World Health Organization, if you go to WHO.int, that's their Web site, and click to their COVID-19 site you'll see we're answering tons and tons of questions there. This is a really big opportunity. We're completely focused on both revenue growth through acceleration of Answers, but also at the same time we're focused on operational efficiency, and that's what you saw in Q3, like we pointed out on the script to basically suggest we went from minus, I think -- we were minus $0.02 on our EPS, showing the -- and the decrease from 81% of revenue in sales and marketing to 64% year-over-year. So we are seeing huge efficiencies in addition to our ability to acquire logos with 86 closed in the quarter.
- Unidentified Analyst:
- Got it. Thank you very much. That's it. Thanks.
- Operator:
- And our next question will come from Naved Khan with Truist Securities. Please go ahead.
- Naved Khan:
- Yes, thanks a lot. Two questions, so on the last call, on the second quarter call, I think you guys had talked about sort of a bottleneck or almost too much demand for Answers, where it just takes a lot of time to onboard customers, any progress in removing that? And I think you also spoke about self-serve as potentially a solution. Can you maybe touch on that a little bit? And then secondarily, can you also talk about the Adobe partnership and any early results from that channel that you might have to date?
- Howard Lerman:
- Naved, this is Howard. I'll take the first part of your question, and I'll kick it over to Dave for the Adobe update. We're very focused on removing friction to be able to be a self-serve product. The two main things that we did in the Q that made that accelerate were, first, we went general availability with our Hitchhiker program, and Hitchhiker program, that's our brand for Yext admin, those are the super experts in our platform, and historically, it's been pretty hard. You had to be an expert to set up and use Yext. You really had to know your way around. You didn't have to be an engineer, but you had to be -- have a lot of institutional knowledge to be able to configure things. And we've been working really hard to simplify that and to put better training in place, and we've seen a great pickup in people becoming Hitchhikers, and now, if you go to our site, it's funny, because you can almost track what's happening in the flows and stuff because if you just go to our Web site and you click Free Trial you go through that. There is a self-serve experience there, and there's quite a lot of people coming through that every day, and then what happens is we still have to get people set up manually, helping them get their Knowledge Graph set up, except if you really know and you become a Hitchhiker you can start to do this yourself. So we've seen some pickup there. And then once you have the data in, what we need you to do is put it up on your site, and that's where things like the WordPress integration, and that's the second big thing we did this quarter, to remove the friction from that flow to become more self-serve. With a few clicks you can set up Answers on your WordPress site if you are a WordPress user and have set up your data in your Knowledge Graph. We continue to make progress there. We continue to see quite a lot of free trial requests every day. You can almost go through and monitor the flow; you'll see every time you log in and try to do something you're going to see an update there. This is a process; it's not going to happen overnight to become a self-served landing, but that is the sort of north star here, and we're excited about the progress we've made.
- David Rudnitsky:
- And Naved, it's David Rudnitsky, and just to answer your question about Adobe, we've got a really good motion going with them now, and I feel really good about it. I've had success building a partner program in the past, and we've got a solid bottom up top down engagement, we started to get our Field A's engaged on account base together pursuits, we've started to engage at the highest levels with our executives, I feel like the collaboration is going really well, and we've had a few deals that were completely influenced by our relationship with Adobe this past quarter, and as I look at the excitement of going into the Q4, we've got a number of engagements where we're partnering with them together on joint pursuits in a very bespoke way, and we found a couple great use cases to work together. So I feel really good about it.
- Naved Khan:
- Thank you, maybe a quick clarification, if I may, on the first part of the answer. So if I had to just think about the backlog, whether it's Answers or the core offering, how does that look like compared to the prior quarter?
- Howard Lerman:
- We continue to drive great demand for Answers. It's clear every company needs it, it's clear that a free trial is a compelling offer, particularly for mid-market companies, and the hope is that with integrations with companies like WordPress that are large CMS companies in power, tons of small business and mid-sized business Web sites will accelerate that. For the big companies, they come through and that still requires a real Yext Admin to be with you, and that's more on the company that's using Experienced Cloud, or a company that's using a bigger CMS that wants to use our platform, and so, they'll end up in Dave's hands.
- Naved Khan:
- Thank you, Howard. Thank you, David.
- David Rudnitsky:
- Thank you.
- Operator:
- And our next question will come from Matt Coss with J.P. Morgan. Please go ahead.
