Yext Inc (YEXT) 2018 Q4 法說會逐字稿

Good day, everyone, and welcome to the Yext, Inc.

Fourth Quarter Fiscal 2019 Earnings Conference Call.

(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 nonhistorical 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 the 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's a lot of highlights, but just to select a 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 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 firm, it's in the same tier as Morgan Stanley, signed a major expansion with us, 3x their previous contract to go broader across their organizations with more products and services from Yext.

Given our strength in the quarter, we enter 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 our brand or its products 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 consumer's questions.

When you search -- when your search for information starts with a question, like, is this particular menu item gluten-free?

You should expect to get a 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've 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 1 attribute.

But the actual amount of information that our customers have been giving to us was much greater.

So now we're 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 5 facts.

If they give us what school they went to and when they graduated, that's 2 facts.

Facts are the foundation of verified answers.

And when consumers have questions about a business, increasingly they're 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 transactions 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 2 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 assistance 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 to 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 and we always will.

Now I'd 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've 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 compare 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 2 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.

2 years ago, most of our sellers were generalists, working any account in their territory.

Today, we have sellers who focus on specific categories like financial services and health care.

This approach let us 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're 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 2 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've ever seen from any international market in our history.

In China, major western businesses are seeing the value of the network we had built with the publishers in that region, including our recently announced partnership with Baidu.

In fact, we recently won our first western customer base 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 and she will 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're using the modified retrospective method, results prior to fiscal 2019 are not adjusted.

I'll remind you the guidance we issued for the fourth quarter and full year was given under 605.

So to keep things comparable, I'll 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 3-year period.

This reduced fourth quarter sales and marketing expense by a 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 provided reconciliations in our press release so that you can see all 4 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 onto 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, but 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.

I'm going to 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 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, marketing and R&D.

But as typical for a company at this stage in our life cycle, we'll 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've 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 reflect 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 '20 and our future.

The quality of our product road map is very strong.

We continue to make gains, increasing our global distribution.

We're building the category to finding company with a unique value proposition and a strong competitive position.

I'd also like to take a minute to introduce Dominic Paschel, who is joining us as Global Head of Communications.

So he'll have public relations and investor relations working with him, and I am excited to have Dom joining me for yet -- the third time in a great company.

With that, operator, we'll set up questions.

(Operator Instructions) And our first questioner today will be Naved Khan with SunTrust.

Just a couple of questions.

So the disclosure of the RPO is, I think, is a pretty useful metric for us to track.

Can you just talk about how that metric has looked like in the last quarter or maybe just a 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 is -- a good question, but we're just introducing and reporting 606 this quarter.

So the number that we're reporting does reflect all of our contracted but unbilled revenue, as you know.

The $34 million, in 606, there's a couple of exclusions that we can't include, so we've -- 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've got the quarterly data and you can see some of that in our releases, but we'll look at these metrics going forward because we haven't, obviously, had history of the stuff.

Understood.

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

Sure.

This is Jim.

We -- as you know, we've been focused heavily on enterprise the last couple of years, and we built a strong team a couple of years ago, bringing Dave Rudnitsky and a number of enterprise-class SaaS execs into the company.

Last year, we brought Dave Lehman, also ex-Salesforce, and he is doing exactly what Dave Rudnitsky did in the enterprise 1 year later.

We started last year with mid-market.

So we've been ramping up the hiring.

We've got now a sizable mid-market team of quota-carrying reps in throughout the U.S., mostly in New York, Chicago and San Francisco.

We also have a mid-market team now across Europe.

So we're ramping quickly.

We're 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've kind of pulled back from direct sales into the small, midsize.

Do you think the increased focus on the -- sorry, you pulled 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 don't -- I wouldn't call it softness.

I think we've 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've got lots of partners that are better equipped to sell a bundled offering to our -- 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're going after and to us, it's just building the playbook that we have in the enterprise for mid-market, and that's what we've been doing over the last year and we're seeing the impact of that.

And our next questioner will be Koji Ikeda with Oppenheimer.

Congrats on the strong finish here.

Just had a follow up on the SMB business with that with being less than 6% of res.

I guess, any sort of color on how retention has been trending for that SMB segment now that it's been pushed to partners would be helpful.

Yes.

It's -- we talked about that in the mid-40s to 50%, nothing has really changed.

I think as we said, it's going to continue to be less and less significant to our business, and we're obviously not replacing the stuff at loss.

What you're seeing is more the growth in the mid-market and enterprise business.

So and part is, as Jim described, our whole agenda there is to put our bets and resources into the enterprise and mid-market direct and not the small business.

Okay.

Great.

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 the likes of, I think, about 700 new employees between the 2 sites.

