Earnings Call Transcript - YEXT Q1 2021

Operator, Operator

Good day, and welcome to the Yext First Quarter Fiscal 2021 Financial Results Conference Call. All participants will be in listen-only mode. 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.

Yuka Broderick, Head of Investor Relations

Thank you, Sara, and good afternoon, everyone. Welcome to Yext fiscal first quarter 2021 conference call. With me today are CEO, Howard Lerman; CFO, Steve Cakebread; President and Chief Revenue Officer, Jim Steele; and SVP Finance, Dominic Paschel. 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 guidance, cash flow, timing and size of capital expenditures, retention rates, market opportunity, business performance, 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, the timing of the exit of our New York headquarters, 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 investor.yext.com. With that, I will turn the call over to Howard.

Howard Lerman, CEO

Thank you, Yuka, and welcome aboard. First of all, I hope you and all your families are staying healthy and safe. After a record-breaking Q4, we had the strongest pipeline we'd ever seen heading into Q1. However, we saw headwinds in bookings and retention in March and April as customers delayed purchasing decisions due to the pandemic. I've characterized what we saw as a tale of two cities. In one city, we saw challenged industries like retail and food services. The pipeline in these businesses typically didn’t disappear; instead, it just slipped to later quarters. Meanwhile, in the other city, we saw industries like healthcare and financial services perform strongly, showing signs of accelerated digital transformation where Yext plays a key role. Approximately 25% to 30% of our ARR at the end of Q1 was in these challenged industries. The divide is now less severe, and we are seeing signs of recovery, and we are growing faster in the other industries. The pipeline is strong for Q2, and retention levels in May have already improved. Needless to say, the last few months have been unprecedented for everyone. But despite these challenges, our first quarter was incredibly productive. We had Q1 revenue of $85.4 million, growing 24% year-over-year. The number of Structured Facts reached over $295 million, a 43% year-over-year increase. We saw a huge increase in fact activity, with an 84% increase in the number of updates made on the Yext platform in the first month after the COVID-19 shutdown started. This huge growth tells us that Yext is a critical part of a customer's digital transformation. In fact, we believe now more than ever that the world needs official Answers straight from the source. There has been an explosion of questions asked on the web over the past few months. Website visits from people seeking information from brands have increased by an average of 65%, and by as much as 700% in some industries. The pandemic has accelerated digital transformation, and Yext Answers fits squarely into this trend. As evidence of this, we launched Answers-powered websites with the State Department of the United States, the states of New Jersey and Alabama, and the World Health Organization within a record 60-day period. Each website was launched within a matter of weeks after the first conversation with key stakeholders, showing just how swiftly we can put their official Answers online. There's no better validation than the fact that the world needs Yext, and to have international agencies in the United States federal and state government bodies choose Answers as the best way to ensure citizens access to key information during a global pandemic. Our work with government organizations is just one example of our rapidly expanding total addressable market. Simply put, Answers takes us into new verticals that we never were able to address before. We see nearly 4,000 enterprises in North America with $500 million of annual revenue that we can address with listings and pages. But when we look at the broader opportunity to include those addressable by Answers, that number doubles to nearly 8,000 enterprises. With Answers, we can work with any type of organization because virtually every company has a digital presence and needs to provide official answers about their business. That's why we positioned Yext as the official Answers company. We branded our search bar with the official Answers seal because we want to signal to consumers that a search bar powered by Yext means they're going to get the official answers to their questions. For example, when you look at the World Health Organization's website and conduct a search, you can see the Yext Answers seal—the official answer seal—right in their search bar. For users of that website, this means they are going to get an official answer to the COVID-related question. Going forward, we're going to drive sales efficiency with our new land with Answers sales approach. The tip of the spear for land with Answers is the Answers free trial. Any qualifying company can set up an answer site search on their site and see improved revenue generation, lower customer support costs, and insightful analytics on what customers want to and are asking about their business. We made it easier than ever for companies to see how their website is addressing questions with our No Wrong Answers challenge at nowronganswers.com. Anyone can go there and see easily and automatically how a company's website answers the most common questions about it on the web, and then reach out to us for an Answers free trial to improve site search and experience. Also, last week, we announced a strategic relationship with Adobe. They are the behemoth in the digital experience space. This opens up an entirely new avenue to drive Answers customers alongside our inbound and outbound channels. Now every Adobe rep in the world can bring Yext Answers to their customers. Adobe is our first go-to-market partner with Answers, and opening up a partner channel will drive even greater sales efficiency. We expect land with Answers to drive higher sales efficiency because it will lead to faster sales cycles, as the time to show value to the customers is much shorter. In just a few days of being live, we are able to automatically show cost savings and revenue generation metrics demonstrating the compelling ROI of Yext Answers. Finally, we're focused on land with Answers, but we are also going to expand with the rest of our platform. So we land with Answers and expand with everything else. Based on the knowledge graph, our products put our customers in control of placing official answers everywhere, starting on their own website, then across hundreds of platforms for people search. And to talk more about all this, here’s Jim.