- Matt Coss:
- Hi, good afternoon. Thank you for taking my questions. One for David, was there any uncertainty near the end of the quarter as we were leading up to U.S. Election? And then Steve, can you talk about the mix of sustainable or durable OpEx improvements versus one-time savings from Yext ONWARD Conference and less travel this year?
- David Rudnitsky:
- Hey, Matt, as far as the Election, surprisingly, no, I mean, it was a point of interest when you engage with the customer to talk about it, it was on top of mind, but it didn't influence any of our deal cycles whatsoever that I know of. It's a non-issue actually.
- Steve Cakebread:
- Yes, I'd like to just add to that. I mean, we had a really solid Q3, especially in the United States, especially United States.
- David Rudnitsky:
- Yes, and then with regards to sustainable yes, obviously, a third of the spend was around ONWARD, we're rethinking that a little bit. We'll see what happens next year, depending on how the world opens up. The other there yes, obviously, the travel is at close to zero, not zero, but we're also making huge progress in infrastructure. As Howard said, the sales motions with Answers has changed dramatically, and we think a majority of that savings is going to be sustainable. We're still working on processes and infrastructure, self service is going to help. So I feel fairly comfortable, we're on a good trajectory to continue to improve our OpEx as a percent of revenues and drive those down, and we'll see how things go next year as well, but we're really got our teams looking at changing processes, the sales motion is changing with both self-serve and Answers and feel good that will be on a sustainable path to our non-GAAP breakevens at some point.
- Matt Coss:
- Okay, that's helpful. Thank you, and then maybe one last one, so I know you're being prudent with the Q4 guide, and especially mid-COVID resurgence and the lockdown. It's hard to predict the future, but I mean, do you think Q4 might be low watermark in terms of growth, or any additional, we don't know, we don't know.
- David Rudnitsky:
- That's a great question, and to be fair, Howard, and I have that conversation almost daily as to where's the bottom in all of this? I will say that, we're being realistic in our growth, and it's not because we think, we know we're not losing customers, but we also know that they're not stepping in yet. The renewals, like I said on a gross basis were historically good, and we feel good about that. So, as people start, not just us, but as other companies start to see daylight at the end of this tunnel with a goal of 255 sales reps with good gross retention, with new products, we feel that we're going to be in great position to start to benefit from that up tick, your question is a million dollar question, though, is when does that start, and I just think with the uncertainties coming into Q4 for everybody, it's hard to call that bottom at the moment but we'll see as the next couple of months progress what happens here.
- Matt Coss:
- Thank you very much.
- Operator:
- And our next question will come from Rohit Kulkarni with MKM Partners. Please go ahead.
- Rohit Kulkarni:
- Thank you. …
- Yuka Broderick:
- Rohit, we can't hear you. Can you please try asking your question again, you're cutting in and out?
- Rohit Kulkarni:
- Sorry about that. …
- Howard Lerman:
- Rohit, one more time please. Let's go onto the next question, we'll get Rohit back in the Q&A please.
- Operator:
- Certainly, and our next question will come from Mark Mahaney with RBC. Please go ahead.
- Mark Mahaney:
- Okay, two questions, please. I'm trying to figure out the materiality of answers to Yext business that 30% of new TCV is useful, of total TCV now, does that mean it's probably high single-digits, low double-digits, and then you just talked about other products and solutions, and you mentioned it earlier in the script, could you spend a little bit of time on what those are? Thanks a lot.
- Howard Lerman:
- Hey, Mark. Most of our deals that we're starting to beat that, we started to see are really being Answers led which means that Answers are huge part of our deal and huge part of the deal and often is the deal. If you look at higher Ed, for example, that's a 100% Answers led deal and 100% Answers deal at Bucknell University, Texas Christian University, if you look at the States that we sold into and government, those are primarily Answers deals, almost entirely Answers deals. That's the main use case that that's being solved for there. So it's material, and if you look at the biggest deal that Dave talked about close with the top three financial institution, that was the biggest deal in the quarter, I think we said how big it was, it was about $2 million of ACV. That was an Answers deal, and that was the main use case there. Their Head of Digital came in sat down with Dave and I right before the pandemic started, and he said, "Oh, gosh, what I'd love is a Google for my own Web site," and boy, we were like, "Do we have something for you?" And that is where, Answers materialize from that deal. So Answers is material part of our business, and going forward, Mark, the best way, I think to think about us as we've retuned our company a little bit this year we're search company, and, if you look at the biggest companies out there, every customer journey starts with the search when you think about our new products where we might go, there are extraordinary applications for search across every company, and that doesn't mean just on a Web site, that could mean search internally, that could mean search for a product, that could mean search for content. That means all sorts of technologies around search, and we think that with landing with the Answers, we're setting ourselves up to be able to be a search partner, for every company for every company that needs it, starting with their own customer journey, but expanding into all the areas across their enterprise where they need search all by the way, I should mention founded on that original principle that if you read S1, the very first sentence says, "Yext is a knowledge engine." It's all about the knowledge graph. The breakthrough Yext is knowledge-based search, no other search company out there does knowledge-based, search-based on NLP, it's all index-based, it's all keyword-based. Our unique angle, our differentiator is knowledge-based, search-based on a knowledge graph. We're going to do that for every company that we can, in every area that we can, in all kinds of new markets as we build what we think, what I think could be the second biggest search company on the planet.
