v3.25.2
Business Combinations
 6 Months Ended
Jul. 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
Hearsay Acquisition
On August 1, 2024, Yext completed its acquisition of Hearsay pursuant to an Agreement and Plan of Merger dated June 10, 2024. At the effective time of the acquisition, each outstanding share of Hearsay stock was canceled and converted to a right to receive cash consideration, and Hearsay became a wholly owned subsidiary of Yext. The acquisition is intended to produce an end-to-end digital presence platform, combining Yext’s digital presence management capabilities with Hearsay's compliant engagement solutions across social media, websites, text, and voice.
During the three months ended April 30, 2025, the Company finalized the accounting for its acquisition of Hearsay. The fair value of consideration transferred for Hearsay as of the acquisition date consisted of the following:
(in thousands)
Cash consideration and liabilities incurred
$132,462 
Contingent consideration(1)
39,800 
Fair value of outstanding employee awards assumed
7,825 
Other transaction related payments(2)
640 
Total consideration transferred
$180,727 
(1)    Inclusive of $0.3 million measurement period adjustment recorded during the three months ended April 30, 2025.
(2)    Inclusive of post-closing adjustments of less than $0.1 million.
Cash consideration and liabilities incurred of $132.5 million includes the base purchase price of $125.0 million and customary adjustments set forth in the merger agreement. The cash consideration includes $17.2 million of payments held in escrow as partial security for certain indemnification obligations of the former holders of Hearsay equity. Amounts held in escrow were reflected on the Company's condensed consolidated balance sheet at the acquisition date within restricted cash (current and non-current) as the funds are owned by the Company until settlement. In connection with the amounts held in escrow, the Company recognized a corresponding liability on its condensed consolidated balance sheet at the acquisition date at its present value of $16.6 million to reflect the amounts payable to former Hearsay equity holders following the resolution of contingencies surrounding the amounts held in escrow. The liability will be accreted to its contractual value over the estimated escrow period with changes in the liability being recorded within interest expense on the Company's condensed consolidated statements of operations and comprehensive income (loss). During the three months ended April 30, 2025 interest expense of $0.5 million was recognized, which encompassed all remaining accretion. As of July 31, 2025, the remaining amounts of $15.5 million held in escrow is estimated to be released during the fiscal year ended January 31, 2026.
The purchase price also includes $39.8 million of contingent consideration related to an earnout arrangement, inclusive of a $0.3 million measurement period adjustment recorded during the three months ended April 30, 2025 based on refined estimates. Under the terms of the earnout arrangement, the Company may be required to pay up to $75.0 million to the former holders of Hearsay's outstanding equity interests, subject to the achievement of certain Annual Recurring Revenue ("ARR") milestones over a two-year period, which will end in September 2026. The portion of the earnout arrangement included within contingent consideration excludes amounts attributable to employees of Hearsay that held unvested awards as of the acquisition date, for which earnout payments are subjected to future service. Accordingly, these amounts represent compensation expense in the post-acquisition period. Payment of the earnout can be settled in cash or shares at the Company's election. The Company estimated the fair value of the contingent consideration as of the acquisition date. This estimate incorporated projected ARR values inclusive of revenue synergies and growth rates, as well as other key inputs. The key inputs as of the acquisition date are outlined below:
Volatility15%
Revenue beta0.35
Expected timing of paymentFY 2026 - FY 2027
Discount rate
5.90% - 6.20%
See Note 6 "Fair Value of Financial Instruments" for additional details on the fair value of contingent consideration.
The Company also issued approximately 2.1 million replacement equity awards with a fair value of $11.8 million, of which (i) $7.8 million was allocated to consideration transferred for pre-acquisition services, inclusive of employer related payroll taxes, and (ii) $4.2 million was allocated to the post-acquisition period and expensed over the remaining requisite service period associated with the awards. The value attributed to consideration transferred was based on the fair value of Hearsay options prior to the exchange. Approximately 1.5 million equity awards that were granted also vested on the acquisition date, and $0.6 million was recognized in the post-acquisition period immediately to reflect the excess of the fair value of the replacement awards over the fair value of the Hearsay options. These awards were subsequently net settled, which represents an event that is separate from the acquisition.
In addition, the Company recognized other transaction related payments of $0.6 million in the consideration which are comprised primarily of post-closing adjustments, including working capital.
The Company is also required to make additional payments related to a $20.0 million incentive pool that can be settled in cash or shares at the Company's election, shortly after the first anniversary of the acquisition date. Approximately $8.8 million of this pool is to be paid to Hearsay founders and early employees, and is not contingent on future service being provided. This amount was recognized immediately in the post-acquisition period in operating expenses, within general and administrative expenses on the Company's condensed consolidated statements of operations and comprehensive income (loss). The remaining amount of the incentive pool is allocated to employees generally subject to continued employment of one-year from the acquisition date. In addition, a transaction bonus of $1.5 million is payable to individuals determined by Hearsay and deemed to be compensation expense attributable to the post-acquisition period. Amounts attributable to the remaining incentive pool and transaction bonus will be expensed in the post-acquisition period over the requisite service period. As of September 1, 2025, all remaining payments related to the incentive pool were settled in cash for $18.2 million. In aggregate, incentive pool payments totaled $19.9 million, with forfeitures amounting to $0.1 million.
Acquisition-related costs related to Hearsay totaled $11.2 million. These costs were expensed as incurred and include $8.8 million related to the portion of the incentive pool attributable to Hearsay founders and early employees, as well as professional fees. Acquisition-related costs are presented within general and administrative expense in the Company's condensed consolidated statement of operations and comprehensive income (loss).
