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2 This presentation includes forward-looking statements including, but not limited to, statements regarding our expected financial and operating results in future periods, and statements regarding our expectations regarding the growth of our company, our market opportunity, product roadmap, including artificial intelligence, sales efficiency efforts and our industry. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "might," "would," "continue," or the negative of these terms or other comparable terminology. Actual events or results may differ from those expressed in these forward-looking statements, and these differences may be material and adverse. We have based the forward-looking statements contained in this presentation primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, strategy, short-and long-term business operations, prospects, business strategy and financial needs. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, but not limited to, our ability to renew and expand subscriptions with existing customers especially enterprise customers and attract new customers generally; our ability to successfully expand and compete in new geographies and industry verticals; our ability to expand and scale our sales force; our ability to expand our service and application provider network; the effects of the development and application of artificial intelligence on our customers and the market generally; our ability to develop new product and platform offerings to expand our market opportunity; our ability to release new products and updates that are adopted by our customers; our ability to manage our growth effectively; the effects of acquisitions of businesses or products and the related integration; weakened or changing global economic conditions; the number of options exercised by our employees and former employees; and the accuracy of the assumptions and estimates underlying our financial projections. For a detailed discussion of these and other risk factors, please refer to the risks detailed in our filings with the Securities and Exchange Commission, including, without limitation, our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, which are available at http://investors.yext.com and on the SEC's website at https://www.sec.gov. Further information on potential risks that could affect actual results will be included in other filings we make with the SEC from time to time. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this presentation. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this presentation relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date hereof or to conform such statements to actual results or revised expectations, except as required by law. Safe Harbor Statement
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3 Agenda Welcome & Safe Harbor Nils Erdmann SVP, Investor Relations The State of Digital Presence Michael Walrath Chairman & Chief Executive Officer Insights & Impact Christian Ward EVP, Chief Data Officer Michael Misiewicz Director, Data Science The Yext Growth Flywheel Chris Brownlee SVP, Product Jason LaFollette EVP, Chief Technology Officer Q&A Break From Platform to Pipeline Thomas Nielsen Chief Revenue Officer Reimagining Customer Success Yvette Martinez-Rea Chief Operating Officer Financial Strategy Darryl Bond Chief Financial Officer Q&A
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4 Michael Walrath Chairman & Chief Executive Officer
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5 How Yext is transforming, leading and innovating in a rapidly evolving landscape The State of Digital Presence
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7 Establish a Sustainable Cost Structure Reconnect with Our Core Accelerate the Pace of Innovation
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8 Adj. EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures; see Appendix for definitions and reconciliations of GAAP to non-GAAP measures.
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9 Gross Retention Rate Performance over the past 12 quarters Gross Retention Rate is an operating metric which prior to Q4 FY24 excludes usage. Refer to the Appendix for current and legacy definitions of Gross Retention Rate.
