Yext, Inc. (YEXT) FY 2022 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward Looking Statements," the following discussion and analysis contains forward looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part I, Item 1A in this Annual Report on Form 10-K.

Overview

Yext organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. Our platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. Our platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which we refer to as our Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. Our platform powers all of our key features, including Listings, Pages, and Answers, along with its other features and capabilities.

We sell our platform throughout the world to customers of all sizes, including our enterprise, mid-size, and third-party reseller customers. In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.

Revenue is a function of the number of customers, the number of licenses with each customer, the package to which each customer subscribes, the price of the package and renewal rates. We offer subscriptions in a discrete range of packages, with pricing based on specified feature sets and the number of licenses managed by the customer as well as on a capacity-basis.

Fiscal Year

Our fiscal year ends on January 31st. References to fiscal 2022, for example, are to the fiscal year ended January 31, 2022.

COVID-19 Update

The COVID-19 pandemic has significantly disrupted business operations for us and our customers, as well as suppliers, and other parties with whom we do business. Such disruptions are expected to continue for an indefinite period of time.

We have adopted several measures in response to the COVID-19 pandemic and continue to monitor regional developments to inform our operational decisions. Our offices have been open on a voluntary basis in accordance with guidance provided by government agencies, although currently the majority of our employees are still working remotely. While we continue to hold virtual events, we have also resumed in-person marketing events. The uncertain duration of these measures have had and may continue to have negative effects on our sales efforts and revenue growth rates. We continue to be committed to our business, the strength of our platform, our ability to continue to execute on our strategy, and our efforts to support our customers.

We may continue to see some existing and potential customers, in particular customers in industries that have been highly impacted by the pandemic such as retail and food services as well as certain geographies such as Europe, reduce, suspend or delay technology spending, request to renegotiate contracts to obtain concessions such as, extended billing and payment terms; shorten the duration of contracts; or elect not to renew their subscriptions which could materially adversely impact our business, financial condition and results of operations in future periods. The ultimate extent of the impact of the pandemic will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and its variants, vaccination rates and efficacy and the actions taken to contain and address the impact of the pandemic, among others. However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be fully reflected in our results of operations and overall financial performance until future periods. See Part I Item 1A “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business.

Recent Developments

On March 7, 2022, Howard Lerman notified our Board of Directors of his intention to step down from his position as Chief Executive Officer of the Company effective March 25, 2022. Michael Walrath, the Chairman of the Board of Directors, will succeed Mr. Lerman as Chief Executive Officer, principal executive officer and principal operating officer of the Company, effective March 25, 2022.

On March 7, 2022, Steven Cakebread notified our Board of Directors of his intention to step down from his position as Chief Financial Officer of the Company effective March 25, 2022. Darryl Bond, the Company’s Executive Vice President and Chief

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Accounting Officer, will succeed Mr. Cakebread as Chief Financial Officer and principal financial officer of the Company, effective March 25, 2022. Mr. Bond will continue to serve as the Company’s Chief Accounting Officer.

On March 7, 2022, the Board also appointed Marc Ferrentino, the Company’s Chief Strategy Officer, as President and Chief Operating Officer of the Company.

In connection with the changes in our senior management, our Board of Directors and new management anticipate certain additional changes to our strategy and personnel that have not yet been determined.

Components of Results of Operations

Revenue

We derive our revenue primarily from subscription and associated support to our Yext platform. Our contracts are typically one year in length, but may be up to three years or longer in length. Revenue is a function of the number of customers, the number of licenses or capacity purchased by each customer, the package to which each customer subscribes, the price of the package and renewal rates. Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to customers. At the beginning of each subscription term we invoice our customers, typically in annual installments, but also monthly, quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue. Unearned revenue is subsequently recognized as revenue when transfer of control to a customer has occurred.