- Mark Mahaney:
- Okay, thank you, Howard.
- Operator:
- And our next question will come from Koji Ikeda with Oppenheimer. Please go ahead.
- Chad Schoening:
- Hi, guys, this is Chad Schoening on for Koji. Thanks for taking the questions. Two questions here, if I may. First on free trials, I know you haven't given an exact number on the conversion rate there in the past, but can you share any incremental details there on how that's kind of trended throughout the quarter, and what your expectations are there kind of into the New Year? And then I have one follow-up. Thanks.
- Howard Lerman:
- Yes, free trial is one way. We're getting customers to come in. It's a marketing offer. It's a limited time offer. We started in March. We may keep it, we may not, it's going pretty great. It's been very successful in generating interest, it has been very successful in generating leads for our sellers, it's not the only way we land, you know, for example, I think we mentioned that top three bank, that top three financial institution, we often land without a free trial and that's okay too. The free trial is more compelling for mid-market or CBU customers or prospects than it is for enterprise. We look closely at the conversion rates. It typically it's classic SaaS. If you look at the classic softwares and services company, you'll see conversion rates between 20 and 50%, depending on the industry and the segment, and we're right in line with that.
- Chad Schoening:
- Great. That's super helpful, and then my second one is actually on the technology side, and thanks again for that demo at the onset of the call there that was helpful. I'm just thinking about the kind of increasing prevalence of chatbots and AI, and curious how you're leveraging the increased philosophy of search data from all the customer queries on your platform to kind of improve that value proposition to your customers, and is that all finding its way into kind of your R&D roadmap? Thanks.
- Howard Lerman:
- It's funny. It's a really great question, Chad, because as we all know with AI and machine learning, data is oil. Data is gold. The more data you have, the more questions you have, the better your models get, the more tests you can run, the better answers you can give. So the more queries we handle and we are beginning to handle lots and lots and lots of queries every day, and like I told you, it's our objective to be the second biggest search company on the planet, the better and better our search results get, which is happening continuously. We just put out a search release in the quarter. I think we actually put this out into general availability this week, or last week we met had a multi-algorithm improvement where users can of our system hitchhikers can pick which types of algorithms they want to apply to which types of entities, which is super cool. That means, hey, if you're using maps, I might want to use a direct answer. If someone asks for a phone number, but I might want to use extractive Q&A, which is a different algorithm for someone that's asked a question, which is contained in an FAQ, these are all the parts that make up a modern search engine. And so, to your point, the more data you have, the better answers you're going to give, and then you also asked about chatbots and chatbots. Let's be clear when we talk about chatbots, there really are a lot of different kinds of chatbots out there. Most of them aren't really chatbots at all, but are just chat windows that try to get you to put your phone number in which become a lead gen form, and then someone is texting you that you didn't want to talk to and they have your phone number. So that's what most chat quote chatbots look like, and that's not really a chatbot. That's really just a form to get you to get your phone number. We think, and by the way, chatbots or chat or live chat, it turns out it's actually kind of expensive. It costs money everytime someone chats with you on the other end, if there is someone, even if they're in an outsource center in the Philippines or India or wherever they're chatting with you, that's still costs dollars per session, sort of like a customer support call. So we think that search has a place where it will always be, which is to deflect as many chats or as many customer success or service calls as possible, you know, Krispy Kreme for example in that example we gave earlier, they've seen a reduction in call volume to their call center of 42% since putting answers up, that's an astounding savings, and so, simply by being able to ask a question and search on a site and get a quick answer that will deflect a lot of people that would have otherwise tried to chat, tried to call thereby saving the company money. So chatting is really getting pretty deep into your personal account situation, and that's pretty different than, "Hey, what's the routing number for a bank? Or, "Hey, you know, how do I check my Krispy Kreme reward card balance? Or, "Hey, what's the phone number of Dr. Rudnitsky?"