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10 Yext Product Timeline
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12 Strategic M&A to accelerate our roadmap R&D innovation focused on the customer
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13 Why We Will Win Fragmentation of search Rise of AI agents
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14 The Evolution of Search to AI Search
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18 How we will win Operate better than others Innovate more than others Allocate capital better than others
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19 Chris Brownlee SVP, Product Jason LaFollette EVP, Chief Technology Officer
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20 How data-driven insights and recommendations drive material improvements in digital presence The Yext Growth Flywheel
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21 Listings (Data) The largest data publisher network Knowledge Graph Pages Search engine optimized landing pages Social Key social engagement platforms Reviews 60+ reviews sites What Yext Does Well What a brand can control
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22 Digital Presence Management “Help us execute on that focus” Market & ROI Analytics “Help us understand where to focus” Yext customers need to understand “How am I doing?” before they can execute a strategy & More
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23 How am I performing? Against the market and my competitors? Where can I improve? Where and what is the ROI of doing this? What do I need to do next? Prioritize my actions, and help me execute. 1 2 3 Three Questions to Maximize your Marketing Strategy…
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24 The Evolution of Search to AI Search
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25 Google Yelp Apple TripAdvisor YellowPages Mapquest Hours.com Gemini OpenAI Perplexity Grok
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32 Rolling Fish Sushi | 4000 Ashley Ave, Portland, OR
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33 Rolling Fish Sushi | 4000 Ashley Ave, Portland, OR
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35 Rolling Fish Sushi | 4000 Ashley Ave, Portland, OR
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44 5900 Rockville Blvd, North Bethesda, MD 20852 Oakmere Outfitters How can Oakmere Outfitters improve visibility? Oakmere Outfitters has
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50 Listings (Data) The largest data publisher network Knowledge Graph Pages Search engine optimized landing pages Social Key social engagement platforms Reviews 60+ reviews sites Growth Flywheel
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52 Christian Ward EVP, Chief Data Officer Michael Miciewicz Director, Data Science
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53 The data driving the Yext advantage Insights & Impact
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54 Fragmentation will Accelerate From Agents to Agentic - ● Today, most AI search is still more intelligent than agentic (bottom right) ● High agency and intelligence means optimizing for agentic data use ● Yext optimizes this through the four primary data channels to Search & AI systems
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55 AI & Data Strategy Search & AI will soon merge - requiring the best, most authoritative data Pages (websites) Search engine optimized landing pages Listings (data) The largest data publisher network Social Key social engagement platforms Reviews 60+ reviews sites Scout AI Search and competitive Intel Agent
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56 Scout metrics to correct for distance in search rankings Scout’s analysis of competitive digital presence platforms Measuring brand presence in generative AI systems Three Examples Of market impact from data science insights (and Scout)
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57 80% of the difference? This right here
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58 Correcting for distance matters! Correcting for distance allows us to provide more useful recommendations for each location scanned by Scout
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59 Ranking methodologies change regularly While classic search used distance (regardless of category) - AI search will leverage memory and context more
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60 Scout metrics to correct for distance in search rankings Scout’s analysis of competitive digital presence platforms Measuring brand presence in generative AI systems Three Examples Of market impact from data science insights (and Scout)
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61 Yext outperforms competitors Results of Scout scanning
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62 Three Examples Of market impact from data science insights (and Scout) Scout metrics to correct for distance in search rankings Scout’s analysis of competitive digital presence platforms Measuring brand presence in generative AI systems
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63 Branded Where is the closest Apple Store? Simple What is the address for this dentist? Objective What time does this restaurant open? Citations in Search & AI Each question type is tracked to measure brands and source data Unbranded Where is the closest computer Store? Subjective Is this a good restaurant to get brunch? Complex Why does my dentist use invisalign over SureSmile?
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64 Most Queries are Combinations of Types Most Queries are Combinations of Types Branded Unbranded Objective Subjective Simple Complex Query Types Question
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65 Most Queries are Combinations of Types Most Queries are Combinations of Types Branded Unbranded Objective Subjective Simple Complex What time does the Apple store open in Chelsea Market? “ ” Query Types Question
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66 Most Queries are Combinations of Types Most Queries are Combinations of Types Branded Unbranded Objective Subjective Simple Complex “ ” Query Types Question Is Catch Steak a good restaurant near Chelsea Market?
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67 Most Queries are Combinations of Types Most Queries are Combinations of Types Branded Objective Subjective Simple Complex Unbranded “ ” Query Types Question What’s a good restaurant for a business dinner near Chelsea Market?Complex
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68 Trust is the Currency of AI, and Citations are Its Receipts AI search requires authoritative, consistent, and up-to-date data through listings, websites, reviews, and social signals
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69 Scout understands citations Both classic search and AI search make use of citations We ingest and analyze citation data at scale to understand how both SGE and classic search are affected by digital presence By collecting AI search data at scale, we can observe and analyze digital presence strategies employed by brands
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70 Brands Have Signatures in AI Search We can detect different marketing strategies and brand voices in AI Search as a result of the scanning technology we built for Scout.