I guess, what's the right way to think about the pace of hiring between those 2 locations over the next, say, 12 to 24 months?

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've got global opportunities and we need to be present in those markets 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're 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've got to be in these markets.

We also announced we'll be doubling our sales force in Southern Europe, that's also an amazing market for Yext and 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 there called Thomas Jefferson High School.

It's kind of a nerd school and I'm 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 facility going forward.

And thanks for covering us, starting the coverage.

Look forward to working with you.

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

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 could maybe give us an update on how sales hiring is trending.

Where 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.

Taylor, thanks.

And yes, really excited about Wendi moving to London to run our European business and help us accelerate growth over there and scale even faster and that's just a great opportunity for her and for all of us here.

The hiring has been aggressive.

We -- 2 years ago, we said we were going to focus on this hiring surge for our sales capacity.

We felt like we were 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're now at about 18%, so we're still focused on getting to that 20% objective.

We're obviously growing the denominator across the company.

So we're, like Howard mentioned, we're hiring people throughout in Virginia, in Europe and it's not just quota carriers.

So we are increasing that percentage as a percent of the company and we're at 18% and our goal is still to get to 20%.

So we're hiring fast and we're -- we've got now geographies around the world that we can hire into and we're excited about growing that capacity across our 2 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 benefit to op margins is under 606 for next year, just to get a sense for how we should be thinking about organic op 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're using 3 years right now as our period.

I think there is some upside to that.

But as I 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're 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 facilities.

So those expenses will come into play as well.

But we're still on track to continue to improve our non-GAAP loss as a percent of revenue every year.

We did that this year, widely did it, and we're 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've got more cash in the company at the end of this year and yet I want to make sure that we're now investing in the company.

So I'm 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.

And then next questioner today will be Brett Knoblauch with Berenberg Capital Markets.

I've got a couple actually.

So to start, bonus growth was strong for the quarter.

Was any of this attributed to like a pushback of Q3 deals due to the timing of your annual conference at the end of Q3 into Q4?

No.

Q4, we just -- you can see our seasonality showing itself over the last year or 2, 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're looking at doing it again.

Great.

And then you mentioned about this Morgan Stanley like financial client who renewed their contract.

What drove the 3x increase in the contract value?

Was it moving up to a higher price package?

Did they add 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 were 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 2 things.

And the result is some services on top of that as well, which is another opportunity for us to help deploy our technology.

Okay.

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

Yext Brain, which you mentioned, is our structured knowledge platform that lets customers structure knowledge upfront, store it in the 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've 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, I guess, reduced sales ramp time given that, I guess, the DKM markets become a little bit less nascent and given you have more salespeople maybe there is 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're obviously seeing some efficiencies there.

The ramp time is about the same.

It takes -- like, for enterprise, it takes a good 9 to 12 months to get our enterprise reps ramped up.

And the sales cycles range, we -- I'd say like the SMB, it's a matter of weeks.

It could be one call close, it could be 2 weeks maybe on average, 2 to 3 weeks.

The mid-market is typically about 1.5 months to 2 months.

And then enterprise could take anywhere between 5 months and, say, 8 months.

That's pretty typical range.

We've had sales cycle longer, sales cycle shorter.

But in the 2 years that I've been here, the visibility of Yext has dramatically improved.

We still are out there creating this new category and explaining to customers an opportunity here that they didn't know anything about a few years ago until we actually showed up and talked to them about what we deliver, it's not -- it hasn't been a standard category spend line item that they've had.

So there is still that evangelical part of it, but it's definitely the awareness has improved a lot in the 2 years I've been here.

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

Perfect.

A couple of quick questions for you.

How are you thinking about quota-carrying sales headcount hiring for next year overall and maybe the kind of the breakdown between mid-market versus enterprise?

Yes, we're not going to tell you kind of the breakdown, but I can tell you we're going to continue to hire aggressively.

I mentioned that we're, right now, stand 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.

I mean, we want to -- 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're going after it in an aggressive way.

So if you know of anybody, any candidates, send them our way because we're hiring.

That's a good thing.

Just maybe a couple of very quick ones for Steve.

Obviously, you really dig deep on billings in Q4.

Were there -- that certainly coincides with the 128 new enterprise logos that you picked up in the quarter, were there any material changes maybe in payment terms, more customers coming in 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 the billings calculation, I don't do the billings calculation just because of the mix issues and the timing of the deal.

So don't really have any commentary around that.

And as we've talked before, it's -- a lot of it's based on seasonality of the business as well.

So our mix in billings is roughly the same.

We stayed really strong.

I mean, obviously, you have good enterprise deals coming in Q4.

So we're excited about how we did, and I think we're very excited about where we're going this year.

