Yext, Inc. (YEXT) Q4 2019 Earnings Report, Transcript and Summary

Good day everyone and welcome to the Yext, Inc. fourth quarter fiscal 2019 earnings conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. And please note that today's event is being recorded. I would now like to turn the conference over to James Hart, Vice President of Investor Relations. Please go ahead.

Thank you William and good afternoon everyone. Welcome to our end of fiscal year 2019 conference call. With me today are Howard Lerman, CEO of Yext, Steve Cakebread, CFO and Jim Steele, President and Chief Revenue Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements, including statements about revenue and non-GAAP net income guidance, cash flow, our industry outlook, market opportunities, hiring, geographic expansion, business performance, financial outlook 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, evolution of our industry, product development and success, market opportunities, adoption of accounting principles and general economic and business conditions. 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 statement 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 report on Form 10-Q and our press release that was issued this afternoon. During the call, we will also refer to non-GAAP financial measures. Reconciliations with most comparable GAAP measures are also available in the press release, which is available at investors.yext.com. With that, let's begin by turning the call over to Howard.

Well, thank you James and thank you everyone for joining us today. We are pleased to report another record quarter and the best fiscal year in our history. There is a lot of highlights, but just a selected few. Total revenue grew 33% over the fourth quarter last year, exceeding the high-end of our guidance. Full year revenue increased 34%. And if you take out small business, which is now less than 6% of revenue, we increased 38% in the fourth quarter and approximately 40% for the full year. And we generated nearly $31 million of operating cash flow in the fourth quarter alone, which is by far a record for us. And we are reporting our first full year of positive operating cash flow, an important milestone as we prove the power of our business model. This quarter, we signed 128 new enterprise logos. Now, that is an astounding 68% increase from the fourth quarter of last year and it's our best quarter ever for new logos. The strong close to the year was also reflected in the very strong growth of our deferred revenue which Steve Cakebread will detail in a moment. Our momentum has never been better and the best-known brands around the world are choosing to work with Yext, including this quarter new logos like NewYork–Presbyterian Hospital, Allegheny Health, Adidas, Nationwide Insurance, PNC Bank, Dunkin' Brands, Chick-fil-A, Chipotle and many, many more. And we also signed renewals and expansions with Farmers Insurance, T-Mobile, Marriott, Tesco in the United Kingdom, Denny's, Panera, 7-Eleven and many, many more. For instance, one of the world's largest banking and financial services firms, it's in the same tier as the Morgan Stanley, signed a major expansion with us, three times their previous contract to go broader across their organization with more products and services from Yext. Given our strength in the quarter, we entered the year feeling very positive about the state of our business and the size of this opportunity. The Internet today is an incredible resource and it provides vast amounts of information. For every query you can think of, there is a dizzying array of results. But all too often, this results in too much information and not enough verification. Consumers looking for answers about a brand or its product don't have a way to distinguish fake from fact or bad information from good. Their questions deserve verified answers that are easy to get. With Yext, brands can enable a single source of truth online to ensure accurate answers are provided to consumers' questions. When your search for information starts with a question like, is this particular menu item gluten-free, you should expect to get verified answer back. Not a guess from a third-party who really doesn't know the answer. That just makes sense. Yext is uniquely positioned to provide brands and consumers with brand verified answers. As of January 31, our customers were storing more than 185 million authoritative facts in our platform. That's an increase of approximately 50% from a year ago. Now to put this in perspective, our customers have added, on average, more than 172,600 facts into our platform every single day for the past year. Before this quarter, we have been periodically reporting attributes like, when a customer provided information to us such as their hours of operation we counted that as a single attribute. It didn't matter how much information was provided. Everything in the field was aggregated together as one attribute. But the actual amount of information that our customers have been giving to us was much greater. So now we are tracking the atomic level of this data and we call that facts. If a customer gives us opening hours from Monday through Friday, that's five facts. If they us what school they went to and when they graduated, that's two facts. Facts are the foundation of verified answers. And when consumers have questions about a business, increasingly they are getting verified answers from Yext. Recently, we did a study on how the consumer experience has changed. We looked at a global example of hundreds of thousands of customer locations and compared the ways that consumers interacted with those businesses in 2018 to how they did just a year ago. The results were stunning. In discovery, customer actions with knowledge cards, that include clicks to call and clicks for directions grew more than 20%. In the transaction stage, customer actions on local pages, like booking appointments or placing orders, they were up 30%. In the post transaction stage, this is new reviews per business location, they increased an incredible 87% compared to the prior year 2017. And this means the acquisition funnel is no longer a company's own website exclusively and that's why verified answers are becoming critical. The way we see it, there are two kinds of companies, those that structure their data for verified answers online and those that will. In the search for truth, Yext provides brand verified answers. If the Internet and AI powered voice assistants are going to review information about a brand that doesn't come from the brand's website, that information should be verified by the brand, period. Our mission is to provide perfect answers everywhere. Our purpose is define the chaotic results consumers see today into the verified answers of tomorrow and our vision is to ensure there is a single source of truth online. Our platform has been built to provide billions of verified facts everywhere so that consumers searching for answers can get the truth from the source itself. For more than a decade, Yext has innovated to put the truth online by putting brand verified answers everywhere. We always have now and we always will. Now I would like to turn the call over to our President and Chief Revenue Officer, Jim Steele.

