Yext, Inc. (YEXT) Q3 2021 Earnings Call Transcript

Good day, and welcome to the Yext, Inc. Third Quarter Fiscal 2021 Financial Results Call. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Yuka Broderick, Head of Investor Relations. Please go ahead.

Thank you, Paul, and good afternoon, everyone. Welcome to Yext's fiscal third quarter 2021 conference call. With me today are CEO, Howard Lerman; CFO, Steve Cakebread; and Chief Revenue Officers, David Rudnitsky and Patrick Blair. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, including statements about revenue and non-GAAP net income, customer upsells and retention, sales efficiency, hiring targets, expense margins, market opportunities, business performance, capital expenditures, and other non-historical statements as further described in our press release. These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, including with Answers, and general economic and business conditions such as the impact of the COVID-19 pandemic. These statements reflect the company's current expectations based on its beliefs, assumptions, and information currently available to it. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our most recent quarterly and annual reports, and our press release that was issued this afternoon. During the call, we will also refer to non-GAAP financial measures. Reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors.yext.com. Finally, I'd like to point you to investors.yext.com for a slide deck that we've posted to the site, which Howard will be referring to during his remarks today. With that, I will turn the call over to Howard.

Well, thank you, Yuka. We had a solid third quarter. We closed 86 Answers-led deals in Q3, driving over 30% of our new and upsell ACV in the quarter compared to 20% of new and upsell ACV in Q2. It also includes our conversion of the states of New Jersey and Alabama to paid customers, representing our first customers in the government vertical. We're seeing fast traction in another new vertical, higher education, with Bucknell University, Texas Christian University, and Adelphi University adding Answers to their websites. Our Knowledge Graph continues to grow with over 405 million facts now contained in it, growing 58% year-over-year. While we're laser-focused on revenue growth driven by our Land with Answers sales motion, we're also simultaneously focused on greater efficiency, particularly in GAAP sales and marketing as a percentage of sales. We dramatically improved that metric this quarter, from 81% in the third quarter of fiscal '20 to 64% in the third quarter of fiscal '21. This helped drive our Q3 non-GAAP loss per share to $0.02, well above our guidance of $0.07 to $0.09 loss. We don't believe these are temporary improvements. We are committed to driving sustainable increases in operating margins and will continue to take action on cost efficiencies in the coming quarters. Land with Answers is efficient. While these numbers show that we can effectively manage the business despite the challenges of the current global economic environment, our metrics also tell a more exciting story: that the world is hungry for a big breakthrough in search. Search is critical; every customer experience starts with a question. When it comes to branded search, there are really two places where searches can happen, either on a company's website or in Google. Billions of times a day, brand websites fail to answer the most basic questions, so their customers, at that exact moment of intent, bounce over to Google to continue their quest for an answer. When websites keep failing you over and over again, you learn to just start your customer journey on Google. But the reality is, the experience isn't even better for a customer. In fact, you could argue it's even worse because in that context Google isn't really a search engine; it's an ads engine. In other words, it's incentivized to deliver a slew of ads, not a direct answer to the question, and I want to show you what I mean by this. We posted a slide deck to the Investors section of our website, and I'm going to refer to that here. If you look at slide three, when I type in a simple branded search query on Google for information about a Sleep Number product, I get the result shown on slide four. There are literally 14 ads above the fold before an organic result is an option. Now, please take a look at slide five for another example, which was highlighted in technology columnist Geoffrey Fowler's Washington Post article last month, where he noted that Google's search experience has gotten worse over time. If I ask a question about how to check my Krispy Kreme rewards card balance – that just happens to be the most popular question asked to them – Google delivers what appears to be an answer from the