Jim Steele, President and CRO

Thanks, Howard. We are very excited about the opportunity that Answers presents for our customers and for Yext. Howard talked about how the pandemic has accelerated the need for digital transformation for every business. For example, we talked to one of the leading US financial institutions, and they told us it's all about digital transformation. They're looking closely at their entire customer digital experience. They came to Yext because they know that’s what we do—we deliver a great client experience. We are having conversations like this across a broad set of industries, as companies recognize the need to provide accurate timely answers and understand that Yext can deliver those official answers. We see that with a better customer experience, the result is higher conversion rates and lower customer support costs. Let me review our first quarter sales metrics. In Q1, we closed 73 deals with at least $100,000 in total contract value. This includes three deals that resulted in at least $1 million of total contract value, including new logos and renewals of existing customers. The total number of customers increased 36% year-over-year to nearly 2,100 customers. This excludes our SMB and third-party reseller customers. As Howard described, in Q1 we saw the tale of two cities, with verticals highly impacted by the pandemic, such as retail and food services, and other verticals which are less impacted, like financial services and healthcare. For retail and food services verticals, in some instances we saw teams we worked with getting furloughed, and many understandably began to cut budgets. We also had some instances where customers were not able to meet their typical renewal windows and fell into a grace period. A majority of those renewal opportunities associated with grace accounts have now been renewed. Despite these challenges, we saw continued deal flow in food services, particularly in pharmacy and grocery. We had renewals with Safeway, Albertsons, and Rite Aid. The new logo signings included a deal with Sainsbury, a leading grocer in the UK. In other verticals, like financial services and professional services, we saw strong performance—proof that more brands are increasingly finding our platform mission-critical. Retention rates in financial services and professional services were exceptionally strong. Large renewals included the US Postal Service, Allstate Insurance, and Centura Health. We continued to close large new deals, including Lloyds Bank and Thrive in Financial. In the first quarter, our sales team focused on our land with Answers sales motion to drive sales efficiencies while addressing an enormous business opportunity. We're starting to see entirely new verticals open up to us. We're now seeing interest from technology, CPG, and digitally native companies who can see great ROI from increased conversion and lower customer support costs. Regarding our sales force, we had nearly 240 quota-carrying sales reps at the end of Q1 compared to nearly 250 at the end of last quarter. This decline is due to normal seasonal attrition and a challenging hiring environment. Our goal is to end the fiscal year with 255 quota-carrying sales reps, which was our original plan. In summary, I'm very excited about our future as the official Answers Company and the expanded opportunity set and increased sales efficiencies that will come with our land with Answers sales motion. So now I'll turn the call over to Steve. Steve?