Thanks Howard. We couldn't be more pleased with what we accomplished this past year and we have never been more optimistic about the opportunity in front of us. This was the best quarter ever for new enterprise logos. Over the course of the year, we won nearly 350 new enterprise accounts, a 47% increase from last year. In short, we are seeing strong demand indicators and great execution by our teams around the world. To meet these opportunities, we added more than 40 new quota carrying reps this year. We ended the year with over 170 quota carrying reps, up over 30% from the year ago period. But this is still just a drop in the ocean compared with the size of our market opportunity and the level of demand we are seeing. So you should expect that we will continue to expand our capacity by adding reps in all of our geographies. We are also scaling the organization by adding support in areas like recruiting, enablement and training. This is all part of the process we began two years ago to put a team in place that would take Yext to the next level. We attracted some incredible talent and are seeing the benefits of that approach. Dave Rudnitsky and his team created our first enterprise playbook, which was rolled out to our U.S. teams a few months ago and is now being deployed globally. A big part of that playbook is to understand the challenges our customers face. Two years ago, most of our sellers were generalists, working in the account in their territory. Today, we have sellers to focus on specific categories like financial services and healthcare. This approach led to speak to those customers in their own language and bring industry best practices to the table when we meet with them. Because this has been so effective, we are looking to expand this approach by building out our vertical focus into other areas. The strategic discussions we are starting to have with our customers are also leading to larger contracts as well. This quarter, we closed a record 169 deals above $100,000 in total contract value. That's 50 more than what we saw in the year ago period. And we also closed 18 contracts over $1 million in total contract value. That's twice as many as just a year ago. We believe these bigger deals tell us two things. First, there is a growing awareness of our category. And second, C-level executives are increasingly viewing Yext as a strategic technology provider who is critical to the success of their business. We see a lot of these same C-level execs starting to think globally as well. With our presence in the U.S., Europe, China and Japan, we are uniquely qualified to meet the needs of a global brand. This past year, our international results were off the charts. Japan had the largest first year we have ever seen from any international market in our history. In China, major Western businesses are seeing the value of the network we have built with the publishers in that region, including our recently announced partnership with Baidu. In fact, we recently won our first Western customer based solely on our presence in China. And Europe had record results with continued strength in the northern and southern regions in particular. With Europe growing so quickly and becoming a bigger part of our business, Wendi Sturgis, our Chief Customer Officer, is now taking on the additional role of CEO, Yext Europe. Wendi will be moving to London this spring to help position Yext as a global solution to our customers. So now let me turn the call over to Steve Cakebread to walk you through the quarter in more detail. Steve?