brand, but if you look carefully, it's not. You see that on slide six; it's a random third party, and while it's not labeled an ad, the experience is essentially about selling you something, and if you engage on the site you get hit with popup ads, like in slide seven. Why would Google reward this strange site and its very annoying sales tactics and ads ahead of an answer, a direct answer from Krispy Kreme itself? This is ironic because even the co-founders of Google denounced this in one of their early research papers in 1998. They said, “We expect that advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.” They were right. Brand search queries reward the highest bidding advertiser. So it becomes a numbers game, and how much does a brand have to pay to get in front of a customer asking for them, and how many ads does a customer have to navigate before getting the answer that they want? And that is what inspired our Answers, Not Ads campaign that we launched last month. More than just a meme, Answers, Not Ads poses an important question to every company: when your customers have questions about you, do you want to give them answers, or do you want to give them ads? To us, the answer is obvious, but the reality is that the only way a brand can compete with Google is to offer a Google-like experience. Think of it as their own Google on their own site, and that is not easy. Yes, site search exists, but it's not that modern; it's index-based, meaning it functions to deliver links that send you to another page on the website. That's search 1.0, and it's how Google used to work. Google modernized, and they built a knowledge graph that continues all of the facts that they know about the world. Their relationships combine with natural language understanding to present their users with answers, and that's where we come in. Our Answers search engine is the breakthrough that gives brands a modern search experience, so they can take that customer journey to deliver Answers, Not Ads, to every customer question. Modern search has three layers. The first is a knowledge graph, which is a brain-like database, containing all the facts represented as entities and their relationships. This provides the foundation for answers to be derived from an understanding of natural language, which is the second layer of modern search. The third layer is a dynamic interface that allows users to transact with the answer itself. This is essentially how Google has won in consumer search, and we believe there's an opportunity for millions of businesses and organizations around the world to win in branded search. This is happening in real-time. Every time Yext answers a question we've won back branded search on behalf of the customer. If you look at slide nine, you'll see Yext Answers addresses the same question about Krispy Kreme gift cards, but instead of receiving a poor customer experience from a third-party website, the customer just gets the correct answer. They can click straight through to the webpage where they can check the gift balance online, which you see on slide 10. And as for the Sleep Number question about hypoallergenic pillows, on slide 11, Yext Answers directs the customer to exactly the products that match their requested attributes, including call-to-action buttons that are part of that dynamic interface, leading to a conversion, on slide 12. We know that delivering official answers makes a big difference, not only because more brands are adding Answers to their websites but also from our own experience. Almost immediately after launching Yext Answers on our own website, branded searches for Yext declined, which is astounding, 34% on Google. Now you might think that's a negative, but the beauty is at the same time the number of searches on our own site increased by the same amount as the decline on Google. This shows that branded searches on Google and searches on a brand's own site are intricately linked. It's kind of an obvious point, but when you give people a great site search experience, they come back again and again. Transforming the broken world of search is a long game. We are only in the top half of the first inning, and we're generating tremendous interest, closing deals of all sizes across all sectors. Finally, I want to take a minute to highlight and welcome Hillary Smith to our Board of Directors. Hillary is a highly experienced tech executive. She played a key role in the success of several companies, including Square. She is currently an operating partner at Craft Ventures. We are proud Hillary decided to join our Board of Directors and Comp committee, and we really look forward to working with her. Now, to tell you more about our progress in the last quarter, I'm going to turn it over to David Rudnitsky, our Co-Chief Revenue Officer. Dave?