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71 The Search Market will expand with AI AI Search expands beyond the classic search context and will need more structured data from brands
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72 Thomas Nielsen Chief Revenue Officer
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73 From Platform to Pipeline Turning product momentum into measurable growth
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76 646 sign ups on the waitlist (and climbing) 300+ customer conversations "This allows us to tell a cleaner story both from a "what do we ask people to do" as well as "here's how things are measured with very specific actionable things we did and the result we got out of it." So it provides a granularity, for me … It's exciting for us." "We NEED to be your first EMEA beta customer - immediately!" "Big news with Places Scout, that is awesome. I'm ecstatic, the local community, they're all buzzing about it... that's huge. I'm pretty excited that we can have a lot more granular view in how we're performing in the local space from just our standpoint, but then from a competitive standpoint as well... I can't wait to hear more.” "I can definitely see where this approach will allow us to unlock more of those insights. I think the data you showed today just obviously reinforces that. So, I think in those areas alone, it will show us the value.”
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79 GTM Strategy: Reseller Commitment to Reseller Channel New Resellers Activated Gross Retention Rate is an operating metric. Refer to the Appendix for definition. Gross Retention Rate Among top 10 resellers As of 1/31/2025 From 2/1/24-1/31/25 97% of resellers sell more than one product 70%+175+ As of 1/31/2025
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80 Vertical Focus Financial Services Retail Hospitality Food Services Other Industries Other Services Healthcare ARR is an operating metric; refer to the Appendix for definition. % of ARR by Vertical, Direct excl. SMB
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81 GTM Strategy Focus on the right accounts Full-funnel execution Unify our field teams
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82 Productivity Today our teams are smaller, there are better spans of control, and more opportunity per AE Productivity is calculated monthly by dividing incremental bookings by quota-carrying headcount for the relevant period
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83 Growth & Productivity Vertical Focus & Depth Future Proofing
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84 Yvette Martinez-Rea Chief Operating Officer
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85 Reimagining Customer Success Aligning structure, service, and strategy to deliver impact at scale
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86 ➔ Shrinking budgets led to contract downsizing ➔ Lack of essential features drove churn ➔ CS strategy was misaligned to customer needs ➔ Competition offered cheaper, bundled solutions THEN… Rethinking Customer Success
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87 Addressing Key Customer Themes “Show me how I’m doing” “Tell me what to fix” “Help me do more with less”
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88 Yext Customer Experience Customer Success Managers Partners Assistance & Concierge Services Training & Enablement Publisher Operations & Technical Support Expert Services Value Consulting
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89 Investment in Customer Success Improved Operational Efficiency Expanded Our Product Offerings Launched New and Improved Success Packages Strengthened our Partner Ecosystem
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90 Right Team, Right Structure, Right Cost. ➔ Restructured our post-sales org under one team ➔ Reduced costs across the org ➔ Improved resolution times, decreasing by two business days ➔ Retained industry-leading satisfaction at 96%