Thanks Jim. As Howard described, we had a great quarter, which allowed us to finish the year on a very strong note. But before we get into the numbers, please note in the fourth quarter we adopted ASC-606. So our results for both the quarter and fiscal year 2019 are now presented on a 606 basis. Because we are using the modified retrospective method, results prior to fiscal 2019 are not adjusted. I will remind you, the guidance we issued for the fourth quarter and full year was given under 605. So to keep things comparable, I will discuss our results with you this quarter on a 605 basis and highlight the impacts that 606 have on specific items. At a high level, the net impact to revenue from 606 was not material. It was less than $100,000 in the fourth quarter and less than $500,000 for the full year. On the expense side, of course, there is no impact to R&D and G&A, but in sales and marketing there are commissions and related costs we now amortize over a three-year period. This reduced fourth quarter sales and marketing expense by reported $4.5 million or approximately 10% as compared to what we would have reported under 605 and reduced the full year sales and marketing expense by $9.5 million or about 6%. We have provided reconciliations in our press release so that you can see all four quarters of fiscal 2019 on the basis of both 605 and 606. And keep in mind, the press release also includes a comparison of GAAP and non-GAAP results. So let's get on to the results. Revenue on a 605 basis grew 33% over the fourth quarter to $63.8 million, above the high-end of our guidance. And for the full year, revenue was $228.8 million, an increase of 34%. We continue to see very balanced growth between new and existing accounts. Approximately half of our new ACV in both the quarter and the year came from new customers, the other half coming from expansions and upsells with existing accounts. Our net revenue retention for the year improved to 110%. Gross retention in enterprise and mid-market was well above 90% this year. Deferred revenue was $137.4 million, an increase of 54% from the year ago period. With 606, we now report unearned revenue on the balance sheet as opposed to deferred revenue under 605. Unearned revenue increased more than 51% from the year ago balance to $135.5 million, slightly less than the 605 deferred revenue number. Looking ahead, we will continue to see variability in the year-over-year growth of unearned revenue. This is due in part, as you know, to the timing and size of new enterprise deal flow and because we continue to see a variety of billing terms. The press release also discusses a new disclosure under 606, remaining performance obligations or RPO. As of January 31, we had $262 million of RPO. But in addition, we also look at our whole backlog which includes another $34 million of revenue that is under contract that's subject to certain accounting exclusions. So it isn't reported in RPO. That provides us with the $296 million in estimated future revenue under contract as of the start of fiscal year 2020. Looking at profitability. Gross margins were 75% in both the quarter and the year. And gross margins increased 80 basis points for both periods, reflecting our improved economies of scale. Total operating expenses increased from $53.3 million in the fourth quarter last year to $68.8 million this quarter. And for the full year, OpEx increased from $192.7 million in fiscal 2018 to $256 million this year. In both periods, sales and marketing was the largest driver. This was due primarily to the increase, as Jim said, in quota carrying sellers as compared to last year. As a percentage of revenue, we saw improvement in sales and marketing, R&D and G&A as compared to the fourth quarter last year and this continues to highlight the efficiencies we continue to realize as we gain scale. Looking at our net losses. Fourth quarter net loss increased from $17 million a year ago to $19.9 million this quarter. On the basis of 101.4 million weighted-average shares outstanding, net loss per share of $0.20 this quarter compares to $0.18 loss a year ago. On a non-GAAP basis net loss, that excludes stock-based comp, improved 21% this quarter from $9.6 million a year ago to $7.6 million this quarter. Non-GAAP loss margin went from 20% of revenue a year ago to 11.9% in the current quarter. And our non-GAAP net loss of $0.08 per share this quarter was $0.01 favorable to the high-end of our guidance and is an improvement from the $0.10 non-GAAP net loss share we reported a year ago. For full year, non-GAAP net loss improved from $44.2 million a year ago to $39.7 million in fiscal 2019. And our full year non-GAAP loss margin improved from 26% to 17.3% and demonstrates our ability to realize operating leverage as we scale. Now looking at the balance sheet and cash flow. Cash, cash equivalents, marketable securities totaled $143 million at the end of this year. That was an improvement of more than $24 million from the year ago balance and is our highest ever balance for cash and equivalents. Net cash provided by operating activities was nearly $31 million this quarter and that compares to a cash use of $2 million in the year ago quarter. Over the full year, net cash provided by operating activities was more than $5 million. Let me say that again, over the full year, net cash provided by operating activities was more than $5 million. This is our first full year of positive operating cash flow. And it proves the business model is capable of generating healthy cash flows. It's an improvement of nearly $38 million from fiscal 2018. In fiscal 2020, we expect to continue to invest in people, specifically sales and marketing and R&D but as typical for a company at this stage in our lifecycle, we will see step function increases in facilities. We expect to increase our CapEx spend and facility related expenses over the next 12 to 24 months to address the needs to expand both new and existing facilities across the U.S. and other countries. You have already seen the start of that with our recent announced expansions in Washington D.C., France and just yesterday the U.K. Now let's take a look at our expectations moving forward, all of which reflects our adoption of 606. In the first quarter, we expect revenue to be between $66 million and $67 million. In addition, we anticipate a non-GAAP loss per share of between $0.09 and $0.11. This assumes a weighted average share count of approximately 103.1 million shares. For the full year, we expect revenue of $295 million to $300 million and a non-GAAP loss per share of between $0.40 and $0.44. This reflects investments in people and facilities throughout the year and is based on an assumed weighted average share count of approximately 105.9 million shares. So in conclusion, we are pleased to report such a strong finish in 2019. We are really excited about fiscal 2020 and our future. The quality of our product roadmap is very strong. We continue to make gains increasing our global distribution. We are building a category defining company with an unique value proposition in a strong competitive position. I would also like to take a minute to introduce Dominic Paschel, who is joining us as Global Head of Communications. He will have Public Relations and Investor Relations working with him. And I am excited to have Dom join me for the third time in a great company. With that, operator, we will set up questions.