Thanks, Howard, and I will further review Q3. The sales organization had a solid Q3; new customer activity continues to improve, and gross retention was in our historical range. In Q3, we closed overall 107 new and renewal deals with at least $100,000 of total contract value. This includes 10 deals with more than $1 million of total contract value. The total number of mid-market and enterprise customers increased 28% year-over-year to nearly 2,300. This excludes our SMB and third-party reseller customers. Our quota-carrying sales rep count at the end of Q3 was nearly 240, and we're on track to reach our target of 255 quota-carrying sales reps by the end of the fiscal year, consistent with our original plan. Upsell deals included Humana, Five Guys, Cole Haan, and Wells Fargo, and we had significant upsells with CommonSpirit Health and Cox Communications. In mid-market, new deals included leading Bitcoin network Liberty Acts and direct-to-consumer mattress company Purple Innovation. Upsell and renewal deals included Stanford Health and Earl Enterprises, a leading restaurant branded group that includes Planet Hollywood and Buca di Beppo among others, and internationally while conditions remain challenging due to COVID-related economic lockdowns. New deals were signed with Cosmos Pharmaceutical and Rolex, upsell deals with Hutchison, 3G, U.K., and Superdry, and renewal deals with JTB and ASTA stores. With Answers, we're unlocking a huge opportunity with new companies that we haven't been able to reach before, and we love that it opens up new use cases for us. I want to highlight a new logo we had with Sinclair Oil this quarter. They signed up with us for Answers because people on the road want to know what's available, what the COVID protocol is for when they get there, and other important information. We believe we will have opportunities to expand with Sinclair with Answers and other UX products in the future. This is an example of how Answers led the way; it's a new sales motion that is successfully getting us into use cases that we wouldn't have thought of a year ago. Looking out over the next several quarters, we see many opportunities like this in our pipeline. To conclude, we've developed a successful sales motion. We're gaining experience leading with the Answers in the sales process, and we know how to take the customer and upsell them. Our opportunities are driven by the platform, not by a product and the unique ability to address search as a modern platform. We feel good about our Q3 progress, and we're excited about what's happening with the new opportunities. With that, I'll turn the call over to Steve.

Thank you, David. Our third quarter revenue grew 17% year-over-year to $89.1 million and unearned revenue increased 20% year-over-year to $129 million. Annual recurring revenue, our ARR metric at the end of Q3, was $346 million, which is up 18% year-over-year from the $293 million we reported in the year-ago quarter. Our trailing 12 months net dollar-based retention, which excludes our SMB customers, was 103%, while our trailing 12-month net dollar-based retention for direct enterprise, which also excludes our SMB and third-party resellers, was 104%, and our gross retention was solid within historical levels. What we saw was muted upsells, particularly with our customers in retail and EMEA, where there’s another round of lockdowns. In the near term, we continue to see customers be conservative with expansions due to the volatile macro-economic environment, but in the long run, we expect our upsell rate to return to historical levels, as we continue to grow our existing customer base and expand with other products and services as well. One note before turning to margins and expenses: I'll just point out that we'll be discussing both GAAP and non-GAAP results, and we provided a reconciliation of GAAP and non-GAAP in our earnings report. Q3 GAAP gross margin was 75.7% this quarter, which compares to 73.3% in the year-ago quarter. Q3 non-GAAP gross margin was 77.4% compared to 74.9% in the year-ago quarter. The change in gross margin was primarily driven by leverage on higher revenue. Year-to-date non-GAAP gross margin was 76.9%, compared to 75.6% a year ago. Q3 GAAP operating expenses were $89.2 million and that’s down 10% from the $98.8 million in the year-ago quarter. Q3 non-GAAP operating expenses were $71.4 million or 80% of revenue, compared to $78.9 million or 103% of revenue in the year-ago quarter. We've made significant progress in managing costs this quarter; non-GAAP sales and marketing expenses declined 11% year-over-year, and non-GAAP G&A expenses declined 14% year-over-year, compared to a year-ago quarter. The primary drivers of this decrease were our ONWARD user conference, which is typically hosted in the fall, but didn’t happen this year. We've reduced spending on travel and events and significantly improved overall operational efficiencies. Year-to-date, non-GAAP operating expenses were $223 million or 85% of revenue, compared to $206 million or 95% of revenue a year ago. We continue to drive lower sales and marketing and general G&A spending as a percent of sales. Many of these efforts are sustainable changes and will drive our operating margins higher over time. Given uncertain business conditions, we're remaining conservative with our hiring, but we're keeping our goal of 255 quota carrying sales reps by the end of the fiscal year, and we're continuing to invest in product innovation and revenue-generating opportunities. At the end of Q3, we had nearly 240 quota-carrying salespeople on board. Q3 GAAP net loss was $22 million compared to a $42.7 million loss in the year-ago quarter. That's a 48% improvement over last year. On the basis of $120.7 million weighted average basic shares outstanding, net loss per share of $0.18 this quarter compares to a $0.38 loss in the year-ago quarter, on the basis of $113.5 million weighted average basic shares outstanding. Q3 non-GAAP net loss, excluding stock-based compensation, was $2.8 million. That's a dramatic improvement compared to the $21.6 million loss in the year-ago quarter, and our non-GAAP net loss per share of $0.02 compares to a $0.19 loss in the year-ago quarter. Cash and cash equivalents were $209 million. We continue to believe our balance sheet is strong and positions us well to weather the current economic environment. Net cash flow from operations for Q3 was negative $7.4 million, which compares to negative $31.8 million in the year-ago quarter. CapEx was $13.9 million compared to $2.9 million in the year-ago quarter, and we continue to make progress with our building projects in New York, Washington D.C., Tokyo, and Paris. We expect remaining CapEx related to these projects to be about $19 million, and based on current schedules, we expect most of this to occur in Q4. Now let's turn to our outlook. We expect Q4 revenue to be between $87 million and $89 million, and we anticipate non-GAAP net loss per share to be between $0.08 and $0.10. We expect a weighted average basic share count of approximately $123.3 million into Q4. Q4 EPS is impacted by $0.02 to $0.03 of one-time non-recurring expenses. We continue to drive Answers into a broad market opportunity, and as Howard described, we have the opportunity to help our customers drive value and deliver Answers, not ads. Q4 is typically when we get a large amount of our business. We have a significant pipeline of opportunities that we're executing against; however, our guidance is being realistic, as global business conditions remain difficult due to the pandemic, including recent lockdowns, both in Europe and the United States. To wrap things up, I'm pleased with the performance this quarter in a challenging and uncertain macroeconomic environment. We are pleased to have Answers leading the way for our business, and we continue to be laser-focused on efficiency while investing in growth opportunities. With that, I'll turn the call back over to Yuka.

