Yext (YEXT 19.40, +0.02, +0.10%), which made its IPO debut in April 2017, has
quietly been trading to new post-IPO highs this week. The company operates a
platform that lets businesses manage their digital knowledge in the cloud and
sync it to over 100 services, including Apple Maps, Bing, Cortana, Facebook,
Google, Google Maps, Instagram, Siri, and Yelp. Digital knowledge is the
structured information that a business wants to make publicly accessible.
Yext is a pioneer in a new category called DKM (digital knowledge management). Yext's mission is to give companies control over their brand experiences across the digital universe of maps, apps, search engines, voice assistants, and other intelligent services that drive online and mobile consumer discovery. Today, thousands of businesses, including brands like Taco Bell, Rite Aid, and Steward Health, across diverse sectors use the Yext Knowledge Engine to manage their digital knowledge in order to boost brand engagement, drive foot traffic, and increase sales.
Intelligent searches, which are searches of digital knowledge that combine context and intent, have grown significantly in recent years. In particular, searches that return maps in the results, as engines intuit that searchers are seeking something present in their nearby physical world, have grown significantly with the proliferation of mobile devices. These now make up 30% of all mobile searches.
For example, online searches for categories, such as "restaurants", "wine", "insurance", "wealth advisor", or "doctor", or for specific brands, such as "Marriott", "McDonald's", or "Home Depot", return maps directly in the search results. The source of the results for each of these searches is not a web page, but structured data. Businesses want their information to be more prominent than that of their competitors when consumers look for them on search platforms. Yext's platform connects consumers to the businesses that are most relevant to them.
The type of results produced vary by industry and related customer needs: food service locations might highlight the address, phone number, or menu details of a restaurant; healthcare providers feature the health insurances accepted by a physician or the precise drop-off point of the emergency room at a hospital campus; and finance names detail ATM locations, retail bank holiday hours, or insurance agent biographies.
How does Yext contribute to search engine processes? The vast majority of digital knowledge provided by searches currently comes from third-party sources such as data aggregators, governmental agencies, and consumers. But this merely creates a "best guess" result, as it is not provided by the business itself, which is capable of providing the most accurate and timely data about the business. Yext has established direct data integrations between its software and the 100+ members of its PowerListings Network, which includes Apple Maps, Facebook, Google, TripAdvisor, SnapChat, Instagram, Yelp, and many other U.S.-based and international online maps, apps, search engines, social networks, and directories that act as online hubs in which search inquiries are made.
The bottom line is that with Yext, businesses can directly control how their own digital knowledge is distributed within the PowerListings Network rather than leaving it in the hands of third parties. Some of Yext's customers include AutoZone, Ben & Jerry's, Best Buy, Citi, Denny's, Farmers Insurance, H&R Block, HCA, Infiniti, Marriott, Michael's, McDonald's, and Rite Aid. Yext estimates that there are currently over 100 million potential business locations and points of interest in the world that could benefit from its platform, representing an addressable market, solely with respect to locations, of approximately $10 bln annually.
Yext is not yet profitable, but it's growing the top line quickly. On May 31, Yext reported Q1 (Apr) revenue of $51.1 mln, a 38% year/year increase, driven by growth in its customer base and higher revenue from existing customers, primarily due to expanded subscriptions. While not profitable, Yext did report positive operating cash flow in AprQ.
Yext won more than 60 new enterprise logos in AprQ. It also issued its Spring Product Release, which was packed with new features for its Knowledge Assistant platform. Through simple SMS or Facebook Messenger commands, customers can now easily update even more information about their business, including uploading photos and broadcasting featured messages, and can even ask Knowledge Assistant for information about their reviews, ratings, and profile views.
Then, on June 6, Yext announced an expanded relationship with Yelp (YELP). As an official Yelp Knowledge Partner, Yext can now offer businesses of all sizes the ability to monitor Yelp reviews and leverage data-driven insights. Additionally, businesses can now use Yext to manage Yelp Listing data.
In sum, Yext, though still very much in its early days, sees its opportunity as a pioneer in the field of digital knowledge management as substantial. The market's understanding of this new category is increasing every day, and Yext is increasingly being recognized as the platform of choice for DKM, particularly among mid- and large-sized businesses. The stock had been rangebound in the $11-15 area for most of the interval since its IPO, but it has broken out to new highs in the past six weeks or so. It's a sign that investors are starting to buy into the long-term potential here, although profits are still a ways off.
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