Thryv Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 1, 2025
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Operator

Thank you for standing by. My name is Celine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tribe First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to Mr. Cameron Lassarte. Please go ahead.

Cameron Lessard
Cameron Lessard
Vice President, Corporate Development and Strategy at Thryv

Good morning and thank you for joining us for Thrive's first quarter twenty twenty five earnings conference call. With me today are Joe Walsh, Chairman and Chief Executive Officer Grant Freeman, President and Paul Rouse, Chief Financial Officer. During this call, we will make forward looking statements that are subject to various risks and uncertainties. Actual results may differ materially from these statements. A discussion of these risks and uncertainties is included in our earnings release and SEC filings.

Cameron Lessard
Cameron Lessard
Vice President, Corporate Development and Strategy at Thryv

Today's presentation will also include non GAAP financial measures, which should be considered in addition to, but not as a substitute for our GAAP results. Reconciliations of these measures can be found in our earnings release. As a reminder, on this call, SaaS revenue reflects the combined performance of Thrive and Keep. We will only specify Keep's performance when discussing its revenue contribution for the quarter and fiscal year. With that, I'll turn the call over to Joe Walsh, Chairman and CEO.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thank you, Cameron, and good morning, everyone. Thrive started 2025 on really good footing, just continuing the momentum that we had in 2024. And for the first quarter, we delivered both a top and bottom line guidance beat. So we're really proud of that. Our execution has been excellent.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Our team are working really hard to develop additional products and additional services, and the marketplace is responding well to them. So pretty happy with what's happening with Thrive as we continue to develop as a software platform. When we look at the actual results for the first quarter, we had 50% year over year revenue growth. And when you normalize for the Keep acquisition, we had 24% growth. So SaaS EBITDA margin expanded to 10%.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

SaaS revenue is now 61% of revenue for this quarter. So you think about that. We are transforming this business from marketing services to SaaS, and I know there are a lot of people waiting for us to become completely SaaS. We're just about there. I mean, we're we're majority SaaS revenue now, and that's a big, big milestone for us as a business.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Another thing that happened is our ARPU increased. Dollars $3.35 a month was the ARPU that we delivered, up nicely from the last period. I think you're going to see that trend throughout this year as we continue to go back to existing customers and add more products on. Our season net revenue retention reflected that motion too, 103. So pretty solid outcome there for net revenue retention.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We're pleased with that. Subscriber growth was 37%, bringing the Thrive total to 96,000. And if you include the Keep subscribers in there, it's 111,000 overall. You know, one of the key drivers in acquiring Keep was the partner channel. They have an excellent partner channel.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

They've been at it for a long time. A few weeks ago, I was able to attend our PartnerCon conference out in Arizona, which was a combined Thrive and Keep partner conference with more than 100 of our partners in attendance, some from as far away as Europe and Australia. It was great to have a chance to talk to them about what they're thinking. And what they're thinking is they wanna sell the full Thrive product catalog. The idea that they can add the top of the funnel where Thrive is really good at helping you build your list, helping you meet new customers, helping you be found to the very strong key product in the middle and bottom of the funnel where you nurture your list and convert sales and then follow-up post sale for more business in the future, kinda gives them a more complete marketing funnel.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And they feel like it's gonna help them grow their their business, and that they're excited about that. So gives me a lot of hope for what 'twenty six and 'twenty seven are going to look like in terms of us beginning to really build out that partner channel that they have the full catalog of Thrive and Key products to sell. So to tell you more about the progress of our business, I'm going to bring Grant Freeman on, our President. Grant?

Grant Freeman
Grant Freeman
President at Thryv

Thanks, Joe, and thank you all for joining us. You know, in 2025, we're entering a new chapter of growth for our

Grant Freeman
Grant Freeman
President at Thryv

SaaS business. Many of you

Grant Freeman
Grant Freeman
President at Thryv

have tracked our progress cross selling and upgrading marketing services customers to SaaS products. As you probably know, most of the legacy customers we converted to SaaS were upgraded to our marketing center product, which as you probably remember helps clients boost their online presence, gives them lead attribution tools so they know what marketing and advertising is working and also helps them manage their social media posting across multiple platforms in addition to other features that are tied to growth. Our sales strategy will remain focused on growing our SaaS subscriber base through upgrades, cross sells and new sales. Of course, our most efficient path forward is deepening relationships within our existing software base and expanding their spend. As of the end of the first quarter, '17 point '2 percent of our SaaS subscribers use multiple paid products, a nice increase from where we were.