Perfect.

And then last one.

Net revenue retention ticked up 210% and we've now officially anniversary-ed the DexYP merger.

How are you thinking about net revenue retention moving forward into fiscal '19 -- I'm sorry, fiscal '20?

Should be thinking about getting back the 113%, 120-ish ranges?

Well, what we talked about where our main emphasis in the business is, is in enterprise and mid-market and that's -- 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'm more focused and as we've told you guys a number of times, our retention on our enterprise and mid-market is really strong and that's where we're focused both in our business and our deployment of resources.

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

A handful here, if I could.

Let's start with Jim.

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 health care, when did you make this shift to kind of vertical focus?

What portion of the quota-carrying sales reps are now vertically focused?

Give us a little update on kind of where you're at, kind of, in motion around the vertical focus?

It sounds like it's been very successful.

Yes, we -- for the last couple of years, we've been seeing tremendous success in financial services, that's one of our top ones.

Food, health care, retail, auto, these are all great markets for us and we find when we hire a profile of a sales rep who's had experience and has a Rolodex in those markets, they really have an impact pretty much immediately.

So we have been hiring to those profiles for the last couple of years, but we really haven't organized around them until really the past year.

And we've done it with the enterprise, we're doing it to a smaller degree in mid-market and I don't really have a percentage.

I mean, it's -- we've got the 2 big ones that I mentioned, financial services and health care and we're looking at doing the same with a couple of others and it's really just shifting, it's having the salespeople focus just on those industries, rather than carry kind of this generalist territory.

And it -- as we're scaling, I expect to see a lot more of that, but I can't give you a 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's been kind of an organic part of the sales initiative here over the last year, at least in those 2 verticals and with the success there, it sounds like they're going to 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 kind of a surge in deferred.

And if I look at kind of deferred trends sequentially, we've been kind of flat to down in Q1, Q2, Q3 the last couple of years and there's big kind of rebound in Q4.

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 mean, I do think that we have an underlying bias as a software company where our Q1 tends to be a little bit light and Q4 is a barn burner.

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, December -- November, December, January, we're going to have renewals.

So that -- there is a cascading effect of new business comes in and we get bigger renewals.

So you start to see that, that's pretty much the phenomena.

Along with like I said, that to me, I've always seen in software 2 quarters are strong and 2 quarters are just a little soft.

Got it.

And that mix, as you see the mix enterprise continue to skew, that could continue to unfortunately skew some of that deferred revenue bump in Q4 -- continue to skew it and layer it on in Q4.

Is that the right way to think about it?

Yes.

That could be.

Like I said, we've got -- we're 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're on trend for what we've been the last 2 years.

Great.

Super helpful.

And then my last question is for Howard here.

Thank you.

I needed a question.

You're the first one.

We're going.

We're going there.

I really like the positioning around brand-verified facts or data points.

You have 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 5 years, you're talking about maybe potentially 1 billion brand-verified kind of data points within 5 years.

So walk me through how big of an opportunity is the brands-verified facts market.

Where we're at today at 185 million?

And just walk us through the thinking there and how that positioning is resonating with both the U.S. clients and then, obviously, international clients.

Brent, we live in an 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.

There's -- 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 5 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 carrying larger sizes in 2007." But if you look at Old Navy's website, you'll see that they happily carry plus size clothing in their stores.

If you ask Google, how many -- 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're going to begin a brand verification program that the truth needs to be out there.

And for more than a decade, Yext has believed and we've 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 intelligence 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 in our -- when we went public, it looks like it was more than $10 billion, I think, it's clearly well beyond that.

And what we're 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 true, the truth, the right information.

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

This is Matt Coss on behalf of Mark Murphy.

Jim, you mentioned some strong demand indicators that you've been observing.

I just wanted to know if you could get more specific on that.

Is it increased C-level executive engagement?

Is it a greater volume of inbound increase or something similar?

And then separately, did you close the largest deal in company history this quarter or a top 3 or 5 deal?

Well, I don't think we're ready to announce that one, Matt, the latter question.

But we're closing lots of big deals and that's the excitement.

I mean, the number of deals that we mentioned, over 100k, the 169, I mean, 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 2 big indicators, just a number of big deals.

And just the demand is there.

We just need to make sure we have the capacity to meet the demands.

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, the -- like you mentioned, the access now to C-level executives that we didn't have.

The -- actually, the CMO of our largest account, I'm 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 of years ago.

So that -- those are all the reasons that I'm 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'm allowed, that there is a little bit of a race here.

There is a network effect to our business.

The more knowledge, the more facts 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 announce 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 effect in this winner-take-all market.

Absolutely.

And there looks to be 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 3 months time.

As always to the extent you 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.