Thank you, Steve. Before we move along to Q&A, we would like to invite you to our analyst day, which we plan to hold on Wednesday, March 17, 2021. Joining the Q&A session will be CEO, Howard Lerman; CFO, Steve Cakebread; and Chief Revenue Officers, David Rudnitsky and Patrick Blair. Paul, can we please open to questions?

We will now begin the question-and-answer session. And our first question today will come from Arjun Bhatia with William Blair. Please go ahead.

Great, thank you. Steve, if you can maybe just start off with you on the guidance for Q4. We typically see that being a seasonally strong quarter for you, where I think the guidance implies a pretty meaningful slowdown in growth and a step down in revenue. Can you just maybe dig into those dynamics a little bit more, and the assumptions that you have baked in there? Is there an uptick in turn or new logos slowing down in Q4? Help us understand those dynamics a little bit.

Yes, that's a great question. As I said in the scripted comments, we're trying to be realistic here. We're looking at lockdowns coming and going, and we think this quarter is probably going to be more challenging than we saw in Q1 and part of Q2. So we're just being realistic. Like I said on the call, our gross retention is doing quite well, but we need upsells from our customers as well, and I think just given the uncertainty around the world that we're seeing, we're going to sit and say, look, we're going to deliver these results. We're still focused on improving operational activities, but on the revenue side, we're just going to be realistic about what we can do and deliver those results.

Got it, thank you. Howard, I saw an announcement that you made regarding a new WordPress integration with Answers. There's obviously a pretty big WordPress footprint out there. Can you just help us understand that opportunity, what it means for Answers adoption? Should we think of that as being similar to the Adobe partnership that you have or is there a different dynamic at play there?

Thanks for the question. The WordPress integration addresses a little bit of a different segment. The bigger enterprises tend to use the Adobe Experience Cloud. The WordPress integration really targets more of our small to mid-sized customers. The biggest bottleneck for us is often getting the Answers integration live on a website, and so, the WordPress integration makes it so that anybody using WordPress can do it without code. They can just easily plug it in and turn it on. So that has been a nice way to get faster with a bunch of mid-sized customers that want to use Answers.