Cost of Revenue

Cost of revenue consists primarily of employee-related costs, including personnel-related costs, which mainly consist of salaries and wages, and stock-based compensation expense. Cost of revenue also includes fees associated with our Knowledge Network application provider arrangements, the nature of which may be unpaid, fixed, or variable, and are unpaid with many of our larger providers, as well as the costs associated with our data centers. In addition, cost of revenue includes depreciation expense, including with respect to certain capitalized software development costs incurred in connection with additional functionality to our platform. Cost of revenue also includes lease expenses associated with our office spaces, which are allocated based on employee headcount. In addition, cost of revenue includes software expense, which relates to licenses, professional services, and other costs associated with software for use in the operations of our business, which is also allocated based on employee headcount.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages and costs of obtaining revenue contracts. Sales and marketing expenses also include lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount. In addition, sales and marketing expenses include costs related to advertising and conferences and brand awareness events.

Research and development expenses. Research and development expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages. Capitalized software development costs related to additional functionality to our platform are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and depreciated to cost of revenue over the term of their useful life. Research and development expenses also include lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount.

General and administrative expenses. General and administrative expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense for our finance and accounting, human resources, information technology and legal support departments. Personnel-related costs mainly consist of salaries and wages. General and administrative expenses also include lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount, and other professional related costs.

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Results of Operations

(1) Amounts include stock-based compensation expense as follows:

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The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:

Fiscal Year Ended January 31, 2022 Compared to Fiscal Year Ended January 31, 2021

Revenue and Cost of Revenue

Total revenue was $390.6 million for the fiscal year ended January 31, 2022, compared to $354.7 million for the fiscal year ended January 31, 2021, an increase of $35.9 million or 10%, primarily driven by new customer subscriptions to our platform, and to a lesser extent included expanded subscriptions for existing customers. Our revenue is predominately derived from our enterprise, mid-size, and third-party reseller customers. Revenue recognized from subscriptions and associated support to our platform was 92% and revenue recognized from professional services was 8%, for the fiscal year ended January 31, 2022, compared to 93% and 7%, respectively, for the fiscal year ended January 31, 2021.

Cost of revenue was $98.3 million for the fiscal year ended January 31, 2022, compared to $86.4 million for the fiscal year ended January 31, 2021, an increase of $11.9 million, or 14%. This increase was primarily driven by employee-related costs, as personnel-related costs increased $8.8 million and stock-based compensation expense increased $1.4 million, reflecting higher headcount and employee stock grants. In addition, depreciation expense increased $2.2 million and costs associated with our data centers increased $1.5 million. These increases were partially offset by Knowledge Network application provider fees which decreased $5.1 million due to favorable contract renewal terms with certain providers in the prior year.

Gross margin was 74.8% for the fiscal year ended January 31, 2022, compared to 75.6% for the fiscal year ended January 31, 2021 as reflected in the discussion above.

Operating Expenses

Sales and marketing expense was $230.5 million for the fiscal year ended January 31, 2022, compared to $228.4 million for the fiscal year ended January 31, 2021, an increase of $2.1 million, or 1%. The increase reflected a $5.5 million increase in personnel-

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related costs, inclusive of a $3.5 million increase in costs to obtain revenue contracts. In addition, there was a $2.3 million increase in depreciation expense and a $0.9 million increase in advertising costs associated with certain brand media campaigns. These increases were largely offset by a $6.1 million decrease in stock-based compensation expense, which is lower in the current period reflecting the impact of certain departures of senior management in the prior periods.

Research and development expense was $68.4 million for the fiscal year ended January 31, 2022, compared to $58.1 million for the fiscal year ended January 31, 2021, an increase of $10.2 million, or 18%. The increase was primarily driven by a $3.6 million increase in stock-based compensation expense due to employee stock grants, a $3.6 million increase in personnel-related costs, reflecting higher headcount, which mainly consisted of salaries and wages, as well as a $0.8 million increase in depreciation expense.

General and administrative expense was $83.4 million for the fiscal year ended January 31, 2022, compared to $76.0 million for the fiscal year ended January 31, 2021, an increase of $7.4 million or 10%. The increase was primarily driven by a $2.6 million increase in personnel-related costs, a $2.3 million increase in stock-based compensation due to employee stock grants, as well as a $0.9 million increase in depreciation expense. This was partially offset by a $1.3 million decrease in bad debt expense as the prior year period had higher expense to reflect the initial impacts of the COVID-19 pandemic.

