Yext, Inc.YEXT
Yext, Inc. Income Taxes Disclosure
Income Taxes
The domestic and international components of the Company's income (loss) from operations before income taxes are as follows:
| Fiscal year ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Domestic | $ | 33,480 | $ | (33,349) | $ | (4,444) | |||||||||||
| International | 6,646 | 5,291 | 4,106 | ||||||||||||||
Income (loss) from operations before income taxes | $ | 40,126 | $ | (28,058) | $ | (338) | |||||||||||
The Company's (provision for) benefit from income taxes is comprised of the following:
| Fiscal year ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (180) | $ | (63) | $ | (43) | |||||||||||
| State | (415) | (1,359) | (912) | ||||||||||||||
| International | (1,766) | (1,893) | (1,262) | ||||||||||||||
| Total current | (2,361) | (3,315) | (2,217) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 112 | 2,378 | (4) | ||||||||||||||
| State | 6 | 1,007 | (11) | ||||||||||||||
| International | (12) | 40 | (60) | ||||||||||||||
| Total deferred | 106 | 3,425 | (75) | ||||||||||||||
Total (provision for) benefit from income taxes | $ | (2,255) | $ | 110 | $ | (2,292) | |||||||||||
The Company’s current tax provision for the fiscal years ended January 31, 2026 and 2025, is primarily attributable to profitable jurisdictions outside of the United States (U.S.) and U.S. state income taxes due to limitations imposed on state operating loss ("NOLs") carryforwards and state margin tax. During the fiscal year ended January 31, 2025, the Company recorded a deferred tax benefit of $3.4 million from a partial release of the valuation allowance in connection with the Hearsay acquisition. The net deferred tax liability from the acquisition provided a source of additional income to support the realizability of the Company's pre-existing deferred tax assets and as a result, the Company released a portion of its valuation allowance.
The Company has elected to prospectively adopt the guidance in ASU 2023-09 Income taxes (Topic 740): Improvements to Income Taxes Disclosures. The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective tax rate for the year ended January 31, 2026 in accordance of the guidance in ASU 2023-09:
| Fiscal year ended January 31, 2026 | |||||||||||
| (in thousands) | Dollars | Percent | |||||||||
| U.S. Federal Statutory Tax Rate | $ | 8,426 | 21.00 | % | |||||||
State and local income tax, net of federal income tax effect(1) | 408 | 1.02 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Switzerland | |||||||||||
Adjustments to deferred tax assets (NOL expiration) | 707 | 1.76 | % | ||||||||
FX adjustment | (603) | (1.50 | %) | ||||||||
| Other | (118) | (0.29 | %) | ||||||||
| Other foreign jurisdictions | 396 | 0.99 | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 1,062 | 2.65 | % | ||||||||
| Other | 191 | 0.47 | % | ||||||||
| Tax Credits: | |||||||||||
| R&D credit | (2,532) | (6.31 | %) | ||||||||
| Changes in valuation allowances | (2,479) | (6.18 | %) | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Stock-based compensation | 1,814 | 4.52 | % | ||||||||
| Executive compensation | 2,461 | 6.13 | % | ||||||||
| Contingent consideration | (6,336) | (15.79 | %) | ||||||||
| Other | 1,469 | 3.66 | % | ||||||||
| Changes in unrecognized tax benefits | (28) | (0.07 | %) | ||||||||
| Other | 223 | 0.55 | % | ||||||||
| Excess tax benefits | (2,806) | (6.99 | %) | ||||||||
| Total tax provision | $ | 2,255 | 5.62 | % | |||||||
(1) State taxes in California, Pennsylvania, Texas, and Virginia made up the majority (greater than 50 percent) of the tax effect in this category.
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective tax rate for the year ended January 31, 2025 and 2024 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Fiscal year ended January 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| U.S. federal tax benefit at statutory rate | $ | 5,892 | $ | 71 | |||||||
| State taxes, net of federal benefit | 2,711 | (1,286) | |||||||||
| Foreign tax rate differential | (317) | (191) | |||||||||
| Non-deductible expenses | (2,209) | (1,902) | |||||||||
| R&D credit carryforward | 3,725 | 15,656 | |||||||||
| Changes in valuation allowance | (2,133) | (13,913) | |||||||||
| Rate change | (1) | 386 | |||||||||
| Stock-based compensation | (758) | (1,593) | |||||||||
| Net excess tax (shortfalls) benefits from stock-based compensation | (1,334) | 213 | |||||||||
| Return to provision adjustment | (56) | (25) | |||||||||
| Global intangible low-taxed income | (1,191) | — | |||||||||
| Acquisition-related costs | (3,532) | — | |||||||||
| Other, net | (687) | 292 | |||||||||
| Total benefit from (provision for) income taxes | $ | 110 | $ | (2,292) | |||||||
The following table represents income taxes paid (net of refund received) for the year ended January 31, 2026 in accordance with the guidance in ASU 2023-09:
| (in thousands) | Fiscal Year Ended January 31, 2026 | ||||
| Federal | $ | — | |||
| State | 873 | ||||
| Foreign | 2,696 | ||||
| Total income taxes paid | $ | 3,569 | |||
Income taxes paid in individual jurisdictions exceeding 5% of total income taxes paid for the year ended January 31, 2026 is as follows:
| (in thousands) | Fiscal Year Ended January 31, 2026 | ||||
| United Kingdom | $ | 763 | |||
| France | 409 | ||||
| Mexico | 348 | ||||
| California | 334 | ||||
| India | 391 | ||||
| Germany | 238 | ||||
| Hungary | $ | 230 | |||
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The components of the Company's deferred income taxes were as follows:
