Back in March there was a changing of the guard at AI search platform Yext as founder and CEO Howard Lerman stepped aside, stating:
Today, it's time for me and Yext to take the next step in our journey.
With him went long-standing CFO Steve Cakebread, while the hot seat was taken over by Mike Walrath, then Chairman of the Board, who declared:
There’s a lot of work to do as well.
So, six months later, how’s that work coming along? Well, there are signs of improvement in the numbers, with Q2 revenues just reported of $100.87 million, up three percent year-on-year from $98.12 million. And the net loss has been reduced from $27.6 million this time last year to $20 million. Meanwhile the customer count has increased eight percent year-on-year to “over 2,870”.
So, progress, yes, but still slow progress. That said, the scale of what needs to be done is such that it’s going to take time to bear fruit, as Walrath reminded analysts:
This Friday, I think I will have been in the job for six months. Obviously, the first order of business was getting the team organized, which took a little bit of time, and the second order of business was a lot of the restructuring and efficiency work that we've been doing. I still fundamentally believe that the more efficient operation that we're creating and that you're starting to see on the expense side of the business is going to help us produce better results by having a more co-ordinated and more streamlined and a more agile organization.
But I think it's really important to understand that our sales cycles are six months plus and so our ability to fundamentally change bookings and retention dynamics, it's just going to take longer than it is for us to flex the expense lines. And so I think what we're beginning to see in the business are very early indications that better co-ordination, better management of our opportunities, but we're just so early in that process, and as we get into the next six months to 12 months, I think we start to see the fruits of all that work.
But there have been results to date, he added:
Providing greater clarity around our brand and platform capabilities are a key to re-architecting our go-to-market strategy. During the quarter, we made significant progress against this priority and transitioned the name of our Answers product to search and our core set of products, Listings, Reviews, Pages, Search and Knowledge Graph together as the Answers platform.
We did this to align with what we actually do for customers in our vision to help businesses answer every question from their customers, employees and partners anytime, anywhere. We made this change with the launch of our summer release that included 60 plus new features and upgrades across every area of the platform, reflecting our continued commitment to innovation and realizing our vision as the Answers company.
The growth in customer numbers was pointed to as indicative of positive momentum, with Walrath arguing:
I believe these customer stories are leading indicators reflecting that the ongoing re-architecture of our go-to-market is having an impact and we are well positioned to capture additional opportunities as we continue to improve all elements of our go-to-market motion to drive product innovation and expand customer use across the platform.
In conversations with dozens of customers and prospects this quarter, I've observed first-hand the increasing importance to the C-Suite of answering their constituents’ questions wherever and whenever those questions are being asked. The individual use cases and priorities of each customer vary from location based questions on third-party properties to various company controlled search use cases such as support search, but this is a clear priority across the diversity of customer use cases. While we remain cautious on our outlook, I am highly encouraged by our prospects to drive tremendous customer value.
Chief Operating Officer Marc Ferrentino was more upbeat, insisting that “major progress” has been made on cleaning up the Yext brand and messaging. He also reminded analysts of Yext’s basic premise:
We believe that every CEO has an answers problem. Every day, customers, employees and partners are asking questions about your business in an attempt to find information. Answering these questions is hard for any business since the answers are scattered across different content silos and digital channels are managed separately. With the Answers platform, Yext solves this problem by collecting and organizing your content, then answering these questions through seamless multi-channel digital experiences.
Ferrentino also picked up on the customer growth aspect, citing a number of use cases:
Texas Children's Hospital was a Listings renewal and upsell this quarter. Originally, they used Listings for several hundred of their care providers. After we were able to demonstrate incremental revenue lift, the customer decided to renew and increase their commitment to approximately 3,000 providers. This is a Listings customer that started small and by showing value we were able to expand our relationship over time and we see future potential opportunities to expand with other products.
Piedmont Health is another good example of a healthcare client who started with Listings over three years ago and seeing that Yext could deliver on both scale and speed invested in additional products, this quarter we expanded our agreement with Piedmont Health to include additional providers.
In retail, we've expanded our Listings and Pages relationship with the SPARC Group to include additional brands that we haven't worked with before, including Aeropostale, Eddie Bauer and Nautica. We also transformed Nationwide's support hub by adding Yext Search. After Yext was able to successfully deliver on Listings and Pages over the past two years, Nationwide decided to expand our relationship to include Support Search.
Internationally, HCA UK was a great win for us, as they are one of the largest private healthcare companies in the UK. We landed with Search this quarter, helped them solve the support pain point, but with over 3,000 consultants in 240 facilities, we see future opportunities to expand with this customer.
In Japan, we signed Tsuruha Holdings, one of the leading companies in the drug store industry in Japan, which will be using our Listing solution. After a competitive evaluation process, Box, the content cloud, selected Yext to transform the search experience of their Zendesk support site. The Support Search deal is their initial high priority use case and we see additional room for growth across the business.
Signs of improvement, albeit small ones. But it’s a long game being played here. Assuming Ferrentino’s assessment of the progress on simplifying the brand messaging, there should be further improvement to come here with the appointment of Raianne Reiss as the new Chief Marketing Officer, coming in with 20 years experience at the likes of Elastic, Juniper Networks and AWS. Walrath clearly has high expectations of her impact:
She is a complete marketing executive, who will oversee our whole marketing organization. We are not thinking about things from a Search being separate standpoint here anymore and I think that's reflected in the positioning.
So what we're excited about, and I think what Raianne is excited about here, is that there's a complete platform to sell her. It’s keyed in on solving some of the most important problems of the C-Suite, which are answering their constituent questions anytime, anywhere. And between our brand positioning work, which Raianne will continue to advance, as well as really importantly the demand generation background that she has and the ability to drive that we just really saw, she actually will bring lot to the table here.
Reiss is only two weeks into her role. Let’s check back in a few months and see how things are going.