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91 “Show me how I’m doing.” “Tell me what to do.” "Help me do more with less.” Social Platform Listings Recommendations Automatic Review Response Reviews Insights: Themes & Summaries Social Optimal Post Times Generative Review Response We Built What Customers Want "The local community, they’re all buzzing about it… that’s huge. Especially for our local SEO team. It’s the first thing they’ve been excited about in a long time." –Head of Local SEO "This will show us the value. It’s something we’ve been trying to figure out for years — now we’ll finally have the insights to back it up.” –VP of Patient and Consumer Experience “I’ve really been enjoying the Insights tool…I really love how [the themes] are laid out.” –Digital Content Specialist ~1,000 businesses have accessed the feature since launch February Customers leveraging Listings Recommendations measured +10.56% increase in impressions and +8.33% increase in engagements from Google. “This is a great recommendation of what you need to clean up to maximize your listings. It’s very simple editing them in bulk…” –Senior Manager Global Retail Experience Customers leveraging Optimal Post Times expect to see an average of 93% increase in impressions from using the feature. 80% of customers have adopted using Recommended Post Times “Yext is saving us around 175 personnel hours a week spent on managing social media.” –Social Media Manager “Since we launched with the tool, we’ve seen our response rate grow by 50%... we’re responding to reviews 80% faster than last year.” –VP, Marketing “We’ve received over 70 reviews in the last three days—well above our usual volume. Thanks to Yext’s generative AI response feature, I was able to address them within minutes, and I’m incredibly grateful for its efficiency.” –Customer Loyalty Supervisor
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92 XX% Retention rate for Value Consulting Success Tailored For Every Customer CSAT across CS Programs CSAT across Services of top 200 customers have CS Packages Launched new and improved success packages Continued emphasis on value consulting and training Tailored strategic customer success for largest customers Scaled guided engagement models for mid-market and SMB
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93 Strengthened our Partner Ecosystem
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94 The Results: Customer Satisfaction is High and Improving
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95 Continued Focus on Gross Retention Rate Goal of 90%+ Gross Retention is an operating metric; refer to the Appendix for definition.
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96 A Broad and Diverse Global Customer Portfolio Hospitality Healthcare Financial Services Retail Restaurant Chains
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97 Strong Momentum with Opportunity Ahead Continue to Push 100%+ NRR Strengthen Mid-market Cross-sell and Upsell Opportunities Optimize Customer Success System
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98 Darryl Bond Chief Financial Officer
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99 Financial Strategy
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100 1 FY25 Performance Growth Opportunities Long-term Objectives 2 3 Section Overview
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101 FY25 Performance
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102 M A R G I N S Non-GAAP Gross Margin Non-GAAP Opex as a % of Revenue Adjusted EBITDA Margin Non-GAAP Operating Margin O T H E R K P I s Net Retention Cash Cash Flow from Operations Free Cash Flow Share Repurchases Year-End Summary *Basic and diluted $ in millions except per share data. Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP Net Income, Non-GAAP EPS, Non-GAAP Gross Margin, Non-GAAP Opex as a % of Revenue, Non-GAAP Operating Margin and Free Cash Flow are non-GAAP measures; ARR and NRR are operating metrics; see Appendix for further information, including definitions and reconciliations of GAAP to non-GAAP measures. T O P L I N E ARR ARR Growth Revenue Revenue Growth B O T T O M L I N E GAAP Net Loss Adjusted EBITDA Non-GAAP Net Income GAAP EPS* Non-GAAP EPS* $443M 13% $421M 4% $(28)M $67M $45M $(0.22) $0.35 79% 66% 16% 13% 93% $123M $50M $48M $18M
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103 2023 vs. 2025 Investor Day *ARR as presented includes usage and is an operating metric. Prior to Q4 FY25 we defined ARR to exclude usage as disclosed in filings through Q3 FY25. Refer to the Appendix for current and legacy definitions of ARR. Adjusted EBITDA Margin and Free Cash Flow are non-GAAP measures; see Appendix for definitions and reconciliations of GAAP to non-GAAP measures. Rule of 40 includes revenue growth % and Adjusted EBITDA Margin. 2023 Investor Day As of FY23 ARR* Revenue Growth Adjusted EBITDA Margin Rule of 40 Last FQ Rule of 40 TTM FCF New Product(s) (TTM) Market Dynamics: Commoditization driven by static market and search monopoly $407M 3% 4% 7% 12% $12M Chat 2025 Investor Day As of FY25 ARR* Revenue Growth Adjusted EBITDA Margin Rule of 40 Last FQ Rule of 40 TTM FCF New Product(s) (TTM) Market Dynamics: Differentiation driven by Search fragmentation and AI platforms $443M 4% 16% 20% 34% $48M Social Relate Scout