Fiscal Year Ended January 31, 2021 Compared to Fiscal Year Ended January 31, 2020

Revenue and Cost of Revenue

Total revenue was $354.7 million for the fiscal year ended January 31, 2021, compared to $298.8 million for the fiscal year ended January 31, 2020, an increase of $55.8 million or 19%, primarily driven by new customer subscriptions to our platform, and to a lesser extent included expanded subscriptions for existing customers. Our revenue is predominately derived from our enterprise, mid-size, and third-party reseller customers. Revenue from our small business customers represented less than 5% of total revenue for each period. Revenue recognized from subscriptions and associated support to our platform was 93% and 95%, while revenue recognized from professional services was 7% and 5%, for the fiscal years ended January 31, 2021 and 2020, respectively.

Cost of revenue was $86.4 million for the fiscal year ended January 31, 2021, compared to $77.0 million for the fiscal year ended January 31, 2020, an increase of $9.4 million, or 12%. This overall increase primarily reflects the increases in costs associated with our data centers of $3.2 million, personnel-related costs of $1.6 million, stock-based compensation expense of $1.6 million, and software expense of $1.4 million. These increases were partially offset by a decrease in Knowledge Network application provider costs of $1.0 million as a result of more favorable contract terms with certain providers.

Gross margin was 75.6% for the fiscal year ended January 31, 2021, compared to 74.2% for the fiscal year ended January 31, 2020 as reflected in the discussion above.

Operating Expenses

Sales and marketing expense was $228.4 million for the fiscal year ended January 31, 2021, compared to $218.1 million for the fiscal year ended January 31, 2020, an increase of $10.3 million, or 5%. The increase was primarily due to a $23.6 million increase in personnel-related costs, reflecting higher headcount, which mainly consisted of salaries and wages and costs to obtain revenue contracts, a $2.8 million increase in software expense, a $1.4 million increase in operating and short-term lease expenses, a $1.3 million increase in depreciation expense, and a $1.2 million increase in stock-based compensation expense. These increases were partially offset by reductions in light of the COVID-19 pandemic and leveraging costs, including a $10.8 million decrease in employee travel and a $7.6 million decrease in conferences and events.

Research and development expense was $58.1 million for the fiscal year ended January 31, 2021, compared to $49.4 million for the fiscal year ended January 31, 2020, an increase of $8.7 million, or 18%. The increase was primarily due to a $3.9 million increase

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in stock-based compensation expense, a $3.0 million increase in personnel-related costs, reflecting higher headcount, which mainly consisted of salaries and wages, and a $0.8 million increase in software expense.

General and administrative expense was $76.0 million for the fiscal year ended January 31, 2021, relatively consistent compared to $77.2 million for the fiscal year ended January 31, 2020, as decreases of $2.1 million in stock-based compensation expense and $2.0 million in employee travel, were generally offset by a $1.3 million increase in the allowance for doubtful accounts and a $0.8 million increase in software expense.

Net Loss

Net loss was $93.3 million, $94.7 million, and $121.5 million for the fiscal years ended January 31, 2022, 2021 and 2020.

Non-GAAP Net Loss

In addition to our financial results determined in accordance with GAAP, we believe that non-GAAP net loss is useful in evaluating our operating performance and our business.

Non-GAAP net loss is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net loss as our GAAP net loss as adjusted to exclude the effects of stock-based compensation expense. We believe non-GAAP net loss provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations. We also believe non-GAAP net loss is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, which may vary for reasons unrelated to overall operating performance.

We use non-GAAP net loss in conjunction with traditional GAAP net loss 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 this or similar metrics. Thus, our non-GAAP net loss should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.