| As of January 31, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 109,034 | $ | 97,463 | |||||||
| Tax credit carryforwards | 25,007 | 22,577 | |||||||||
| Stock-based compensation | 4,484 | 5,905 | |||||||||
| Allowance for doubtful accounts | 598 | 524 | |||||||||
| Operating lease liability | 19,134 | 23,392 | |||||||||
| Accrued expenses | 3,736 | 6,420 | |||||||||
| Unearned revenue | 81 | 65 | |||||||||
| Property and equipment | 1,373 | 199 | |||||||||
| Capitalized research & experimental expenditures | 32,678 | 51,062 | |||||||||
| Other | 2,325 | 1,451 | |||||||||
| Total deferred tax assets | 198,450 | 209,058 | |||||||||
| Less: valuation allowance | (168,940) | (171,650) | |||||||||
| Deferred tax assets, net of valuation allowance | 29,510 | 37,408 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Costs to obtain revenue contracts | (5,820) | (5,916) | |||||||||
| Operating lease right-of-use assets | (12,001) | (16,638) | |||||||||
| Intangible assets | (11,413) | (14,427) | |||||||||
| Other | (438) | (533) | |||||||||
| Total deferred tax liabilities | (29,672) | (37,514) | |||||||||
Net deferred tax liabilities | $ | (162) | $ | (106) | |||||||
As of January 31, 2026, for federal income tax purposes, the Company had $370.3 million of gross U.S. federal NOL carryforwards, with pre-2018 NOLs expiring starting in fiscal 2036 with others indefinitely carried forward.
As of January 31, 2026, for state income tax purposes, the Company had $22.9 million of post-apportioned, tax-effected NOL carryforwards, which expire in fiscal 2027 through fiscal 2046. As of January 31, 2026, the Company had $7.5 million of tax-effected foreign NOL carryforwards which expire starting in fiscal 2027.
As of January 31, 2026, for federal income tax purposes, the Company had $32.0 million of gross U.S. federal research and development tax credits carryforwards which expire starting in fiscal 2037, and $0.3 million of gross state research and development credits which expires starting in fiscal 2034.
Utilization of the Company’s NOLs and tax credit carryforwards in the future will be dependent upon its ability to generate taxable income and could be limited due to ownership changes, as defined under the provisions of Section 382 of the Code and similar state provisions. Utilization of the Company’s foreign NOL carryforwards in the future will be dependent upon local tax laws and regulations.
The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback, and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. During the fiscal year ended January 31, 2026, the valuation allowance had a net decrease of $2.7 million from approximately $171.6 million to $168.9 million, primarily due to decreases in U.S. deferred tax assets resulting from capitalization and amortization of research and development expenses, netted with the generation of U.S. research and development tax credits and NOLs in the current period. During the fiscal year ended January 31, 2025, the valuation allowance increased $2.1 million from approximately $169.5 million to $171.6 million, primarily due to increases in U.S. deferred tax assets resulting from capitalization and amortization of research and development expenses, and generation of U.S. research and development tax credits, then netted with the net deferred tax liability from the Hearsay acquisition
and impact of NOLs utilized. The Company will continue to assess the realizability of the deferred tax assets in each applicable jurisdiction going forward.
Other Considerations
The Company generally does not provide deferred income taxes for the undistributed earnings of its foreign subsidiaries where the Company intends to reinvest such earnings indefinitely. The Company maintains a mix of assertions across the various jurisdictions where foreign subsidiaries are located. During the current year, the Company changed its assertion with respect to certain subsidiaries' undistributed earnings; however, any incremental U.S. income taxes or local withholding taxes are not material.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits for the fiscal years ended January 31, 2026, 2025, and 2024 is as follows:
| Fiscal year ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Beginning of period | $ | 6,531 | $ | 4,920 | $ | — | |||||||||||
| Tax positions taken in prior period | |||||||||||||||||
| Gross increases | — | 942 | 4,404 | ||||||||||||||
| Gross decreases | (27) | — | — | ||||||||||||||
| Tax positions taken in current period | |||||||||||||||||
| Gross increases | 670 | 669 | 516 | ||||||||||||||
| Currency translation effect | — | — | — | ||||||||||||||
| End of period | $ | 7,174 | $ | 6,531 | $ | 4,920 | |||||||||||
The Company did not recognize interest and penalties in fiscal years ended January 31, 2026 and 2025, and 2024. As of January 31, 2026 and 2025, none of the accrued unrecognized tax benefits, if recognized, would reduce the provision for or increase the benefit from income taxes, respectively, or the Company's effective tax rate.
The Company is subject to income tax examinations in the United States and various state and foreign jurisdictions. The Company’s most significant operations are in the United States and the earliest open tax year subject to potential examination in the United States is 2008.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 10, 2026 | Showing above |
| 2025 | Mar 13, 2025 | |
| 2024 | Mar 13, 2024 | |
| 2023 | Mar 17, 2023 | |
| 2022 | Mar 18, 2022 | |
| 2021 | Mar 16, 2021 | |
| 2020 | Mar 20, 2020 | |
| 2019 | Mar 15, 2019 | |
| 2018 | Mar 16, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.