Steve Cakebread, CFO

Hey, thanks, Jim. Our first quarter revenue grew 24% year-over-year to $85.4 million, which is a pretty good result under the circumstances. Unearned revenue increased 22% year-over-year to $153 million. As you know, we're focused on Annual Recurring Revenue or ARR, which we believe reflects the health of our primarily recurring revenue business model. For that, ARR at the end of Q1 was $326 million, growing 24% year-over-year from the $262 million in the year ago quarter. Q1 ARR was flat with Q4, both because of normal seasonality of the business in Q1 and of course the pandemic's impact we saw in bookings and renewals in March and April. Our net dollar-based retention, which excludes our SMB customers, was 106%, the same as Q4. Our net dollar-based retention for direct enterprise, which excludes our SMB and third-party reseller customers, is 107%. Just to remind you, this is a trailing 12-month number. The GAAP gross margins were 75.2% this quarter, compared to 74.3% last quarter and 76% in the year-ago quarter. The change in gross margin was driven primarily by higher lease expenses and hiring in our services organization over the past year. However, publisher costs remain stable. Total GAAP operating expenses were $93.4 million compared to $71.5 million in the year-ago quarter. Compared to the year-ago period, the primary drivers of this increase were again the overall growth and headcount, as well as higher real estate costs. Given current business conditions, we're managing our operating expenses carefully, while continuing to make investments to support our Answers sales motion, which we think will drive higher self-sufficiency. We've gone to replacement-only hiring for the company, but we are still focused only on quota-carrying headcount. In addition, we continue to save on travel-related expenses, and we are rethinking our approach to marketing costs and other OpEx areas that aren't directly tied to driving revenue growth. We're looking for improved efficiencies in these areas. Q1 GAAP net loss was $29.2 million, compared to $19 million in the year-ago quarter. Based on a 116.6 million weighted average basic shares outstanding, net loss per share of $0.25 this quarter compares to a $0.18 loss a year ago on the basis of a 106.5 million weighted average basic shares outstanding. Q1 non-GAAP loss, excluding stock-based compensation, was $11.9 million, compared to a $5.7 million loss in the year-ago quarter. Our Q1 non-GAAP loss per share of $0.10 compares to a $0.05 loss a year ago. Cash and cash equivalents were $249 million as of April 30. We believe our balance sheet is strong and positioned well to weather any current economic environment. In March of 2020, we replaced our prior revolving credit facility with a new $50 million credit facility, believing this action has fortified our balance sheet as well. Net cash flow from operations for Q1 was a negative $700,000, compared to a positive $800,000 in the year-ago period. This reflects the spending controls put in place during the quarter to counter the more challenging revenue environment in Q1. CapEx was $21.3 million, compared to $800,000 in the year-ago quarter. We continue to make progress with our building projects in New York, Washington, DC, Tokyo, and Paris, and we expect the remaining CapEx related to these projects to be about $49 million, with the remaining costs to occur within fiscal year 2021, although schedules could be impacted again by the COVID-19 pandemic. Once these projects are completed, we do not have any further major facility expansions planned for the future. Excluding the facility build-out, we expect CapEx to return to the normalized mid-single-digit millions. Clearly, the facilities build-out is a meaningful use of cash in fiscal 2021, and the timing is unfortunate with a global pandemic occurring this year. But it's been part of our long-term plan, and with our increased focus on efficiencies, we are comfortable with how we're managing our cash. As part of our efforts to manage costs in the face of the business disruption, we've accelerated the exit date of our lease for 1 Madison Avenue to August 31st this year, four months earlier than our previous date of December 31st. We'll save on lease expense for those four months, and that cash savings will be about $2 million. Turning to our outlook, we expect Q2 revenue to be between $84 million and $86 million. We anticipate non-GAAP loss per share of between $0.11 and $0.13. This reflects an impact of a loss of $0.02 due to the charges during Q2 related to our expected exit of 1 Madison Avenue. We expect a weighted average basic share count of approximately 118.5 million shares in Q2. From a full-year perspective, unfortunately, we're withdrawing our guidance for fiscal year 2021 due to limited visibility of future periods at this time. To wrap things up, I'm optimistic about Yext's future because of what you've heard today. We have a strong Answers solution, a strong pipeline, a focus on improving our operating cost, and a great new partnership with Adobe. Finally, I just want to welcome you to Yuka Broderick as our Head of Investor Relations following her more than 15-year career on Wall Street. Tom, obviously, will continue to be part of our IR efforts, but he's also going to get involved in operational roles in APAC and LATAM.

Howard Lerman, CEO

Well, thank you, Steve, and welcome again to Yuka. I am excited about our progress in delivering official answers and our improved land with Answers sales focus. We're thrilled about the initial response to our Answers free trial and our No Wrong Answers campaign. We have a strategic new partnership with Adobe and with it the ability to reach so many more potential Answers customers, and above all we are driving for revenue growth while focusing on greater sales efficiency.

Yuka Broderick, Head of Investor Relations

Thank you, Howard. Sarah, can we please open to questions?

Operator, Operator

Our first question will come from Naved Khan with SunTrust. Please go ahead.

Naved Khan, Analyst

Yes. Thanks a lot and hello everybody. I had a couple of questions. First of all, just on the pretrial of Answers, what percentage of your enterprise base is opted into it and trying it actively? And what kind of interest have you seen so far from those that have tried it out? And the other question, just kind of related, just around the international launch of Answers. Can you sort of brief us on which countries you already have rolled this out? And what's the schedule like for the rest of the world?