Non-GAAP net loss may be limited in its usefulness because it does not present the full economic effect of our use of stock-based compensation. We compensate for these limitations by providing a reconciliation of non-GAAP net loss to the most closely related GAAP financial measure. 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 loss in conjunction with GAAP net loss.

The following table provides a reconciliation of GAAP net loss to non-GAAP net loss:

Dollar-Based Net Retention Rate

We believe that our ability to retain our customers and expand the revenue they generate for us over time is an important component of our growth strategy and reflects the long term value of our customer relationships. We assess our performance in this respect using a metric we refer to as our dollar-based net retention rate. Our dollar-based net retention rate was 98%, 102%, and 106% for the fiscal years ended January 31, 2022, 2021 and 2020, respectively. The general decline in the net retention rate reflects continued challenges in our ability to retain and expand relationships with existing customers, which has been and may continue to be negatively impacted by the effects of COVID-19 on our customers. See "—Overview — COVID-19 Update" and "Risk Factors" for the impact of COVID-19 on our business.

We calculate this metric for a particular period by first establishing a cohort of the enterprise, mid-size, and third-party reseller customers, who had active contracts at the end of each month of the same period in the prior year. We divide the single month revenue from each of those customer cohorts for the applicable month in the current year by the single month revenue of that same customer cohort for the corresponding month in the prior year. We then determine the dollar-based weighted average of each of the monthly rates, and this average represents the dollar-based net retention rate for the period. As a result, if a customer, in particular an enterprise customer, elects to upgrade, downgrade or cancel its subscription, the full impact on dollar-based net retention rate is realized over the subsequent twelve months, thereby mitigating the immediate effect in the quarter when such election was made. We only consider revenue from our enterprise, mid-size, and third-party reseller customers when calculating this metric since small business customers have limited licenses, experience inherently high turnover, and continue to decline as a percentage of total revenue.

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Quarterly Results of Operations

The following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters in the periods ended January 31, 2022 and 2021, respectively. The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this Annual Report on Form 10-K and, in the opinion of management, includes all adjustments, which consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with GAAP. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period.

Quarterly Trends

Historically, a higher proportion of new subscription and renewal agreements have occurred within the fourth quarter of the fiscal year, which contributes to driving our revenue recognized for the following fiscal year. We believe that this results from the procurement, budgeting, and deployment cycles of many of our customers, particularly our enterprise customers. At the beginning of each subscription term, we invoice our customers, typically in annual installments, but also monthly, quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue. As a result, accounts receivable and unearned revenue are seasonally stronger in the fourth quarter of the fiscal year. However, the nature of our subscription agreements generally results in revenue recognition ratably over the contract term, thereby mitigating the effect of potential seasonality in our revenue. Our quarterly revenue has generally increased over the periods presented.

Cost of revenue has moved generally proportional as a percentage of revenue. Personnel-related costs may generally continue to increase, while Knowledge Network application provider costs have become more stable and may continue to decline as a percentage of revenue, although costs may increase at times as we enter new international markets, or introduce new products and features.

Gross margin has generally stabilized in recent periods, and may decrease at times as we enter new international markets, or introduce new products and features.

Operating expenses as a percentage of revenue have generally decreased in recent quarters, reflecting COVID-19 impacts and strategically leveraging costs. Operating expenses may increase as a result of employee-related costs, inclusive of costs to obtain revenue contracts, as well as stock-based compensation.

Our quarterly results may fluctuate due to various factors affecting our performance including impacts of the COVID-19 pandemic and its variants. The ultimate extent of the impact of the pandemic on our business, financial condition and results of operations will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and its variants and the actions taken to contain and address its impact, among others. However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be apparent as a change to our reported revenue until future periods. Most of our expenses are recorded as period costs and thus factors affecting our cost structure may be reflected in our financial results sooner than changes to our revenue.

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Liquidity and Capital Resources

As of January 31, 2022, our principal sources of liquidity were cash and cash equivalents of $261.2 million. We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections, lease payments and capital expenditures, significant marketing events and related expenses, the potential effects of the COVID-19 pandemic, among other factors.