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104 ARR ARR as presented includes usage and is an operating metric. Prior to Q4 FY25 we defined ARR to exclude usage as disclosed in filings through Q3 FY25. Refer to the Appendix for current and legacy definitions of ARR. Expect continued shift to usage-based ARR in Reseller channel Direct ARR Stabilization & Inorganic Growth Contribution
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105 Net Retention Rate *NRR prior to Q4 FY24 is based on our legacy methodology which excludes usage. Refer to the Appendix for current and legacy definitions of NRR. Improving trends driven by increased gross retention
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106 Gross Margin $ in millions. Non-GAAP Gross Profit and Non-GAAP Gross Margin reflected above are non-GAAP measures; see Appendix for definitions and reconciliations of GAAP to non-GAAP measures. Supports ongoing R&D investment and attractive operating margins Consistently strong gross margins in the 75-80% range
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107 Operating Efficiency Amounts rounded for presentation purposes and may not sum. Non-GAAP OpEx, G&A, R&D and S&M as a % of revenue are Non-GAAP measures; see Appendix for definitions and reconciliations of GAAP to non-GAAP measures. Will continue investment in R&D and expect to gain further efficiencies in S&M Continued improvement from productivity initiatives to drive efficient growth
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108 Adj. EBITDA Performance Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures; see Appendix for definitions and reconciliations of GAAP to non-GAAP measures.
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109 Progress Reducing Dilution Continued focus on minimizing issuance dilution Shift to PSUs better aligns compensation with performance $ in millions. Issuance Dilution = Equity grants (net of forfeitures) divided by ending diluted share count (ordinary shares plus outstanding equity awards). Equity grants exclude PSUs which are included if/when awards vest.
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110 -1.1% CAGR in shares outstanding since FY22 Continue to repurchase shares opportunistically ● $31.9M remaining at 1/31/25 ● $50M additional in March 2025 Share Repurchases - $77M $23M $18M Share Buybacks
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111 Growth Opportunities
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112 Data-driven insights show strength of Yext Platform relative to other solutions Competitive intelligence and benchmarking data enable informed recommendations AI-enabled actions can optimize a digital presence at scale Scout Opportunity Impact: New Logo Wins Impact: Cross-sell to Yext customers Impact: Cross-sell of other Yext products
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113 ● Available through both Direct and Reseller partner channels ● Licensing model based on locations, comparable to other Yext products ● Potential for usage-based and tiered pricing structures in the future Scout Pricing and ARR Potential Measurements as of January 31, 2025. ARR is an operating metric; see Appendix for definition and further information. SCOUT High-Potential Entry for New Logos + Broad Upsell Across Existing Base + Cross-Sell Acceleration Expanding ARR + Increased NRR
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114 Cross-sell Yext to Hearsay-only customers Cross-sell Hearsay to Yext-only customers Cross-sell Relate & Actions to Hearsay Social customers New Logo acquisition via full platform vs. point solutions in market Hearsay Opportunity
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115 ● Cross-sell Yext products to 100+ Hearsay customers ● Cross-sell Hearsay products to 400+ Yext-only enterprise and mid-market FINS customers ● Less than 25% of Hearsay-only customers use Relate Hearsay Cross-Sell Motion
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116 FINS Product Multiples Platform adoption drivers: ● Centralized data ● Vendor consolidation ● Compliance-ready ● Scalability ARR is an operating metric; refer to the Appendix for definition.
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117 The most complete end-to-end digital presence platform in market Publisher network that includes AI platforms Comprehensive set of tools to manage, optimize and distribute data Platform Adoption Opportunity
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118 Core Product Adoption 76% of direct customers use 1-2 Products ARR is an operating metric; refer to the Appendix for definition.