Grant Freeman
Grant Freeman
President at Thryv

As we've analyzed retention trends across our customer base, one thing has become glaringly clear. Expansion within our existing clients is one of our most compelling opportunities. When a customer adopts a second paid product, their churn rate drops significantly. Recently, we see it dropping as much as in half compared to just those with one product. Not only does this increase revenue per account, but it dramatically extends customer lifetime, making expansion a far more efficient growth lever than relying solely on net new customer acquisition.

Grant Freeman
Grant Freeman
President at Thryv

At the start of the year, we reoriented our sales organization around growing monthly recurring revenue rather than prioritizing new account acquisition. Each business advisor now manages a large book of business with improved cadences, better automations and enablement tools to help the rep efficiently increase average spend for each account. The result is a more consultative value led approach that has meaningfully improved per rep productivity in recent quarters. This shift was deliberate and the results are really encouraging. We did things like overhauling the compensation to reward MRR and expansion.

Grant Freeman
Grant Freeman
President at Thryv

We've encouraged reps to focus less narrowly on selling individual centers and more broadly on selling the full scope of SaaS solutions that may benefit a given customer. And we encourage reps to focus on existing customers where wallet share expansion is more efficient. The strategy is working. Our productivity is improving and importantly, we spend less to acquire higher quality growth from within our existing SaaS client base. Customers are responding positively to our growth oriented tools like marketing center, growth packages and other customer acquisition add ons that we offer.

Grant Freeman
Grant Freeman
President at Thryv

These products serve as a natural springboard for introducing CRM and workflow automation later on in the journey. We're also seeing encouraging results moving up market with modestly growing average customer size and higher ACVs through more consultative sales approaches and multicenter deals. This is particularly important as we go deeper into specific verticals and higher performing SMB segments. Maybe what's most gratifying is that our clients are happy and they are bringing their friends to learn about our platform. So we have a large referral flow.

Grant Freeman
Grant Freeman
President at Thryv

As such, a large portion of our new clients come via these referrals, which continues to be a strong motion for our business advisors. On the product side, we built five robust centers and added more product to bring to market with the introduction of Keep automations. This phase focuses on deepening adoption rather than just expanding subscribers. Finally, you know, Keep provides strategic advantages through its automation engine, its partner network, and r and d capabilities. We're just beginning to explore cross selling opportunities between our customer bases.

Grant Freeman
Grant Freeman
President at Thryv

And at the end of the day, when we help clients do more, they stay longer, creating compounding growth. And with that, I'd like to introduce Mr. Paul Rouse.

Paul Rouse
Paul Rouse
CFO at Thryv

Thanks, Grant. Let's dive into the numbers. SaaS reported revenue was $111,100,000 in the first quarter and above guidance, representing an increase of 50% year over year and up 7% sequentially. Keep contributed $18,900,000 in the first quarter. Excluding Keep, Thrive's SaaS business grew 24% year over year.

Paul Rouse
Paul Rouse
CFO at Thryv

SaaS adjusted gross margin increased four ninety basis points year over year, reaching 73%. The first quarter total SaaS adjusted EBITDA increased to 10,800,000.0 exceeding our guidance range and resulting in an adjusted EBITDA margin of 10%. This performance underscores the progress we're making in scaling our profitable and durable software business. As we noted last quarter, first quarter included a temporary headwind of approximately $2,000,000 to $3,000,000 tied to shared cost allocations. With fewer print publications scheduled in the beginning of the year, a greater portion of operating expenses were attributed to the SaaS segment under our current allocation methodology, which follows revenue activity.