Our future capital requirements will depend on many factors, including those set forth under "Risk Factors." We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. In addition, we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Common Stock Offering

On March 20, 2019, we closed a common stock offering, in which we issued and sold 7,000,000 shares of common stock, inclusive of the fully exercised underwriters’ option to purchase additional shares. The price per share to the public was $21.50. We received aggregate proceeds of $147.0 million from this offering, net of underwriters’ discounts and commissions, before deducting offering costs of approximately $0.5 million, which were recognized through additional paid in capital.

Credit Arrangements

On March 11, 2020, we entered into a credit agreement with Silicon Valley Bank (the “Credit Agreement”). No significant debt issuance costs were incurred in association with the Credit Agreement. In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors.

The Credit Agreement provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

Under the Credit Agreement, loans bear interest, at our option, at an annual rate based on LIBOR or a base rate. Loans based on LIBOR shall bear interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on our average daily usage of the revolving loan facility. Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on our average daily usage of the revolving loan facility. See Part I Item 1A “Risk Factors - Our credit facility contains restrictive covenants that may limit our operating flexibility" for discussion of LIBOR being phased out.

The obligations under the Credit Agreement are secured by a lien on substantially all of our tangible and intangible property and by a pledge of all of our equity interests of material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.

The Credit Agreement contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain the year-over-year growth rate of its ordinary course recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.

As of January 31, 2022, we were in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.7 million available and $14.3 million in letters of credit allocated as security in connection with office space.

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Cash Flows

The following table summarizes our cash flows:

Operating Activities

Net cash provided by operating activities of $21.8 million for the fiscal year ended January 31, 2022 was primarily due to positive adjustments in reconciling our net loss of $93.3 million to net cash provided by operating activities. These adjustments included stock-based compensation expense of $73.5 million, depreciation and amortization expense of $16.8 million, amortization of operating lease right-of-use assets of $9.3 million, and bad debt expense of $1.3 million. In addition, there were changes in unearned revenue of $33.3 million and changes in prepaid expenses and other current assets of $4.2 million. These increases were partially offset by changes in costs to obtain revenue contracts of $9.1 million, operating lease liabilities of $6.6 million, and accounts receivable of $6.1 million, mainly due to timing of billing and cash collections during the period.

Net cash provided by operating activities of $1.2 million for the fiscal year ended January 31, 2021 was primarily due to positive adjustments in reconciling our net loss of $94.7 million to net cash provided by operating activities. These adjustments included stock-based compensation expense of $72.3 million, amortization of operating lease right-of-use assets of $12.2 million, depreciation and amortization expense of $10.6 million, and bad debt expense of $2.5 million, reflecting an increase in the allowance for doubtful accounts in light of impacts from the COVID-19 pandemic. In addition, there were changes in unearned revenue of $12.7 million, operating lease liabilities of $8.9 million, and costs to obtain revenue contracts of $2.4 million. These increases were partially offset by changes in accounts receivable of $18.0 million, mainly due to timing of billing and cash collections during the period, changes in prepaid expenses and other current assets of $5.5 million, and changes in accounts payable, accrued expenses and other current liabilities of $2.0 million.

Net cash used in operating activities of $30.8 million for the fiscal year ended January 31, 2020 was primarily due to the net loss of $121.5 million, as well as changes in accounts receivable of $27.0 million, mainly due to timing of billing and cash collections during the period, and changes in costs to obtain revenue contracts of $18.3 million. This was partially offset by positive reconciling adjustments related to non-cash charges of stock-based compensation expense of $67.8 million, amortization of operating lease right-of-use assets of $11.1 million and depreciation and amortization expense of $8.1 million. In addition, net cash used in operating activities was also partially offset by changes in unearned revenue of $42.3 million and accounts payable, accrued expenses and other liabilities of $8.3 million.

Investing Activities

Net cash used in investing activities of $13.4 million for the fiscal year ended January 31, 2022 reflected capital expenditures primarily associated with our new corporate headquarters in New York, NY.