Howard Lerman, CEO

Great, Naved. I'll go ahead and take that one. This is Howard speaking. We've seen a really strong response from enterprises and mid-market customers from around the world in taking advantage of the Answers free trial. It's particularly easy to onboard a customer with Answers when they're already using the Yext Knowledge Graph. So if you're an existing customer, there's a strong interest, but we also are using Answers to expand into entirely new segments that we've never sold into before. That's an equally exciting area because we are able to land with Answers in industries like technology and industries like CPG that don't have the ability to purchase traditional listings and pages products. So we're really fired up about the ability to use Answers to sell to any company, as I think we noted more than 8,000 enterprises that do more than $500 million in revenue—more than doubling the potential accounts we can land into. We're working hard to get Answers live in every language, and while I won't promise any specific dates, what I can say is that in Q2 it is our intention to launch Answers in the Romance languages—Italian, French, and Spanish—and then hopefully in Teutonic languages like German. We have on our roadmap French, Spanish, Italian, German, Japanese, and Mandarin.

Naved Khan, Analyst

Great. And then maybe just a quick clarification. So of the customers that are trying it out, what is the conversion rate into them becoming paying customers for Answers as well?

Howard Lerman, CEO

Well, it's pretty early to give you an exact number, but the value is very compelling. Remember, Yext Answers delivers three things: first, customer intelligence; second, increased revenue; and third, lowered support costs. The coolest aspect of this is that once you put the Answers box up there with the official answer seal, and people start asking questions, we can instantly and automatically classify queries as either cost savings or revenue generating. For example, if someone goes to a financial services website and searches for 'advisor,' we know what that’s worth to them because they’ve told us that using our conversion tracking. We're able to quantify the exact value that's being delivered through the search by Yext Answers, and the initial results are very promising. We see very high engagement rates and very high click-through rates, which are an indication of the high search quality. Every time someone asks a support question, one other thing that's going on right now is that support has been overwhelmed. Customer support in many companies during the COVID-19 pandemic is receiving huge volumes of calls and tickets. On average, I think a support call costs around $4.90. So every time there's an answer, a great strategy for a company is to put up our answers bar to catch people before they call. By answering a question upstream, the companies save $3-$5. We can show the company within the analytics the exact questions people are asking and the answers we’re providing in order to deflect calls. We can then estimate the savings and add that to estimate the revenue generated to compute a value they can compare against their annualized costs for a sense of ROI.

Operator, Operator

Our next question comes from Mark Murphy with JPMorgan. Please go ahead.

Mark Murphy, Analyst

Yes. Thank you. Howard, I was interested in Answers and just how it performs sequentially. I think you had said it had done, I want to say a $1.5 million last quarter, and is there any way to compare that? And could you estimate the influence that Answers has had on other deals?

Howard Lerman, CEO

Well, Answers is a huge influence on other deals. I think last quarter we talked about a company, Vanguard, which we never could have sold to before. It's Answers led, and then we bring in the knowledge graph and expand from that. It’s our strategy going forward to land lightly with Answers and then expand from there. Many of our very successful SaaS peers do the same thing: a light land and then expand with platform and other features. Answers is the perfect product to land lightly, especially right now because there's more questions than ever, and being able to deflect a lot of those questions with site search is a powerful technique to reduce costs and drive revenue, which we can immediately quantify. We offer it for free, which is a compelling offer, especially when we handle the implementation at no cost. If you, for example, like a company such as JPMorgan, already have a lot of data in the knowledge graph and facts available, we can quickly see what people are asking and continue to build out the knowledge graph with the questions. It's an exciting time, and we're really focused on supporting the vast volumes of questions. There’s been an explosion of digital questions. It used to be you could walk into a bank branch and ask a teller a question, but now you can’t. You can’t ask questions in the physical world anymore. So people seek online answers.

Mark Murphy, Analyst

Okay. So if we're thinking that Answers may be down sequentially in Q1 from the strong Q4, its influence on some of the other deals is a fair way to consider it?

Howard Lerman, CEO

I don't think we're characterizing any exact ACD from Answers, but I can say that this is how we are leading our deals now.

Mark Murphy, Analyst

Okay. Great. I wanted to ask as well. I think you've commented on adverse impacts in March and April. Did you not sense any kind of improvement in bookings cadence in April? Maybe it's a question for Jim. And could you just comment on the differences in tone you're seeing during May and how long it might take to get back to pre-COVID levels?

Howard Lerman, CEO

Jim, do you want to take that?