Paul Rouse
Paul Rouse
CFO at Thryv

This dynamic will begin to reverse in the second quarter as print revenue recognition ramps, shifting these costs back to the marketing services segment. Importantly, this will also begin to smooth out for the remainder of the year and beyond as we extend the majority of our print publications onto a twenty four month cycle. That change improves visibility and leads to a more consistent cost attribution across the business. We remain focused on driving profitable growth in SaaS, balancing top line expansion with disciplined cost management, and we expect continued adjusted EBITDA margin improvements as we move through the year. We concluded the first quarter with 111,000 SaaS subscribers, including 15,000 Keep subscribers.

Paul Rouse
Paul Rouse
CFO at Thryv

This reflects a substantial 59% increase in our subscriber base year over year. As Grant mentioned in his remarks, a key element of our go forward strategy involves focused effort on our existing customer base to drive increased value and revenue. With a significant portion of our current subscribers utilizing only one paid product, We are strategically positioned to expand their engagement and adoption of our broader offerings. This initiative to drive greater spend within our existing customer base is not only a pathway to ARPU expansion throughout 2025, but also represents a more efficient and significant contributor to our bottom line profitability. In the first quarter, our overall SaaS ARPU reached $335.

Paul Rouse
Paul Rouse
CFO at Thryv

Thrive contributed an ARPU of $320, showcasing positive quarter over quarter growth. Keeps specific ARPU was a robust $428 similar to last quarter. Looking ahead, we have good line of sight for continued ARPU expansion throughout the year, driven by the inherent strength of our software platform with its multiple adoptable products as well as our recently updated compensation plan designed to incentivize and drives increased NRR. We reached our highest reported seasoned net revenue retention this quarter of 103%, emphasizing the differentiated value we create and the sustained return our clients experience. We've discussed previously that our long term goal is to maintain retention near 100%, which we expect to continue to achieve.

Paul Rouse
Paul Rouse
CFO at Thryv

Additionally, clients with two or more Thrive SaaS products grew to 16,000 at the end of the quarter compared to 12,000 in the prior year, further highlighting the expansion we are seeing with existing clients. Thrive centers per client also grew to 14% at the end of the quarter compared to 8% in the prior year, further highlighting the traction we are seeing with existing clients. Moving over to marketing services. First quarter revenue was $70,200,000 and above guidance. First quarter marketing services adjusted EBITDA was 10,100,000.0 resulting in an adjusted EBITDA margin of 14% and just above guidance.

Paul Rouse
Paul Rouse
CFO at Thryv

As anticipated, this quarterly performance is subject to the dynamics of the print schedule, and we project a return to normalized levels starting in the second quarter. First quarter marketing services billings were $81,400,000 reflecting a 42% year over year decline. This trend more closely aligns with our strategic direction for marketing services as we continue to convert many of our legacy marketing services clients to our SaaS offerings. The pace of this transition impacts the rate of decline in marketing services billings. As previously disclosed, we are exiting the marketing services business by 2028 with cash flows from the business extending into 2030.

Paul Rouse
Paul Rouse
CFO at Thryv

This will provide the company with ample liquidity to meet its obligations during the transition to a fully SaaS focused model. First quarter consolidated adjusted gross margin was 68%. First quarter consolidated adjusted EBITDA was $20,900,000 representing an adjusted EBITDA margin of 12%. Finally, our net debt position was $298,000,000 at the end of the first quarter. Our leverage ratio was 2.2 times net debt to EBITDA, in line with our expectations.

Paul Rouse
Paul Rouse
CFO at Thryv

Net debt increased primarily due to planned upfront vendor payments, the timing of corporate bonus payouts, and the extension of our print directory assets to twenty four months. This lengthening of a directory cycle is a component of our previously communicated strategic plan to exit the marketing services business by 2028. As we've previously discussed, the aforementioned factors are expected to result in peak leverage during the second quarter on a trailing twelve month basis, notwithstanding our anticipated strong EBITDA generation in that period. We expect a substantial deleveraging in the back half of the year as these impacts normalize. Turning to our outlook for 2025.