- Chad Schoening:
- Great, thank you.
- Operator:
- And our next question will come from Ryan McDonald with Needham. Please go ahead.
- Ryan McDonald:
- Hi, thanks for taking my questions, Howard, I guess expanding upon sort of your previous answer. You've talked a lot about with answers that the really the value propositions are one driving increased conversions and driving more sales by e-commerce on people's Web sites, but then also customer service deflection. I'm just curious as you're going out there and sort of trying to demonstrate the ROI of answers, which use case seems to be resonating more and has that shifted at all, uh, given sort of the strong trends we've seen early in the holiday season in terms of e-commerce trends as well as sort of customer service interactions over digital channels.
- Howard Lerman:
- Well, first off Ryan, I'd love to -- you did a great job with the picture with those first few value props, we are hiring quota carrying reps still in North America, and we look forward to your application. If you go to the Yext Web site and search for jobs, you should search for that in Yext Answers, you will see a list of jobs because of our NLP. So, great job with the first 2 value props, but there was a third too, which you also sort of hit on, which is the ROI. So the three value props of Yext answers when we sell, we run in our selling program, in our magic pitch are number one, that every customer journey starts with the question, and there're two places where that can happen on Google, your own site, and when you have, when someone's on Google, they're going to see ads and when they're on your own site, you keep control and they're going to get answers from you directly. I think by the way we also showed from our blog post and we talked about this on the script that branded search and searches on Google are intricately linked overnight after putting up our own Yext answers box in our own site, brand searches for Yext went down 34%, and they correspondingly went up on our own site, we saw roughly the equivalent searches happen that we were able to handle. So it really depends on the industry, what the particular value prop is to the business, and so, in the case of a retailer, it might be call deflection, but in the case of a healthcare company. Boy, it might be all about offering virtual appointments, we've seen certain cases of companies that begin to offer the ability to book a COVID-19 test within their search experience on their site, and you see a rocket in search volume across and we're talking big numbers here, people searching on their Web site for COVID-19 tests and booking a virtual, sorry booking a real appointment to show up at a physical time at a later date. So it really just depends on the industry, but the third value prop is the intelligence, is the fact that you can see what people are asking, and you get real time insights into those questions and can exactly see how many phone calls you got, how many driving directions you got off that modern dynamic search interface, which looks a heck of a lot like Google except it's on your own site where you have your own customers and keep all those conversions for yourself as opposed to send them to your competitor. So, I look forward to your -- …
- Ryan McDonald:
- Yes, yes, super helpful, and yes, we'll look for that online I suppose. I guess, my second question is I've seen that the recent expansion to the Japanese language, and it looks like maybe you're starting to have some early success there, can you talk about sort of the resources you're now looking to allocate to that Asia-Pac region as a growth opportunity, maybe I'll start selling there for you?
- Howard Lerman:
- Patrick, you want to take that question?
- Patrick Blair:
- Yes, I could take that question. Thank you very much for the question. We got a great launch of answers in Japan, as it sounds like you've probably seen we have our sales team there trained up where we're trying to collaborate globally across sales to make sure that the magic pitch. Howard just mentioned, is obviously translated the right way into Japanese, and that team is all out there trained and ready to go. So that team is ready to go and rock in terms of allocation of resources. We have a marketing team in Japan. We have a sales organization in Japan. We have hitchhikers in Japan, so we're ready to go with answers there.
- Ryan McDonald:
- Excellent, thanks.
- Operator:
- And our next question will come from Tom White with DA Davidson. Please go ahead.
- Tom White:
- Great, thanks for taking my question. Howard, in the beginning of the prepared remarks you talked at length about Google and your answers not ad -- not ads kind of messaging, any early date or kind of thoughts on how that message that kind of go-to-market messages resonating with your customers and I guess Google's obviously an important partner for you guys for the location's product, and presumably for your customers as well, so maybe just comment on, I guess how you how you guys kind of envision yourself kind of bouncing those dynamics. I mean, is that an issue or is that not something that I should be thinking about? Thanks.