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119 Long-term Objectives
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120 Growth Acceleration Platform New logo acquisition via broader product suite Reseller Channel Accelerate growth with additional products Scout Leverage Scout to execute cross-sell motion Product Roadmap Continue pace of product innovation & enhancements Multi-product adoption and cross-sell motion
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121 Methodical Capital Allocation Re-invest efficiently to drive organic growth Strategic acquisitions to drive inorganic growth Opportunistic share repurchases
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122 Progress Towards Rule of 40 *FY26 is based on the midpoint of our guidance as of March 5, 2025. Adjusted EBITDA Margin is a non-GAAP measure; see Appendix for definition and reconciliation of GAAP to non-GAAP measure. Rule of 40 includes TTM revenue growth % and Adjusted EBITDA Margin.
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123 Significant Upside From New Products and Relationships ● Scout presents multiple growth opportunities for upsell, cross-sell and new logos ● Hearsay products and talent create sizable cross-selling and up-selling opportunities in FINS, with Relate penetration at an early stage Increasingly Strategic Platform due to Search Fragmentation and Portfolio Expansion ● Search fragmentation underscores Yext Platform differentiation and strategic value ● Shifting market and enhanced product portfolio driving better product-market fit ● Opportunity to accelerate Yext platform adoption through Scout and integrations Strong Margins with Ongoing Commitment to Operational Excellence ● Efficient growth paradigm expected to drive continued strong profitability Meaningful Value Creation Opportunities through Disciplined Capital Allocation ● Continue to explore opportunities to accelerate value creation through M&A ● Share buyback program to offset dilution and enhance shareholder value Significant Progress with Continued Focus on Long-Term Financial Objectives ● Rule of 40 objective remains a key input into management decision making 123 Key Takeaways
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125 Appendix
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126 Non-GAAP Measurements In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this presentation and the accompanying tables include non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating expenses (sales and marketing, research and development, general and administrative) as a percentage of revenue, non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, and non-GAAP net income (loss) as a percentage of revenue, which are referred to as non-GAAP financial measures. These non-GAAP financial measures are not calculated in accordance with GAAP as they have been adjusted to exclude the effects of stock-based compensation expenses, acquisition-related costs, and amortization of acquired intangibles. Acquisition-related costs include transaction and related costs, subsequent fair value movements in contingent consideration, and compensation arrangements. Non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative) as a percentage of revenue, non-GAAP operating margin, and non-GAAP net income (loss) as a percentage of revenue are calculated by dividing the applicable non-GAAP financial measure by revenue. Non-GAAP net income (loss) per share is defined as non-GAAP net income (loss) on a per share basis. We define non-GAAP net income (loss) per share, basic, as non-GAAP net income (loss) divided by weighted average shares outstanding and non-GAAP net income (loss) per share, diluted, as non-GAAP net income (loss) divided by weighted average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive awards. In addition, beginning in fiscal 2025, we are utilizing a projected tax rate of 25% in our computation of the non-GAAP income tax provision. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenue and expenses and other significant events. Our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities. We believe these non-GAAP financial measures provide investors and other users of our financial information consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our results of operations. With respect to non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative) as a percentage of revenue, non-GAAP operating margin and non-GAAP net income (loss) as a percentage of revenue, we believe these non-GAAP financial measures are useful in evaluating our profitability relative to the amount of revenue generated, excluding the impact of stock-based compensation expense, acquisition-related costs, and amortization of acquired intangibles. We also believe non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics eliminate the effects of stock-based compensation and certain acquisition-related costs, which may vary for reasons unrelated to overall operating performance. We also discuss Adjusted EBITDA and Adjusted EBITDA margin, non-GAAP financial measures that we believe offer a useful view of overall operations used to assess the performance of core business operations and for planning purposes. We define Adjusted EBITDA as GAAP net income (loss) before (1) interest income (expense), net, (2) benefit from (provision for) income taxes, (3) depreciation and amortization, (4) other income (expense), net, (5) stock-based compensation expense, and (6) acquisition-related costs. The most directly comparable GAAP financial measure to Adjusted EBITDA is GAAP net income (loss). Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to GAAP net income (loss) as a measure of operating performance. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.