Paul Rouse
Paul Rouse
CFO at Thryv

For the second quarter, we expect SaaS revenue in the range of 113,000,000 to $115,000,000 For the full year, we expect SaaS revenue to be in the range of $460,500,000 to $471,000,000 The second quarter, we expect SaaS adjusted EBITDA in the range of $18,500,000 to $19,500,000 For the full year, we expect SaaS adjusted EBITDA in the range of $67,000,000 to 71,000,000 which implies SaaS adjusted EBITDA margin of 15%. The adjustment is related to projected traffic costs. For the full year, we are confirming our marketing services adjusted EBITDA guidance range to be 77,500,000 to $78,500,000 Now back to Joe.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thank you, Paul.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We got a good start to the year as you've heard. Strong core metrics, healthy customer spending. We're doing well. But we do read the same headlines that you do that, you know, awful times are ahead and it's gonna be tough and so on, and I wanted to spend a minute speaking to that. Our customers do break fix stuff.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

They're the guys that show up when you have a broken window or your roof's leaking or your your your car the check engine light comes on or you break a tooth and you gotta go to the dentist. They solve all those nondiscretionary problems, and they are, therefore, very resilient. We don't have any luxury stuff. We don't have any discretionary stuff in our customer base. No little blue boxes, no fine dining.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Our customers are very resilient. And so I've been working with small businesses for a long time. I would expect they will be very resilient going going through a recession if one is in the offering for us. What I'm finding is that we're in kind of a Goldilocks moment, meaning sometimes when things are too good and expectations are too high, small businesses can be, you know, a little slow to invest in marketing tools and doing stuff. Right now, they are concerned about making sure their order book is full, making sure they know where the next jobs are coming from.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And, accordingly, they are buying marketing center and buying a lot of its growth package add ons, so much so that we're seeing additional traffic expense because of that. And so I consider that a really good thing. It does there's a little bit of additional cost to that, but it's a real good thing to see that small businesses want to meet with us. They want to buy marketing center, and they want to buy add ons. So I think that's a real positive.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Just my final comment here on the guidance that we've taken for the year. We've taken a very conservative view in light of all the headlines and all the things that we're hearing and seeing out there. We want to make sure that we can continue to fully deliver on our promises. And we don't actually see any big problems at the moment. Maybe it's out of an abundance of caution, but we feel very confident in the results we've had to date and very confident in the products that we have that they're appropriate for this time.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So with that, operator, we turn it for questions.

Operator

Thank you. We will now begin the question and answer please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and not listening by a loudspeaker on your device, Your first question comes from the line of Arjun Patton with William Blair. Please go ahead.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

Perfect. Thank you, guys, and, congrats on a nice strong start to the year here. Joe, for you know, one the things that stuck out to me this quarter was the the net retention rate that you called out at a 3%, and then it sounds like that was a record high. Seems like the the priority on cross sell and expansion is is working already. But can you maybe just elaborate a little bit on that?

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

What what are customers buying, in addition to their core Thrive SaaS implementations? Which new products are you seeing traction for? And then, further your grant, I'd be curious to hear just in terms of how Salesforce readiness is is is playing out to be able to kinda sell these these, newer products, that that you've launched relatively recently.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thanks for the question, Arjun. We have been investing the last couple of years not just in developing new software centers to build out the platform, but also in our actual go to market motion. We we've we've been doing a lot of work on go to market, and, you know, we're able to give the the the sales reps in in their Salesforce automation tools and, you know, each morning, you know, go call on this customer and have this conversation, and here's why. And, yeah, I think you're seeing a lot of that come through. And you might say, well, haven't you always had that?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We haven't. We've we've worked really hard on that the last couple of of years, and we're we're seeing a fruit to that. In terms of, you know, what those plays are, we we are running very specific plays against the base and, you know, with a good effect. So the simplest one is adding additional centers. So, you know, they'll they'll they'll have business center, we'll add marketing center, or they'll have marketing center, we'll add business center, or, you know, we'll we'll put reporting center in, you know, adding additional full on centers.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

