What happened
Shares of Yext (YEXT 2.21%) plunged nearly 28% on Thursday even after the online search technology specialist announced slightly stronger-than-expected quarterly results.
To be sure, for its fiscal second-quarter 2024 (ended July 31, 2023), Yext's revenue climbed 2% year over year to $102.6 million, including a roughly $0.4 million positive impact from foreign currency exchange. On the bottom line, that translated to adjusted (non-GAAP) net income of $0.81 million, or $0.06 per diluted share. By comparison, most analysts were modeling earnings of $0.06 per share on revenue of $102 million.
So what
Yext Chairman and CEO Michael Walrath credited the company's solid quarter to its "sharpened focus on positioning the business for durable and profitable growth." He said that recent market interest in AI-enabled products should leave the company well positioned to benefit even amid continued macroeconomic uncertainty.
Indeed, while its top-line growth was modest, Yext's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared to $11.8 million from $0.9 million in the same year-ago period.
Yext's board also authorized a new incremental $50 million share repurchase program, noting there was $11.6 million remaining under the company's previous $100 million buyback authorization as of July 31, 2022.
Now what
For the full fiscal-year 2024 (ending January 31, 2024), Yext now expects revenue ranging from $405 million to $407 million (up from $404 million to $407 million previously), with adjusted EBITDA of $50 million to $52 million (up from $49 million to $51 million before) and adjusted net income per share of $0.29 to $0.30 (increased from $0.28 to $0.29 previously).
So what's the problem? For one, this was only a modest quarterly beat and raise that didn't exactly drop any jaws on Wall Street; most analysts were already expecting full-year revenue near the high end of Yext's new guidance. Yext stock was also up nearly 40% year to date leading into this report, leaving it vulnerable to profit-taking traders.
Perhaps that doesn't merit the nearly 28% haircut Yext endured today. But coupled with increasing skepticism over whether AI is truly the material catalyst Yext claims it should be, it's no surprise to see the stock pulling back today.