[Operator Instructions]. And the first questioner here will be Naved Khan with SunTrust. Please go ahead.

Yes. Thanks a lot. Just a couple of questions. So the disclosure of the RPO, I think, is a pretty useful metric for us to track. Can you talk about how that metric has looked like in last quarter or maybe just the year ago period? And then I think you also broke out $34 million that's not included here. What was that in the prior period? I have a follow-up after that.

Yes. Naved, the challenge that we have, it is a good question, but we are just introducing the reporting of 606 this quarter. So the number that we are reporting does reflect all of our contracted but unbilled revenue, as you know. The $34 million, in 606 there is a couple of exclusions that we can include. So that's roughly the 34 million. It's not that significant at this point in time. In terms of historical growth, we haven't really got all that, we have got the quarterly data and you can see some of that in our releases. But we will look at these metrics going forward because we haven't obviously had history of the stuff.

And then just shifting gears and maybe can we talk a little bit about on the mix size, account focus and where are you in terms of ramping that effort up?

Sure. This is Jim. As you know, we have been focused heavily on enterprise the last couple of years and we built a strong team couple of years ago, bringing Dave Rudnitsky and a number of enterprise class SaaS execs into the company. Last year, we brought Dave Lehman in, also ex-Salesforce and he is doing exactly what Dave Rudnitsky did in the enterprise one year later. We started last year with mid-market. So we have been ramping up. The hiring, we have got now a sizable mid-market team of quota carrying reps throughout the U.S., mostly in New York, Chicago and San Francisco. We also have a mid-market team now across Europe. So we are ramping quickly. We are hiring and we see tremendous growth in our mid-market business.

And maybe just to kind of get some additional color there, so obviously you kind of pulled back from direct sales into the small and midsized. Do you think the increased focus on the -- sorry, the pull back on small and micro. Do you think the increased focus on midsize can offset whatever softness you might be having in the small and micro?

Yes. I mean I wouldn't call it softness. I think we have shifted the focus of our direct sales force to go upmarket into the mid-market from the SMB space and we drive a lot of SMB business through our partner channel. We have got lots of partners that are better equipped to sell a bundled offering to the SMB space and it's more efficient for us. In the mid-market, we definitely look at that as a huge opportunity, tremendous addressable space that we are going after and just building the playbook that we have in the enterprise for mid-market. And that's what we have been doing over the last year and we are seeing the impact of that.

Thanks guys.

And our next questioner today will be Koji Ikeda with Oppenheimer. Please go ahead.

Great. Thanks for taking my question and congrats on the strong finish here. Just had a follow-up on the SMB business. With that being less than 6% of res, any sort of color on how retention has been trending for that SMB segment, now that it has been pushed to partners, would be helpful? Thank you.