But even shy of that, you know, we we have been also developing some simple add ons to to help, you know, boost the amount of of of new businesses that they need. Basically, boost their presence in the market and and help, you know, drive additional leads for additional new customers. I mentioned on the on the call, that's that's been really strong lately. And I and I think and, you know, I know it we're supposed to be crying in our mirror about the economy. It's supposed to be terrible, but our guys are chugging along doing just fine.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We aren't we aren't really experiencing a whole bunch of macro issues. We're we're chugging along, and I I can't really, you know, point to anything that's happening there. We're we're sorta, I guess, you know, bracing for all that we're reading about, but we're just not seeing it. I mentioned on the prepared remarks, I mean, our our customers break everything that or fix everything that breaks in your life. When that stuff breaks, you're still gonna fix it even if, you know, the economy is a little softer.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So, they're they're they're definitely, you know, interested in in in trying to make

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

sure their order books are full.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So I hope that helps.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

Yep. Yeah. Very helpful. Then, the the second question, you mentioned increased traffic expense from from, I think, customers seeing or or you guys seeing elevated demand for marketing center. Is that largely just kind of your your inbound marketing costs, your your lead gen costs?

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

What what's what's exactly going into the the incremental traffic expense you're seeing here?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

You know, one one of the tools that is an add on to marketing center. So, you know, marketing center is a is a a platform that instruments all your marketing, allows you to make, you know, data driven decisions. You can you can manage your social in there. You you there's a whole bunch of good things you can do. We've added on top of it now some some add on tools where we'll help you, you know, you know, optimize your position of your of your website to help you show up better and and more organic results.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And we've we've also added some things that have traffic in them. So we're actually, you know, you know, driving some search in the into your business as well. And, you know, that that product has continued to sell well. It's actually sort of, you know, in the mix of things outstripped, actually, what we thought it would do. So we and we had planned for a little bit of attack in there.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It's just a little bit more. So, yeah, it's not a giant thing. I just wanted to bring it up as, you know, one of the moving parts. And it sort of contrasted, at least what I read sometimes in the media that, you know, small businesses, they're gonna just roll over and stop. You know, we're we're finding that they're marketing.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

They're out there doing their thing. You know, looking ahead, you know, trying to make sure their order books are full.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

Okay. Yep. That's super helpful. Perfect. Thank you, guys.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thanks, Arthur.

Operator

Your next question comes from the line of Scott Birch with Needham. Please go ahead.

Scott Berg
Managing Director at Needham & Company

Hi, everyone. Pardon me. Nice quarter here, everyone. Thanks for taking my questions. I guess a couple of questions, Joe.

Scott Berg
Managing Director at Needham & Company

Let's start with the Keap Partner Conference. It was your first one. My guess is that you've been to, obviously, with the acquisition just less than six months ago now, but or almost exactly six months ago now. But what were your takeaways from that conference? What were you hearing from partners, of that platform, you know, with regards to, you know, how they think this, you know, combination should work going forward?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Well, first of all, thank you for attending. Appreciate that. The the the the partners have been thrilled with Keeps automation and and the way they're flexible, the way they're able to put them in. And it's a it's a key, you know, part of the service they provide to, you know, various customers. And, you know, have to illustrate this.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

A lot of our partners are people that, you know, will specialize maybe in a particular vertical. So may maybe they help, you know, wellness people or maybe they help dentists or maybe they help, you know, gym, you know, stay packed, stay full, and they they help them with all their marketing and so on. And what they do is they use the key tools to build automation, not you know, for their marketing, in some cases, not even for their marketing, for other things like hiring automation or service fulfillment. But one of the things that Keith never did and and doesn't do is it doesn't help you build your list. If you have a list, it nurtures the list and it helps you work your way through.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So they're super excited about Thrive's ability to help them build that list, meet new people, add new people to the top of the funnel. So if you picture a marketing funnel where you meet people and they start the process, Thrive is really good up at the top of the funnel, and Keep is really good in the middle and bottom of the funnel, the nurture and convert, and then follow-up, follow-up, follow-up stuff. So for them, it's just the completion of that funnel. And they're super excited because they feel like for a very high percentage of their customers, they're gonna be able to add some of the the Thrive offering. So they're very anxious to get, you know, the the the full Thrive catalog at their disposal.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And like any acquisition, we didn't instantly have all the, you know, back office plumbing done so that they could do that. So they're they're sort of, you know, you know, beat on it going, how how quick can we have it? We wanna go right now. And, you know, happily, you know, the teams have worked really hard, and that's beginning to come together. So I think they're gonna be pretty happy about that.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