Net cash used in investing activities of $65.1 million for the fiscal year ended January 31, 2021 reflected capital expenditures primarily associated with our new corporate headquarters in New York, NY, and our office spaces in Rosslyn, VA and Tokyo, Japan, among others.

Net cash provided by investing activities of $39.3 million for the fiscal year ended January 31, 2020 was due to maturities of marketable securities of $51.2 million, partially offset by capital expenditures of $11.9 million.

Financing Activities

Net cash provided by financing activities of $24.6 million for the fiscal year ended January 31, 2022 was primarily related to proceeds from exercise of stock options of $19.2 million, and net proceeds from employee stock purchase plan withholdings of $5.7 million, partially offset by payments of deferred financing costs of $0.3 million.

Net cash provided by financing activities of $22.5 million for the fiscal year ended January 31, 2021 was primarily related to proceeds from exercise of stock options of $16.5 million, and net proceeds from employee stock purchase plan withholdings of $7.0 million, partially offset by payments of deferred financing costs of $0.9 million.

Net cash provided by financing activities of $168.4 million for the fiscal year ended January 31, 2020 was primarily related to proceeds from our common stock offering of $147.0 million, net of underwriting discounts and commissions, and to a lesser extent proceeds from exercises of stock options of $14.9 million, and $7.3 million of net proceeds from employee stock purchase plan withholdings.

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Contractual Obligations

We are obligated to make payments under certain non-cancelable contractual obligations in the normal course of business. Our contractual obligations primarily relate to our operating lease arrangements for office space. Our other contractual obligations include contracts with our Knowledge Network application providers, which generally have a term of one year, although some have a term of several years, as well as contracts with our software vendors, among others. These obligations represent minimum contractual payments, or our best estimate for variable elements based on historical payments. Our contractual obligations have various expiry dates between fiscal years 2023 and 2035.

As of January 31, 2022, our contractual obligations are as follows (in thousands):

See Note 13 "Commitments and Contingencies" to our consolidated financial statements for further discussion on contractual obligations.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

See Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements for further discussion on our accounting policies. Our most critical accounting policies and estimates, based on the degree of judgment and complexity, are discussed below.

Revenue Recognition

We derive our revenue primarily from our subscriptions and associated support to the Yext platform. Our subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts. Our subscription and associated support performance obligation is distinct because a customer's use of the Yext platform is fully functional upon access, does not require any additional development, modification or customization, and is often sold separately. In certain instances, we enter into a contract that includes a promise to provide certain technical or customized professional services, in addition to a promise to provide its subscription and associated support. Our professional services performance obligation is distinct as it does not significantly change or enhance the functionality of the Yext platform.

In instances when a contract includes more than one performance obligation, we must allocate the transaction price to the performance obligations on a relative standalone selling price basis ("SSP"). SSP represents the price at which a company would sell a promised product or service separately to a customer. We determine the SSP based on a series of complex factors. Our selling prices associated with our subscription and associated support are considered highly variable based on discounting practices, customer geography, customer size, and other such factors. In contrast, our selling prices associated with our professional services are more observable, predictable and consistent. Accordingly, we use the residual method to determine SSP.

The recognition of revenue is determined through application of the five-step model in accordance with ASC 606. Revenue is recognized upon transfer of control of services to our customers, including third-party reseller customers, in an amount that reflects the consideration we expect to receive in exchange for those services. In transactions with resellers, we contract only with the reseller, in which pricing and length of subscription and support services are agreed upon. The reseller negotiates the price charged and length of subscription and support service directly with its customer. We do not pay separate fees to third-party reseller customers in association with these transactions, and do not have direct interactions with the reseller’s customer.

Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to our customers. Amounts that have been invoiced for non-cancelable contracts are recorded

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in accounts receivable and unearned revenue or revenue. See Note 2 "Summary of Significant Accounting Policies" and Note 3 "Revenue" to our consolidated financial statements for further discussion on our revenue recognition.