- Howard Lerman:
- Thanks for the question. It's not an issue to marketing campaign for our search product, very different than a data partnership with a math team. Look, we are working really hard to get the word out there about Yext as a search company. I told this to, just a second ago to Mark when we were talking, that when you look at the biggest companies, every customer journey, every customer experience starts with a question, starts with the search, and we've been for the last decade building up enough structured knowledge and enough technology in the NLP side to become a fully formed search company, and what you were seeing is site search as the first sort of portion of that on top of the Knowledge Graph. This isn't a change in strategy. This is a change to what you've seen this year as a change in sales motion with our land with Answers motion and which by the way, is clearly more efficient because you've seen quantitatively the improvements in sales and marketing over revenue quarter-over-quarter, it's 64% of time versus 81% at last time, and so, everything we've been doing is all about repositioning and positioning this company as a search company, becoming a fully formed search company of which site search and Answers is the first part.
- Tom White:
- Got it, thank you.
- Operator:
- We have our final question comes from Rohit Kulkarni with MKM Partners. Please go ahead.
- Rohit Kulkarni:
- Hey, thank you. Thank you for squeezing me in. Hope everybody hear me fine. I guess question on November. Are you seeing budgets allocated to Yext Answers coming from different pockets in their company as it feels to me that they're historically probably came from more IT, more people managing the Web site and like that? Are you seeing kind of deeper pockets like if 34% of branded search results came back to Yext, then probably that's a very big potential ROI for a large company spending a lot of money on Google. So any anecdotes that you can share on whether you're seeing kind of budgets to Yext coming from other places within a large organization?
- David Rudnitsky:
- Hey, Rohit; Dave Rudnitsky, yes, what's interesting is we're seeing budgets come from a multiple sets of executives, it could be from the Chief Digital Officer, it could be from the Chief Marketing Officer, it could be from the CIO, it could be from the Chief Experience Officer, what we're hearing from all of our customers and the reason I feel so good about what we did this past quarter, is we're in the middle of their probably their most important initiative right now, which is digital transformation. We just concluded our client advisory board late yesterday afternoon, and we had 20 of the biggest brands, not just the Yext but 20 of the biggest important name brands in the world, and they laid out for us their top initiatives, and interestingly enough, the four of them were all focused around digital transformation, it was the acceleration of it, they know they need to change quickly, just like sales companies have changed their sales motion, they need to change the way they do business. So it's acceleration of the digital transformation. It's the ability to make it pervasive. So not just go after a silo, will go after the entire Corporation and change the way they do business. They have to have a strategy of balancing both potential go back to work, physical with digital, and the other thing they really want and Howard alluded to this before, they want actionable insights, they want to understand what's going on with the business and how to react, and our platform puts us right in the middle of and that's why we're starting to see all of these different lines of business or lines of executives come in and actually put money on the table, and it's exciting, because whether it's coming from the CTO, or the CIO, the CTO, the CXO, we've been interacting with all of them, most of our sales cycles, and it's exciting to see. So we're not too siloed from where the budgets are coming from.
- Rohit Kulkarni:
- Okay, great, and if I could ask one follow-up, different topic on proportion of kind of spend or budgets coming from restaurants and retail, how is that trending and do you think the renewals as well as new wins in that in those two categories have kind of bottomed out?
- David Rudnitsky:
- Well, we talked, I think at our earnings call for Q1 about a Tale of Two Cities, where there are certain types of industries which are clearly very affected by COVID-19, and there's no question that a number of those industries that you transact, for example off of Google Maps with to go there physically, whether it's a hotel, whether it's a restaurant, whether it's an airline, wherever you're interacting in the real world, even healthcare. Those industries have been really hurt by the pandemic. They've been slowed. Our gross retention levels have been solid. They've been at historical or around historical levels in the past couple of quarters. Like Steve said, what they haven't done has been willing to expand. So what we've seen is, they've kind of helped their holding, they've been slower to drive expansion particularly in Europe and that's where you've seen the net retention number come down a little bit, but the gross retention number that we look at has been solid.
- Howard Lerman:
- We'll bring the call back to Yuka.
- Yuka Broderick:
- Right, everybody thanks so much for your time. We'll look forward to talking to you again next quarter and we'll look forward to see you at our Analyst Day in March. Have a good night.
- Howard Lerman:
- Thank you all. Bye.
- Steve Cakebread:
- Thank you.
- Operator:
- And the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Other Yext, Inc. earnings call transcripts:
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