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127 In addition, we present non-GAAP constant currency measures of revenue. Constant currency as it relates to revenue provides a framework for assessing Company performance which excludes the effect of foreign currency rate fluctuations. Current period results for entities reporting in currencies other than U.S. Dollars (“USD”) are converted 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. We also present free cash flow, which is a non-GAAP measure defined as net cash provided by (used in) operating activities, less cash used for purchases of capital expenditures, inclusive of capitalized software development costs. Free cash flow margin is calculated as free cash flow divided by total revenue. We believe this is meaningful to investors because it is a measure of liquidity that provides useful information in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. We also discuss future free cash flow conversion rates, which we calculate as free cash flow divided by Adjusted EBITDA. We use these non-GAAP financial measures in conjunction with traditional GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, and to evaluate the effectiveness of our business strategies. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP. These non-GAAP financial measures may be limited in their usefulness because they do not present the full economic effect of our use of stock-based compensation and certain acquisition-related costs. We compensate for these limitations by providing investors and other users of our financial information a reconciliation of the non-GAAP financial measure to the most closely related GAAP financial measures. However, we have not reconciled the non-GAAP guidance measures disclosed under "Financial Outlook" to their corresponding GAAP measures because certain reconciling items such as stock-based compensation, certain acquisition-related costs, and the corresponding provision for income taxes depend on factors such as the stock price at the time of award of future grants, and certain purchase accounting adjustments including subsequent measurements, among others, and thus cannot be reasonably predicted. Accordingly, reconciliations to the non-GAAP guidance measures is not available without unreasonable effort. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net income (loss) and non-GAAP net income (loss) per share in conjunction with GAAP net income (loss) and net income (loss) per share. We have not reconciled our forward-looking Adjusted EBITDA to its most directly comparable GAAP financial measure of net income (loss). Information on which this reconciliation would be based on is not available without unreasonable efforts due to the uncertainty and inherent difficulty of predicting within a reasonable range, the timing, occurrence and financial impact of when such items may be recognized. In particular, Adjusted EBITDA excludes certain items including interest income (expense), net, provision for income taxes, depreciation and amortization, other income (expense), net, stock-based compensation expense, and acquisition-related costs.
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128 Operating Metrics This presentation also includes certain operating metrics that we believe are useful in providing additional information in assessing the overall performance of our business. 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 amounts related to usage above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature. 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 amounts related to usage above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature. We calculate usage by annualizing monthly amounts in excess of contractual minimum commitments in the current month. Beginning in the fourth quarter of fiscal year 2025, we refined our ARR methodology to include usage to align with management’s internal assessment of customers. Prior to that quarter, we had excluded what we previously referred to as overage. While this change may introduce additional volatility, we believe it provides a more comprehensive view of ARR that better aligns with the way we evaluate and manage our business. 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.
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129 Dollar-based net retention rate, or NRR, is a metric we use to assess our ability to retain our customers and expand the ARR they generate for us. We calculate NRR by first 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 NRR. The cohorts of customers that we present NRR for include direct, third-party reseller, and total customers. Direct customers include enterprise, mid-size and small business customers. We also reference dollar-based gross retention rate, or Gross Retention Rate, in this presentation which is a metric we use to assess our ability to retain our customers. We calculate Gross Retention Rate by first 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 contraction and churn. The current period ARR is then divided by the prior period ARR to arrive at our Gross Retention Rate. Beginning in the fourth quarter of fiscal year 2025, we refined our ARR calculation methodology to include usage. This update resulted in a corresponding change in our NRR and Gross Retention Rate, which is based on ARR. While this change may introduce additional variability due to changes in customer usage, it provides a more comprehensive view of our NRR and Gross Retention Rate. Any ARR obtained through merger and acquisition transactions does not affect NRR or Gross Retention Rate until one year from the date on which the transaction closed.
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