Yes. We talked about it in the mid-40% to 50%. Nothing's really changed. I think, as we said, it's going to continue to be less and less significant to our business and we are obviously not replacing the stuff that's lost. What you are seeing is more the growth in the mid-market and enterprise business. So in part, as Jim described, our whole agenda there is to put our best in resources into the enterprise and mid-market direct and not to small business.

Okay. Great. Thanks for that. And then I saw the news today on the new London office and then a few weeks ago with the build out in Virginia, something to like of it, I think about 700 new employees between the two sites. I guess what's the right way to think about the pace of hiring between those two locations over the next, say, 12 to 24 months.

Hi, it's Howard. Look, one of the cool things about our business is that around the world, every single company is going to need to have brand verified answers and have correct answers everywhere. So we have got global opportunity. So we need to be present in those market in order to win. So the London expansion which we announced late last night, that's all focused on Northern Europe and we continue to see amazing progress with signing customers and expansions with companies like Tesco, they are the biggest retailer in the United Kingdom. They work with Yext. Every time you look up a fact about a Tesco store in Google or Siri or Alexa, you find that information verified from Tesco. So we have got to be in these markets. We also announced we will be doubling our sales force in Southern Europe. That is also an amazing market for Yext, an amazing market for brand verified answers to get the truth out online everywhere. Our space in Northern Virginia is an engineering center and I went to a math and science high school their called Thomas Jefferson High School. It's kind of a nerd school and I am very proud of it obviously and we hire a lot of people from TJ. It's been a great base. We acquired a small company back in 2014 that has served as the base of our engineering center down there. So that's an R&D type center to augment our New York going forward.

Great. Thank you for taking my questions.

And thanks for covering us, starting the coverage. Look forward to working with you.

Thank you.

Thank you.

And our next questioner today will be Alex Zukin with Piper Jaffray. Please go ahead.

Hi. This is Taylor Reiners, on for Alex. Congrats on a great end to the year and also congrats to Wendi Sturgis on the new expanded role. I had a question for Jim. I was wondering if you can maybe give us an update on how sales hiring is trending? Where are you are relative to your target of getting quota carrying sales headcount to 20% of the total? And then maybe some thoughts on how you expect productivity to ramp in the coming year?

Yes. Hi Taylor. Thanks. And yes, we are really excited about Wendi moving to London to run our European business and help us accelerate growth over there and scale it even faster and that's just a great opportunity for her and for all of us here. The hiring has been aggressive. Two years ago, we said we were going to focus on this hiring surge for our sales capacity. We felt like we are capacity constrained and we continue to believe that. And at that point in time, we had gone from 11% of our headcount at Yext the year before to 15% and we are now at about 18%. So we are still focused on getting to that 20% objective. We are obviously growing the denominator across the company. So like Howard mentioned, we are hiring people throughout in Virginia and in Europe and it's not just quota carriers. So we are increasing that percentage as a percent of the company and were at 18% and our goal is still to get to 20%. So we are hiring fast and we have got now geographies around the world that we can hire into and we are excited about growing that capacity across our two primary direct markets, which is mid-market and enterprise.

Got it. And then maybe a quick follow-up for Steve. I was wondering if you could comment on what the expected benefits on margins is under 606 for next year, just to get a sense for how we should be thinking about organic margin expansion? And then I know you are not guiding to operating cash flow, but maybe any thoughts on what we should be expecting or how to think about that going forward?

Sure. I mean, clearly there is a benefit in 606 because you capitalize more of your direct sales cost and then you amortize it over a slightly longer period. We are using three years right now as our period. I think there is some upside to that but as I have said before, despite any accounting changes, our goal is to continue to prove op margins, but we also want to continue to invest in our growth rate. So you won't get a full benefit necessarily because we are going to take some of that money and continue to feed, as I said, Jim's organization for sales and marketing and R&D. And I think the other issue and it's part of the whole game plan here, we have to continue to add to our facility. So those expenses will come into play as well. But we are still on track to continue to improve our non-GAAP loss as a percent of revenue every year. We did that this year while we did it. And we are still on track to continue to look to and drive our cash flow behaviors, but I think we proved, we as a company can be cash flow positive and we blew it out in Q4. Obviously, we have got more cash in the company at the end of this year. And yet, I want to make sure that we are now investing in the company. So I am not going to be guiding on cash flow. We have to make investments to keep growing and that's going to be the major agenda.