And our next question will come from Stan Zlotsky with Morgan Stanley. Please go ahead.

Hi, this is Stan Zlotsky. I was wondering if you could provide more context on the success you've had with Answers compared to other areas of the business, and when we can expect to see an increase that might offset some of the uncertainty you're experiencing, as well as the timing for when that impact might occur. Thank you.

Yes, thanks for the question. First off, in Q3, we closed 86 Answers deals, and I just want to be clear, that's not free trials; that's closed business in the quarter, and that represented 30% of our new ACV, new in upsell globally. By the way, that compares to 20% in Q2. So we are seeing tremendous momentum in Answers. In addition to that, Land with Answers is clear, is a more efficient sales motion. I think we've been talking about this over the past couple of quarters; landing light with Answers is not a new strategy, it's a new sales motion to land with a product that addresses 100% of the world that every client needs on their website. We can get out there and land with this product and upsell it. You've seen us be able to penetrate new markets like government; new markets like higher education. Check it out on Bucknell.edu or TCU.edu, or even the World Health Organization's website, and if you go to WHO.int, click to their COVID-19 site, you'll see we're answering tons of questions there. This is a big opportunity. We're completely focused on both revenue growth through acceleration of Answers, but also at the same time focused on operational efficiency. You saw in Q3 we reported a decrease from 81% of revenue in sales and marketing to 64% year-over-year. We are seeing huge efficiencies in addition to our ability to acquire logos with 86 closed in the quarter.

And our next question will come from Naved Khan with Truist Securities. Please go ahead.

Yes, thanks a lot. Two questions. On the last call, you guys mentioned a bottleneck, or almost too much demand for Answers, where it just takes a lot of time to onboard customers. Any progress in removing that? And I think you also spoke about self-serve as potentially a solution. Can you touch on that a little bit? Secondarily, can you also talk about the Adobe partnership and any early results from that channel that you might have to date?

Naved, this is Howard. I'll take the first part of your question, and I'll kick it over to Dave for the Adobe update. We're very focused on removing friction to be able to be a self-serve product. The two main things that we did in the Q that made that accelerate were, first, we went general availability with our Hitchhiker program. Hitchhiker program, that's our brand for Yext administration; those are the super experts in our platform, and historically, it was pretty hard; you had to be an expert to set up and use Yext. You didn't have to be an engineer, but you had to have a lot of institutional knowledge to configure things. We've been working hard to simplify that and put better training in place; we've seen a great pick up in people becoming Hitchhikers. Now, if you go to our site, it's funny, because you can almost track what's happening. If you just go to our website and click on 'Free Trial,' you go through that. There is a self-serve experience there, and there’s quite a lot of people coming through that every day. Once you have the data in, what we need you to do is put it up on your site, and that's where our WordPress integration comes in to remove friction. We continue to make progress there.

And Naved, it's David Rudnitsky. Just to answer your question about Adobe, we've got a really good motion going with them now, and I feel really good about it. I've had success building a partner program in the past, and we've got solid bottom-up and top-down engagement. We've started to get our field A's engaged on account base together pursuits, and we've started to engage at the highest levels with our executives. I feel like the collaboration is going really well, and we've had a few deals that were completely influenced by our relationship with Adobe this past quarter. As I look at the excitement of going into Q4, we've got a number of engagements where we're partnering with them together on joint pursuits in a very bespoke way, and we've found a couple of great use cases to work together. So I feel really good about it.

Thank you, maybe a quick clarification, if I may. On the first part of the answer, how does the backlog, whether it's Answers or the core offering, look compared to the prior quarter?

We continue to drive great demand for Answers. It's clear every company needs it, and a free trial is a compelling offer, particularly for mid-market companies. The hope is that with integrations, like with WordPress, which powers tons of small and mid-sized business websites, it will accelerate that. For the big companies, they still require a real Yext Admin to work with them, and that's more on the company that's using an Experience Cloud, or a company that's using a bigger CMS that wants to use our platform.