Costs Capitalized to Obtain Revenue Contracts

We capitalize costs of obtaining revenue contracts that are incremental and recoverable. Incremental costs primarily include sales commissions, certain related incentives, and associated payroll tax and fringe benefit costs. We amortize such costs on a straight-line basis over the average benefit period, which is typically three years for new contracts and one year for renewals. We determine the average benefit period by considering both qualitative and quantitative factors, which include the estimated life of capitalized software development costs resulting from additional functionality to the Yext platform and estimated customer life, among other such factors. Amortization of costs capitalized to obtain revenue contracts is included in sales and marketing expense in the consolidated statements of operations and comprehensive loss.

Stock-Based Compensation

Stock-based compensation for all employee and non-employee stock-based awards, including restricted stock units and restricted stock, is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units and restricted stock are calculated based on the fair value of our common stock on the date of grant, while the fair value of stock options are calculated using a Black-Scholes option-pricing model.

Stock-based compensation expense is recognized over the requisite service periods of awards, which is typically one to four years for restricted stock units and restricted stock. The estimated forfeiture rate applied to employee awards is based on historical forfeiture rates. The estimated number of stock-based awards that will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period actual results are realized or estimates are revised. A higher forfeiture rate will result in an adjustment that will decrease stock-based compensation expense, whereas a lower forfeiture rate will result in an adjustment that will increase stock-based compensation expense. We do not apply a forfeiture rate assumption to value non-employee awards, given the nature of the services provided.

For our Employee Stock Purchase Plan ("ESPP"), we measure stock-based compensation expense at fair-value using a Black-Scholes option-pricing model, at the commencement of each offering period and recognize the expense over that offering period, which is generally six months. The key assumptions used in the Black-Scholes option-pricing model include a volatility assumption based on the historical volatility of our stock price and the risk-free rate assumption based on the U.S. treasury yield curve in effect at the commencement of the offering period or grant date. The dividend yield assumption is zero as we have not historically paid any dividends and do not expect to declare or pay any dividends in the foreseeable future.

We will continue to use judgment in evaluating the assumptions related to our stock-based compensation. As we continue to accumulate additional data related to our common stock, we may refine our estimates. If factors change and different assumptions are used, the impact to our stock-based compensation expense could be material.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the financial reporting and tax basis of our assets and liabilities. We classify all deferred tax assets and liabilities as non-current on the consolidated balance sheet. The effect of a change in tax rates on deferred tax assets and liabilities is recognized within the (provision for) benefit from income taxes on the consolidated statement of operations and comprehensive loss in the period that includes the enactment date.

We reduce deferred tax assets, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of our deferred tax assets. In making such a determination, we consider all available positive and negative evidence, including results of operations, future reversals of existing taxable temporary differences, projected future taxable income, and tax-planning strategies.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. We recognize interest and penalties related to uncertain tax positions within the (provision for) benefit from income taxes on our consolidated statement of operations and comprehensive loss.

Leases

We enter into contracts in the normal course of business and assess whether any such contracts contain a lease. We classify leases as operating or financing in nature, and record the associated lease liability and right-of-use asset on our balance sheet. The lease liability represents the present value of future lease payments, net of lease incentives, discounted using incremental borrowing rates.

For each individual lease arrangement, we estimate an incremental borrowing rate at the commencement date. The incremental borrowing rate is determined based on what we would estimate to pay for a collateralized loan over a similar term and economic environment for each lease arrangement. As of January 31, 2022, a hypothetical 100 basis point change in our estimated incremental

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borrowing rates for our respective leases would have a less than 10% impact to the aggregated total operating lease liability on the consolidated balance sheet.

With respect to our operating lease arrangements, we account for lease components, and non-lease components that are fixed, as a single lease component in the measurement of operating lease liabilities and right-of-us assets. Non-lease components that are variable are expensed as incurred in the consolidated statement of operations and comprehensive loss. Lease arrangements with an initial term of 12 months or less are recognized on a straight-line basis over the lease term and are not recorded on the consolidated balance sheet.

Recent Accounting Pronouncements

See Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements for our discussion about adopted and pending recent accounting pronouncements.

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