Got it. Thanks and congrats on a good end to the year.

Thanks.

And the next questioner today will be Brett Knoblauch with Berenberg Capital Markets. Please go ahead.

Hi guys. Thanks for taking my question. I have got a couple actually. So to start, balanced growth was strong for the quarter. Was any of this attributed to like a push back of Q3 deals due to timing of your annual conference at the end of Q3 into Q4?

No.

Q4, you can see our seasonality showing itself over the last year or two and Q4 is just a barn burner and Jim's team did a great job there. We also have all the opportunity ahead of us this year. So we are looking at doing it again.

Great. And then you mentioned about this Morgan Stanley like financial client renewed their contract. What drove the next 3X increasing in the contract value? Was it moving up to a higher price package? They added more locations, more departments within? I guess if you could explain that a little bit?

Yes. It's a combination of new opportunity within the account. There are additional many different additional users and in different departments that we had not previously been engaged with and it was also upgrading them to our ultimate package, our higher level package. So that was really, it's a combination of those two things. And the result of some services on top of that as well, which is another opportunity for us to help our customers deploy our technology.

Okay. And then for Yext Brain and Yext Think, can you talk about how about that testing is going and if we should expect any announcements throughout the first half of this year? Anything of that kind?

Yext Brain, which you mentioned, is our structured knowledge platform that lets customers structure knowledge upfront, store it in a cloud and then it's a single source of truth for them online. And Yext think is a beta site search replacement product that can understand the question and give answers back. We continue to be unbelievably excited about these projects. But we have no update for you at this time on their features or functionality.

Okay. And then just one more question in terms of, I guess, QC efficiencies. Are you seeing any reduced sales ramp time, given that the DKM markets become a little bit less nascent and given you have more salespeople maybe there are some efficiencies between ramping those up at a quicker speed?

Yes, So as we mentioned, we increased our sales capacity, our quota carrying capacity, by more than 30% this year. You heard, we grew revenue by 34%. So we are obviously seeing some efficiencies there. The ramp time is about the same. Like for enterprise, it takes a good nine to 12 months to get our enterprise reps ramped up and the sales cycles range, I would say, like the SMB it's a matter of weeks. It could be a one call close. It could be two weeks maybe on average, two to three weeks. The mid-market is typically about a month-and-a-half to two months. And then enterprise could take anywhere between five months and say, eight months. That's pretty typical range. We have had sales cycles longer, sales cycle shorter. But in the two years I have been here, the visibility of Yext has dramatically improved. We still are out there creating this new category and explain the customers an opportunity here that they didn't know anything about a few years ago until we actually show up and talk to them about what we deliver. It's hasn't been a standard category spend line item that they have had. So there is still that evangelical part of it. But definitely the awareness has improved a lot in the two years I have been here.

Great. That's all for me. Thanks for answering my questions, guys.

And our next questioner today will be Stan Zlotsky with Morgan Stanley. Please go ahead.

Perfect. Thank you so much, guys, for taking my question. A couple of quick questions for you. How are you thinking about quota carrying sales headcount hiring for next year overall and maybe kind of the breakdown between mid-market versus enterprise?

We are not going to tell you the breakdown but I can tell you we are going to continue to hire aggressively. I mentioned that we are right now, Stan, at about 18% and we do want to get to that 20%. That feels like the right focus. And so we mentioned that we grew capacity by over 30% this past year and I would expect that same kind of growth rate going into this year. We added 40 new quota carrying reps from 130 to over 170 and I see the same focus this year. So that's important. And mid-market is a big piece of that. It's obviously a smaller market for us right now or I should say it's a smaller footprint in terms of the quota carrying reps that we have, but the market is huge and we are going after it in an aggressive way. So if you know of anybody, any candidates, send them our way, because we are hiring.

That's a good thing. Just maybe a couple of very quick ones for Steve. Obviously, a really big beat on billings in Q4. Were there, it did certainly coincide with the 128 new enterprise logos that you picked up in the quarter, were there any material change maybe in payment terms, more customers coming up for renewal and changing to annual versus some of the other payment terms that drove some of that increase?

