YEXT: An Invisible Force In Artificial Intelligence

YEXT, Inc. (NYSE: YEXT) is one of those behind the scenes companies involved in Intelligence Search that plays an important role in Artificial Intelligence. What does that mean? Remember the Amazon commercial? “Eco, order a 12” Pizza with pepperoni from Stromboli’s and have it delivered”.

Today the vast majority of online searches go through third-party sources such as data aggregators, governmental agencies and consumers. The net result of this third party sourcing has been to produce “best guess” data that can often miss or misstate the target data field.

YEXT developed a better way to source critical digital knowledge.  For example business clients use YEXT to update public facts about their brands. They are building their based on the rapid and ever changing nature of data.  So far the YEXT Knowledge Network offers over 100 services to more than 110 corporate clients and has over $150 million in annual revenue.  So could YEXT play a key role in AI,  the next big thing?

How YEXT Works

Most of us are familiar with big time search engines like Google, Google Maps, Facebook, Instagram, Bing, Cortana, Apple Maps, Siri and Yelp.  These pioneering companies are the major drivers in information search today.  However, we also know, their accuracy is not exactly ideal.  

This is where YEXT steps in.  Their knowledge engine platform lets business manage their digital knowledge in the cloud and sync it to over 100 services including the kingpins of search noted above.

Intelligent Search is the structured information that a business wants to make publicly accessible. In food service it could be the address, phone number or menu details of a restaurant; in healthcare, the health insurances accepted by a physician or the precise drop-off point of the emergency room at a hospital campus; or in finance, the ATM locations, retail bank holiday hours or insurance agent biographies.

Artificial Intelligence Offers a Potential $10 Billion Market

Improving search results in general is nice but not very sexy.  It doesn’t make you want to beg for more information.  However, when you consider the role of Artificial Intelligence (AI) in our evermore data intense world, the importance of Intelligent Search and the opportunities for YEXT becomes a compelling story.  

The AI trend is already underway as YEXT is increasingly using the structured data on their platform to expand or add new integrations with vertically specialized applications, voice-based search and AI engines.

Just Right For Big Data Applications

YEXT customers use their platform to manage their digital knowledge covering over 17 million attributes and nearly one million locations. These customers include leading businesses in a diverse set of industries, such as healthcare and pharmaceuticals, retail, financial services, manufacturing and technology.

Major customers include: AutoZone, Ben & Jerry’s, Best Buy, Citibank, Denny’s, Farmers Insurance Group, H&R Block, HCA, Infiniti, Marriott, Michael’s, McDonald’s, Rite Aid, Steward Health Care and others. The list is growing.

Management believes the market for digital knowledge management is large and mostly untapped with over 100 million potential business locations and points of interest in the world equaling over $10 billion.  

Shooting For Acquisitions and Broad AI Penetration

Founded in 2006 by serial entrepreneurs Howard Lerman (CEO) and Brian Distelburger, President these two are typical software guys whose vision appears much more broad based the their current focus with YEXT.  Here is where the prospectus from their April 2017 IPO offers some mystery and excitement to the story.

Unlike most rapid growth tech companies YEXT had no urgent need to go public.  They generated almost $60 million in gross profit in 2016 before heavy marketing costs resulted in a loss of $26.5 million.  Even so, they still ended the year with $20 million in cash. That’s a fair distance from being destitute.

The company’s real need for the IPO was to establish a liquid public market for the stock. They raised about $123.5 million, all of which will go into the bank.  The company is debt free and there are no insiders selling stock.  Very interesting.

Strong  Financial Results

For the latest reported nine months ended October 31, 2017 revenues grew 38% reaching $122 million.  The good news is the gross profits reached a record 75% or $90 million.  All of this was spent on sales and marketing to expand the business.  When all the beans were counted, YEXT lost $50 million producing a $30 million negative cash flow.  The balance sheet remains liquid with $120+ million in cash and securities.

FYI: In spite of some top notch bankers underwriting its IPO and analysts from those same five firms covering the company, the stock has done almost nothing for investors.  This $1.1 billion market cap was recently hanging out around $12 about the same as the IPO price.

Featured image courtesy of Shutterstock.

Author:
James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.