And our next question will come from Matt Coss with J.P. Morgan. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. One for David, was there any uncertainty near the end of the quarter as we were leading up to the U.S. Election? And then Steve, can you talk about the mix of sustainable or durable OpEx improvements versus one-time savings from the Yext ONWARD Conference and less travel this year?

Hey, Matt, as far as the election, surprisingly, no. I mean, it was a point of interest when you engage with the customer to talk about it; it was on top of mind, but it didn't influence any of our deal cycles whatsoever that I know of. It's a non-issue actually.

Yes, I'd just like to add to that. I mean, we had a really solid Q3, especially in the United States.

Yes, and regarding sustainable improvements, obviously a third of the spend was around ONWARD; we're rethinking that a little bit. We'll see what happens next year, depending on how the world opens up. The other aspect is yes, obviously the travel is close to zero, not zero, but we're making huge progress in infrastructure. As Howard said, the sales motions with Answers have changed dramatically, and we think a majority of that savings is going to be sustainable. We're still working on processes and infrastructure. Self-service is going to help. So I feel comfortable that we're on a good trajectory to continue to improve our OpEx as a percent of revenues and drive those down.

Okay, that's helpful. Thank you. And then maybe one last one, so I know you're being prudent with the Q4 guide, especially mid-COVID resurgence and the lockdown. It's hard to predict, but do you think Q4 might be a low watermark in terms of growth?

That's a great question, and to be fair, Howard and I have that conversation almost daily as to where's the bottom in all of this? I will say, we're being realistic in our growth. It's not because we think, we know we're not losing customers, but we also know that they're not stepping in yet. The renewals, like I said, on a gross basis were historically good, and we feel good about that. So, as people start, not just us, but as other companies see daylight at the end of this tunnel with a goal of 255 sales reps, good gross retention, and new products, we feel that we're in a great position to start to benefit from that uptick. Your question is a million dollar question, though; it’s hard to call that bottom at the moment.

Thank you very much.

And our next question will come from Rohit Kulkarni with MKM Partners. Please go ahead.

Thank you.

Rohit, we can't hear you. Can you please try asking your question again, you’re cutting in and out?

Sorry about that.

Rohit, one more time please. Let's go onto the next question; we'll get Rohit back in the Q&A please.

Certainly, and our next question will come from Mark Mahaney with RBC. Please go ahead.

Okay, two questions, please. I'm trying to figure out the materiality of Answers to Yext's business. That 30% of new TCV is useful; does that mean it's probably high single-digits, low double-digits? And then you just talked about other products and solutions, could you spend a little bit of time on what those are? Thanks a lot.

Hey, Mark. Most of our deals that we're starting to see are really Answers-led, which means that Answers are a huge part of our deal and often are the deal. If you look at higher ed, that’s a 100% Answers-led deal and 100% Answers deal at Bucknell University, Texas Christian University. If you look at the States that we sold into and government, those are primarily Answers deals, almost entirely Answers deals. That's a main use case being solved for there. So it's material, and if you look at the biggest deal that Dave talked about being closed with the top three financial institution, that was the biggest deal in the quarter. I think we said how big it was; it was about $2 million of ACV, and that was an Answers deal. That was the main use case there.

And our next question will come from Koji Ikeda with Oppenheimer. Please go ahead.

Hi, guys, this is Chad Schoening on for Koji. Thanks for taking the questions. Two questions here, if I may. First on free trials, I know you haven't given an exact number on the conversion rate there in the past, but can you share any incremental details there on how that's kind of trended throughout the quarter, and what your expectations are there into the New Year? And then I have one follow-up. Thanks.

Free trial is one way we’re getting customers to come in. It’s a marketing offer; it’s a limited time offer. We started in March; we may keep it, we may not. It’s going pretty great. It’s been successful in generating interest and leads for our sellers. It's not the only way we land. For example, I think we mentioned that top three bank; we often land without a free trial and that’s okay too. The free trial is more compelling for mid-market or CBU customers than it is for enterprise. We look closely at the conversion rates; it’s typically classic SaaS. You'll see conversion rates between 20 and 50%, depending on the industry and the segment, and we're right in line with that.