No. Our mix has been pretty consistent over time. And as you know, I know you guys do billing calculation, I don't do the billings calculation, just because of the mix issues and the timing of the deal. So I don't really have any commentary around that. And as we talked before, a lot of it's based on seasonality of the business as well. So our mix of billing is roughly the same. We have stayed really strong. Obviously, you have good enterprise deals coming in, in Q4. So we are excited about how we did. And I think we are very excited about where we are going this year.

Perfect. And then last one, net revenue retention ticked up to 110%. And we would now officially anniversary the DexYP merger. How are you thinking about net revenue retention moving forward into fiscal 2020? Should we be thinking about getting back into like the 13% and 120%-ish ranges?

What we talk about, where our main emphasis in the business is in enterprise and mid-market and the retention rates are in excess of 90%. So we feel good about that. The 110% is still influenced by small business and other opportunities. But it is clearly going up and it's getting better. But I am more focused in, as we told you guys a number of times, our retention in our enterprise and mid-market is really strong and that's where we are focused, both in our business and our deployment of resources.

Got it. Thank you.

And our next questioner today will be Brent Bracelin with KeyBanc Capital Markets. Please go ahead.

Thanks for taking the question. A handful here, if I could. Let's start with Jim. I wanted to talk a little bit about the shift to a vertical focus. You now have 170 quota carrying sales reps. You talked about seeing good success with a focus on finance and healthcare. When did you make the shift to vertical focus? What portion of the quoting sales reps are now vertically focused? Give us a little update on where you are at in motion around the vertical focus? It sounds like it's been very successful.

Yes. For the last couple of years, we have been seeing tremendous success in financial services. That's one of our top ones. Food, healthcare, retail, auto. These are all great markets for us and we find when we hire a profile of a sales rep who has had experience and has a Rolodex in those markets, they really have an impact pretty much immediately. So we have been hiring to this profiles for the last couple of years, but we really haven't organized around them until really the past year. And we have done it with the enterprise. We are doing it, to a smaller degree, in mid-market. And I don't really have percentage. We have got the two big ones that I mentioned, financial services and healthcare. And we are looking at doing the same with a couple others. And it's really just shifting, it's having the salespeople focus just on those industries rather than carry this generalist territory. And as we are scaling, I expect to see a lot more of that, but I can't give you specific numbers right now. But it's a very big part of our go-to-market strategy.

So it's helpful. And it sounds like it has been an organic part of the sales initiatives here over last year, at least in those two verticals and with the success there, it sounds like you are going to be rolling out in other areas. So helpful color there. Shifting gears to Steve maybe here. Just as we think about deferred revenue, clearly barn burner quarter, phenomenal surge in deferred. And if I look at deferred trend sequentially, we have been flat to down in Q1, Q2, Q3 the last couple of years and this big rebound ingQ4. What is that generally attributed to? Is it just tied to the enterprise buying pattern? And as you renew those deals, those customers are just renewing with more product? Why is there such a big seasonal deferred spike here in Q4, which is a little different than some of the other companies we follow? So any color there would be helpful.

Yes. I do think that we have an underlying bias as a software company, where Q1 tends to be a little bit lighter and Q4 is a barnburner. You add the fact that obviously this is a renewal business, so all this great new business that Jim brought in just the last couple of weeks, November, December, January, we are going to have renewals. So there is a cascading effect of new business comes in and we get bigger renewals. So you start to see that. And that's pretty much the phenomena along with, like I said, to me, I have always seen in software, two quarters are strong and two quarters are just a little soft.

Got it. And that mix, as you see the mix to enterprise continue to skew, that could continue to unfortunately skew some of that deferred revenue bump in Q4, continue to skew and layer it on in Q4. Is that the right way to think about it?

Yes. That could be. Like I said, we are starting to get pretty good seasonality metrics. I don't see any changes that are going to change that dramatically, one way or another. So we are on trend for what we have been in the last two years.

Great. Super helpful. And then my last question for Howard here.

Thank you. I needed a question. You are the first one.