Jim Steele, President and CRO

Sure. Yes. Hey, Mark. Definitely in March, things slowed down while our customers were trying to figure out how to work from home. At the same time, we were all trying to do the same thing. So there were certainly a lot of adjustments we all made in March in particular, and the activity level shot up in April and May as our teams figured out how to communicate better and more directly with the customers. I was super impressed at the level of engagement and obviously we had some deals slip. I haven't seen deals just go away. Customers were still very interested and wanted to pursue opportunities, but due to budget constraints, many of them had to hold off, and some teams we were working with got furloughed. However, we did see tremendous activity, especially in financial services, mortgage, and services related to businesses. Obviously, hospitality and retail took a significant hit. One of the things we noticed was a real spike in customers using our services. In the month after the COVID-19 lockdown in mid-March, we had about an 84% increase in activity from our customers using the knowledge graph to update operational hours and related information about their sites and businesses. The real change we observed was how our customers told us how mission-critical and essential our service became during the chaos. We also saw a lot of new opportunities emerge; we talked about the government, particularly, the states of New Jersey and Alabama, which put up COVID-19 information hubs using Yext within weeks. They had their hubs up and running, as did the US Department of State. It was one of the fastest implementations they experienced. They are currently using it to support a hundred different countries and their expats trying to be repatriated during this crisis. We've found that we're able to spin up Answers sites very quickly for our customers. We learned this during the crisis; we deploy it as we land lightly with Answers and then expand from there. We might come in with Answers focused on a particular set of FAQs and then add other types of Answers based on success in addressing the questions customers and constituents are asking. We had some renewals that got pushed out, but the majority of those renewals have already been renewed in early Q2. From a sales perspective, I feel like the sales team has adjusted well following the initial shock in the second half of March. We have a record pipeline, and with the tenure of the sales force and new enablement tools like the Answers free trial and the No Wrong Answers campaign, we're actually in very good shape going into Q2, given the challenges we all face.

Mark Murphy, Analyst

Okay. That's great to hear, Jim. I appreciate all that detail. One last one, Howard, just on the Adobe relationship. Can you provide a little more color on the contractual commitments and how you foresee Adobe reps retiring quota by selling Answers?

Howard Lerman, CEO

Part of our strategy is to add to our inbound and outbound channels driving awareness for our free trial. A fundamental piece of our strategy is to ramp up a partner channel as well, and Adobe is the first company we are working with to refer Answers free trials to us. They're only our site search partner, and they are our first Answers site search partner. What better company to align with? From a product fit perspective, many of our customers use Adobe’s experience cloud to power pieces of their websites, and Adobe exited the site search business a couple of years ago, which created a great opportunity for us to provide a new type of site search to their customers. As a result of that partnership, their reps will refer companies to Yext, and they will retire quota for any deal that comes through that referral; we pay them a commission.

Koji Ikeda, Analyst

Yes. Thank you for taking my questions. I actually wanted to build upon that last question on the Adobe partnership. Could you talk about the genesis of expanding that relationship with Adobe? Was it Yext driven or Adobe driven? Also, from Yext's standpoint, what changes should we expect in your go-to-market strategy to support the new partnership?

Howard Lerman, CEO

We are focused on sales efficiency. Our new Answers product is the best tip of the spear we've ever had, and it can land in any company of any size around the world when we support that geography and language. Every company that has a digital presence needs to have official answers on their site. We validated early on that people like the site search feature; it sees a ton of usage and drives significant value in customer intelligence, revenue generation, and cost savings. You can quantify this because we can actually see the physical queries coming in. Right now, many companies are looking to drive traffic to their websites. Given our huge total addressable market (TAM), we are aligning our approach to better target customers without heavy sales tactics – particularly now, as face-to-face meetings are limited. What better partner to have referring this free trial offer for a website product than Adobe? They exited site search, and we just happen to have a robust product to fill that gap.

Jim Steele, President and CRO

Howard, this is Jim. A few years ago, our team, led by Marc Ferrentino, our Chief Strategy Officer, went to the Adobe Summit. Although we merely attended, we saw so many of our clients there, and we received inquiries about why we couldn’t collaborate with Adobe. Last year, we decided to participate significantly and had the second-largest booth next to Accenture at the exhibition center. We attracted considerable traffic as numerous Adobe employees, partners, and customers came by. Many of our staff are former Adobe employees, so the excitement about working together has been palpable. When we announced Answers, Adobe was also exiting their site search product, creating a complementary relationship since Adobe specializes in creating content while we excel in delivering traffic and conversion of website visitors.

