What happened
Yext (YEXT -1.46%) stock is soaring this week thanks to strong first-quarter earnings results and guidance. Before the market opened Friday, the marketing software stock was up 47.6% from the previous week's market close, according to data from S&P Global Market Intelligence.
Yext published its Q1 results after the market closed on June 6 and reported sales and earnings for the period that topped the market's expectations. The company recorded non-GAAP (adjusted) earnings per share of $0.08 on revenue of $99.45 million, while the average analyst estimate had targeted per-share earnings of $0.05 on sales of $98.55 million.
So what
Yext's revenue grew 1% year over year in the first quarter, and its annual recurring revenue rose roughly 3% year over year to reach $398 million. Meanwhile, the company's total customer count increased 5% to reach 2,970.
The marketing software specialist's gross margin for the period came in at 78.5%, up from 75% in last year's quarter. Even on such small sales growth, Yext's adjusted net income rose to $10.6 million from $7.8 million in last year's quarter thanks to improving margins. The stock is now up 109% year to date.
Now what
For the second quarter, management is expecting sales to come in between $101.5 million and $102.5 million, suggesting growth of roughly 1% year over year at the midpoint of the target. Meanwhile, adjusted earnings per share for the period are expected to be between $0.06 and $0.07.
Prior to its recent earnings report, Yext had been guiding for adjusted earnings per share between $0.22 and $0.23 on sales between $402 million and $406 million this year. The company now anticipates sales between $404 million and $407 million and adjusted earnings per share between $0.28 and $0.29. For comparison, the company posted sales of $400.9 million and adjusted earnings per share of $0.05 last year.
YEXT PS Ratio (Forward) data by YCharts
While revenue is growing at a relatively slow pace, Yext is showing that it can effectively manage costs in order to drive earnings growth, and investors have responded by bidding up the stock. The company now has a market capitalization of roughly $1.7 billion and is valued at approximately 4.2 times this year's expected sales.