The following table summarizes the purchase price allocation of the fair values of the assets acquired and liabilities assumed at the acquisition date:
(amounts in thousands)
Assets acquired:
  Cash and cash equivalents $26,362 
  Accounts receivable, net5,619 
  Prepaid expenses and other current assets 2,454 
  Property and equipment, net399 
  Operating lease right-of-use assets414 
  Other long term assets (1)
5,942 
Liabilities assumed:
  Accounts payable, accrued expenses, and other current liabilities (5,127)
  Operating lease liabilities, current(74)
  Unearned revenue, current(37,672)
  Operating lease liabilities, non-current(340)
  Other long term liabilities (1)(2)
(11,340)
Identifiable intangible assets acquired (3)
101,850 
Net assets acquired $88,487 
Goodwill$92,240 
Total consideration (4)(5)
$180,727 
(1)    Other long term assets includes a $5.9 million indemnification asset, with the underlying indemnified liability of $6.2 million recorded within other long term liabilities.
(2)    Included within other long term liabilities is a deferred tax liability of $3.6 million.
(3)    Inclusive of measurement period adjustments of $0.7 million recorded during the three months ended April 30, 2025.
(4)    Inclusive of post-closing adjustments of less than $0.1 million.
(5)    Inclusive of measurement period adjustments of $0.3 million related to contingent consideration recorded during the three months ended April 30, 2025.
The Company determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgment related to estimates. During the fiscal year ended January 31, 2025, the Company refined its estimates pertaining to the valuation of intangible assets which resulted in an increase of $9.9 million in intangible assets, a $1.7 million increase in deferred tax liabilities, as well as an increase to the useful life of customer relationships from 12 years to 13 years. During the three months ended April 30, 2025, the Company further refined its estimates in connection with finalizing its valuation of intangible assets. Additional measurement period adjustments were recorded resulting in an increase of $0.7 million in intangible assets and a $0.2 million increase in deferred tax liabilities. See Note 7 "Goodwill and Intangible Assets" for additional information.
Pursuant to the terms of the merger agreement, the Company was indemnified by the sellers for the pre-acquisition contingent liability assumed in the acquisition associated with the Canadian Good and Services Tax (“GST”) and Harmonized sales tax (“HST”) related to certain historical foreign sales transactions. The indemnification of the indirect tax liability is capped at $5.9 million and an escrow fund was established in the same amount. At the acquisition date, the associated indirect tax liability was recorded at the estimated fair value of $6.2 million within other long term liabilities, and the Company recorded an indemnification asset up to the amount of the escrow fund balance of $5.9 million. In October 2024, initial filings to settle this matter with the Canada Revenue Agency were initiated and to date, payments of $2.0 million have been made. During the three months ended April 30, 2025, the Company was notified by the Canada Revenue Agency that the matter was effectively settled, at which point the remaining indirect tax liability was released.
Goodwill represents the excess of the purchase consideration over the fair value of the underlying net identifiable assets and is attributable primarily to expected synergies and the assembled workforce of Hearsay. Goodwill is not deductible for income tax purposes.
Intangible Assets
The following table sets forth the amounts allocated to the intangible assets identified and their estimated useful lives as of the acquisition date:
Identifiable Intangible Assets Acquired Fair Value
(In thousands)		Estimated Useful Life
(In years)		Classification of Amortization
Customer relationships$76,200 13Sales and marketing
Technology24,800 3Cost of revenue
Trademark850 3Sales and marketing
Total$101,850 
The fair values of the identifiable intangible assets are based on management’s estimates as of the acquisition date. The fair value of the intangible assets was determined using the excess earnings method and the relief from royalty method, under the income approach. The Company applied judgment in estimating the fair value of customer relationships using the excess earnings method, which involved the use of significant assumptions with respect to revenue, EBITDA, attrition rate, research and development addback, technology royalty rate, and discount rate. The fair value of the developed technology and trademark was estimated using the relief from royalty method, which incorporates assumptions including royalty rates, annual obsolescence, tax rates, and discount rates.
Pro Forma Results
The unaudited pro forma financial information presented below was derived from historical financial records of Yext and Hearsay and presents the operating results for the periods presented as if the acquisition occurred on February 1, 2023. The pro forma results include adjustments to record additional compensation expense, adjust commission expense, and adjust for the impact of purchase accounting adjustments including amortization and depreciation expense, and the related tax effects.
Accordingly, the following unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of fiscal year 2024, nor are they indicative of future results of operations:
(in thousands)Three months ended July 31,Six months ended July 31,
20242024
Revenue$113,905 $225,049 
Net loss$(11,863)$(20,548)
Places Scout Acquisition
On February 7, 2025, the Company completed its acquisition of KabanaSoft, LLC, doing business as Places Scout (“Places Scout”), for a purchase price of $20.3 million in cash, subject to customary adjustments as set forth in the Unit Purchase Agreement. The acquisition strengthens the Company's ability to provide best-in-class competitive intelligence, benchmarking, and AI-powered insights.
The preliminary purchase price of $20.3 million was allocated to intangible assets including technology and customer relationships, totaling $5.6 million and $0.9 million, respectively, and the remaining $13.8 million was allocated to goodwill. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The goodwill recognized is deductible for income tax purposes.
In connection with the acquisition, the Company also agreed to grant approximately $10.0 million of incentive equity awards to certain key employees of Places Scout. These awards are subject to continued employment and are expensed in the post-acquisition period over the requisite service period associated with the awards of two years.
Pro forma results of operations for this acquisition were not presented as the effects were not material to the Company's financial results.