We are going. We are going there. I really like the positioning around brand verified facts or data points. You have your 185 million today, 50% increase year-over-year. If you just were to kind of roll forward the same type of growth profile over the next five years, you are talking about maybe potentially a billion brand verified data points within five years. So walk me through how big of an opportunity is the brand verified facts market? Where are we at today at 185 million? And just walk us through the thinking there and how that position is resonating with both U.S. clients and then obviously international clients?

Brent, we live in the era of broken truth, broken trust, wrong information, sources that are unverified and a lot of questions where even when you ask search engines that classically give answers, you get wrong answers. The examples are countless. If you type in gluten-free Campbell Soup into Google, the first result you see is from a blog called verywellfit.com that cites five soups that are not gluten-free. If you type in, does Old Navy have plus sizes in stores, the very first result you see in the snippet is an article from Huffington Post saying that Old Navy "only carries plus-size clothes online" and stopped caring larger sizes in 2007. But if you look at Old Navy's website, you will see that they happily carried plus size clothing in their stores. If you ask Google, what the horsepower of a Hyundai Veloster is? They say, it's 275. But Hyundai says on their website, it's 201. The examples that you can find where the information that is out there from a source that you may have never heard of before is wrong and appearing wrong is numerous. And we live in this era where anyone with a pen, with an Internet connection can put up a website and write whatever they want. And I think that when you look at the trend of where the Internet is going, Amazon recently announced that they are going to begin a brand verification program. The truth needs to be out there. And for more than a decade, Yext has believed and we have said that the ultimate authority on information, objective facts about a business is that business itself. And more than ever, the number of facts that need to be out there in these services as the world has shifted from websites where you read information to intelligent services that give you answers, if these services are going to give you answers about a brand, those answers ought to come and be verified by the brand itself. So the TAM, we said when we went public, it looked like it was more than $10 billion. I think it's clearly well beyond that. And what we are intending to do is, put perfect answers for our customers everywhere and what's so fun about Yext is that, unlike a lot of other SaaS companies, every day we touch consumers, we put answers to consumers, we connect consumers to the right doctor, we help consumers find the truth, the truth, the right information.

As always, very helpful insights and thank you so much.

Thanks Brent.

And the next questioner today will be Mark Murphy with JPMorgan. Please go ahead.

Hi. Good afternoon. This is Matt Coss, on behalf of Mark Murphy. Jim, you mentioned some strong demand indicators that you have been observing. I just wanted to know if you could give more specific on that. Is it increased C-level executive engagement? Is it a greater volume of inbound inquiries or something similar? And then separately, did you close the largest deal in company history this quarter or top three or five deal?

Well, I don't think we are ready to announce that, Matt, the latter question. But we are closing lots of big deals and that's the excitement. I mean, the number of deals that we mentioned over $100,000, the 169, that's significantly up from last year at this time. The 18 that we closed over $1 million, that's significantly up. So those are two big indicators, just the number of big deals and just the demand is there. We just need to make sure we have the capacity to meet the demand. So that's my number one focus, just get more capacity in the sales channel out there and our partner channel. So those are all great indicators. The interest level from the partners. The interest level from our customers. Like you mentioned that the access now to C-level executives that we didn't have. Actually, the CMO of our largest account, I am not going to mention who that is, is just down the hallway today meeting with our team. Like we have very high level access that we didn't have a couple years ago. So those are all the reasons that I am optimistic and then just the candidates. The candidate pool has expanded dramatically. All those things are great signals to me.

I want to add, if I am allowed, that there is a little bit of a race here. There is a network effect to our business. The more knowledge, the more fact that we have in our fact platform, the easier it is for us to build relationships, deeper relationships with our publishers. Like, for example, how we announced our new relationship with Baidu. You have to have enough facts in these regions around the world in order to create these relationships. So as we add reps, it helps facilitate this network affect in this winner takes all market.

Absolutely.

Thank you.

Thanks Matt.

And it looks like we have no further questions at this time. So I would like to turn the conference back over to James Hart for any closing remarks.

Thank you everyone for joining us today on the call. We look forward to giving you an update in three months time. As always, to the extent you have any follow-ups or further questions, please just reach out, let us know how we can help. thank you.

And the conference has now concluded. Thank you all for attending today's presentation. And you may now disconnect your lines.