Steve Cakebread, CFO

Yes, at the moment we haven't broken all that up, but we are working on that. When we have an investor day, we'll provide better information, but most of our investments have been in enterprise. Those are enterprise accounts driving that growth, and most of our quota-carrying sales reps are focused there as well. But for later days, we will provide that information.

Hamza Fodderwala, Analyst

Hi, guys. This is Hamza Fodderwala in for Stan Zlotsky. Thank you for taking my question. First question for you, Jim. I'm wondering how you guys have shifted to a remote selling motion in the past couple of months and within that how you feel you can perform in a more low-touch sales model, as well as onboard new hires? Does that change the typical time to ramp to full productivity at all?

Jim Steele, President and CRO

Yes. Thanks for that question. This is Jim. The good news is we've hired a lot over the past year-plus, so we entered this year with a plan to reach 255 sales reps by the end of the year. We are at about 240 right now, so we don't expect to hire dramatically for the balance of the year. This means most of the new hires from the last 12 to 18 months are close to being fully ramped. Using remote onboarding has presented different challenges, but after the end of March and beginning of April, our teams found a rhythm, and customers became much easier to connect with. By mid-April and into May, we saw a significant increase in engagement as our teams learned how to communicate more comfortably and directly with customers. We've been able to handle more outbound calls than ever; we are making far more outreach via email compared to our historical norms. While we acknowledge that there's no absolute substitute for face-to-face interactions, zoom meetings have helped accelerate our processes. Surprisingly, despite my extensive face-to-face experience throughout my career, I now believe we could conduct business like this for an extended period if necessary.

Hamza Fodderwala, Analyst

That's great and I'll echo the sentiment on the Zoom calls. Follow up for Steve, if I may. Steve, you talked about savings from lower travel and event expense, and then you also spoke about rethinking some of your marketing initiatives to ones that are driving revenue. So my question is, how much of those savings do you think are more temporary in nature because of the pandemic versus efficiencies that you think will be sustainable coming out of this?

Steve Cakebread, CFO

I think there are a couple of things, and Howard can probably speak to the marketing aspect as well. This entire opportunity has caused us to rethink how we connect with everybody, from sellers to marketing events. Even though we canceled a number of events this year, we’ve seen stronger engagement and driven more leads than ever. We are reevaluating how we can make our processes more sophisticated with the data and systems at our disposal to enhance productivity levels across our workforce. Therefore, we're using this moment to optimize our market approach and introduce new solutions while establishing better relationships with partners like Adobe.

Mark Mahaney, Analyst

Thanks. I want to get if I could ask three questions, please. First in terms of the salesforce now, do you still have COVID-related operational challenges? Or do you feel like you've worked through all those and your execution is back to normal?

Jim Steele, President and CRO

Sure. I'll start. We recently conducted an employee survey led by our Chief People Officer. The results showed that around 80% of our employees feel they're as productive at home as they were before the pandemic. This environment comes with challenges, but as a company, we've worked tirelessly to keep engagement high even during these uncertain times. Hence, while our approach to connecting with customers has shifted, we continue to adhere to our core purpose of providing answers to our clients. Many products in our market have requirements of speed and efficiency, and we can deliver on that.

Steve Cakebread, CFO

Yes, Mark, regarding gross margins, they tend to vary due to revenue seasonality, but it’s also true that we’ve been expanding our professional services and customer support teams, which is reflected in the overall uptick over the last 12 months. I still feel comfortable stating that our gross margins will hover around the mid-70s range for the foreseeable future, as there are no immediate systemic changes expected.

Howard Lerman, CEO

This is Howard. I'll take the last question regarding the macro trend towards a more permanent remote workforce. I see it benefiting us in two primary ways. Firstly, our improved internal sales and marketing process through Yext allows us to target industries that were previously challenging. We are using the Answers feature as a cornerstone for reaching into new verticals, giving us opportunities that are doubling our total addressable market. Secondly, the demand for official answers on digital platforms is now greater than ever. With people unable to walk into business locations seeking answers, they require digital services. Our goal is to effectively serve those needs, and we have built the infrastructure to do so using the knowledge graph as a foundation. To this point, our capacity to provide essential information means we can more easily penetrate verticals that were previously less accessible to Yext, ultimately leading to increased sales efficiency.

Yuka Broderick, Head of Investor Relations

That concludes today's earnings call. Thank you, everyone, for joining us. We look forward to meeting you throughout the quarter. Thank you.

Operator, Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.