Great, that’s super helpful. And then my second one is actually on the technology side. I'm just thinking about the increasing prevalence of chatbots and AI, and curious how you're leveraging the increased philosophy of search data from all the customer queries on your platform to kind of improve that value proposition to your customers, and is that all finding its way into your R&D roadmap? Thanks.

It's funny; that's a really great question because as we all know with AI and machine learning, data is oil. The more data you have, the more questions you have, the better your models get, the more tests you can run, the better answers you can give. The more queries we handle – and we are beginning to handle lots and lots of queries every day – better our search results continuously. We just put out a search release in the quarter; we met this week or last week we made a multi-algorithm improvement where users can of our system hitchhikers can pick which types of algorithms they want to apply to which types of entities, which is super cool. If you're using maps, I might want to use a direct answer. If someone asks for a phone number, I might want to use extractive Q&A, a different algorithm for someone who's asked a question contained in an FAQ. These are all the parts that make up a modern search engine. To your point, the more data you have, the better answers you're going to give. You also asked about chatbots; most chatbots aren't really chatbots at all but are just chat windows that try to get you to put your phone number in and then someone is texting you. Chatting is really about getting into your personal account situation, and that's different from asking questions like what's the routing number for a bank? Or, how do I check my Krispy Kreme reward card balance? Our platform helps deflect customer service calls.

And our next question will come from Ryan McDonald with Needham. Please go ahead.

Hi, thanks for taking my questions. Howard, expanding upon your previous answer, you've talked a lot about with Answers that the really value propositions are one driving increased conversions and driving more sales by e-commerce on people's websites, but then also customer service deflection. I'm curious as you're going out there and sort of trying to demonstrate the ROI of Answers, which use case seems to be resonating more, and has that shifted at all, given sort of the strong trends we've seen early in the holiday season in terms of e-commerce trends as well as sort of customer service interactions over digital channels.

First off, Ryan, I’d love to – you did a great job with the picture with those first few value props. We are hiring quota-carrying reps still in North America. I look forward to your application. If you go to the Yext website and search for jobs, you should search for that in Yext Answers; you will see a list of jobs. The three value props of Yext Answers when we sell are: number one, every customer journey starts with a question, and there are two places where that can happen: on Google and on your own site. When someone is on Google, they’re going to see ads, and on your own site you keep control and answers comes directly from you. Also we showed that searches on Google and searches on a brand's site are intricately linked, showing that giving people a great site search experience gets them to come back again and again. It really depends on the industry what the particular value prop is to the business. As for our expansion into the Japanese language, we had a great launch of Answers there, and we have a sales team that is trained. We are indeed preparing resources for the Asia-Pacific region; we have a marketing team, a sales organization, and even hitchhikers in Japan.

And our final question comes from Rohit Kulkarni with MKM Partners. Please go ahead.

Hey, thank you. Thank you for squeezing me in. Hope everybody hears me fine. I guess my question on November, are you seeing budgets allocated to Yext Answers coming from different pockets in their company? It feels to me that they historically came from more IT, more people managing the website and like that? Are you seeing kind of deeper pockets, like if 34% of branded search results came back to Yext, that's a very big potential ROI for a large company spending a lot of money on Google. Any anecdotes you can share on whether you're seeing budgets to Yext coming from other places within a large organization?

Hey, Rohit; Dave Rudnitsky. What’s interesting is we're seeing budgets from multiple executives. It could be from the Chief Digital Officer, Chief Marketing Officer, CIO, Chief Experience Officer. The reason I feel good about what we did this past quarter is we're in the middle of their most important initiative right now, which is digital transformation. Our client advisory board showed four initiatives focused around that, and they are trying to change quickly just like sales companies. So we’re not siloed from where the budgets are coming from.

We’ll bring the call back to Yuka.

Right, everybody, thanks so much for your time. We look forward to talking to you again next quarter and look forward to seeing you at our Analyst Day in March. Have a good night.

Thank you all. Bye.

Thank you.

And the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.