The other thing that they wanted is that, you know, towards the towards the tail end of the of the prior administration and keep, they were in kind of a a little bit of a harvest mode. They weren't really growing. They weren't really investing a lot in nourishing their partner channel or or or or even innovating their product as much as they they had in previous years. And so a lot of the partners have got list of of of apps, of things that they would like from Keap that they're waiting for. And, immediately, when we got the Keith, we leaned in to try to speed some of that up, and we were able at the partner conference to unveil some things that are now done and then to make some near term promises for additional improvement, API hooks, other things that they're you know, some technical things they're looking for that will make their experience with Keith better.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And so I think there's pretty high morale. I mentioned they traveled in from all over the world. So we we needed to give them something, or they would have they would have flown back to Italy or wherever they came from. Pretty disappointed. So we we feel like it was a real success.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And the sense of community that they have built, a lot of these people have been coming working with Keith and coming to these conferences for, you know, more than a decade. So there's a real there's a lot of people that are personal friends, you know, a lot of it. And and the other thing we did that what they did, it was really cool, was a networking session where they where they had people sit at a big table and kinda move every three minutes and just meet all these different people that they hadn't known before as you kinda scoot it along, almost like speed dating. And I think they really appreciate the the power networking that happened there as well. So, anyway, the conference was a big success, and, we're planning a a customer event in the fall that that will be many, many times what PartnerCon was, which was just for partners.

Scott Berg
Managing Director at Needham & Company

Understood. Helpful. And thank you for that, Joe. I guess, last question for me is your, your SaaS customer additions were down 3,000 in the quarter. Looks like it's kinda related to, the core Thrive, customer base there.

Scott Berg
Managing Director at Needham & Company

Is, I guess, maybe can you add a little color in terms of why that's down quarter over quarter? I know you're focusing a little bit more on expansion activities than top of the funnel and bringing, you know, customers in, but I would have thought maybe even with that focus, we'd see something that was closer to to flat quarter over quarter. Thanks.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yeah. Good question. Look. The the the holiday season has always stopped for us. You know, in in q four, you know, we're we're we're usually doing fine in in the beginning of q four, but as we get to, you know, that Thanksgiving to New Year's, you know, even a little past New Year's run here in The US, it's harder to get small businesses to sit down and have a conversation with us.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

You know? They're they're they're doing their own lives. They're doing they're taking vacations. They're doing their own thing, trying to finish up, you know, home services jobs for customers under a lot of stresses, ready for the holidays. And then our own employees, a lot of times, have personal plans that, you know, take extended trips because it is a soft period, so it seems to feed on itself.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

That's here. When you get over to Australia and New Zealand, it's next level because it's the middle of summer for them, and it's their big midyear break. And, you know, they pretty much, you know, pull the ripcord a week or so before the Christmas holiday break, and they show back up in late January. I mean, they're gone for a while. They they they they do a lot of international travel, and they they they live life to it full, which is great.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We love them. But it just makes that period a little softer always. And,

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

if you go back and you look

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

at, you know, prior years, we've we've been soft there or, you know, relative. So our business isn't seasonal other than just the ability to sit down and talk to people and get it done. So I think, you know, that's always always part of it. And then the second thing is we really put an enormous amount of emphasis on running these plays into our base, like, on purpose. And so we've kinda eaten up some of the available sales time that they might have spent, you know, out prospecting, you know, with going into the base.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Now the thing that's an energizer bunny that always keeps going for our business advisers is referrals. So we and we're always getting more and more referrals, and that that that's they serve those referrals whenever they come in. But even that motion flows a little bit during the holiday. It's just not top of mind always to add new software. Hey.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It's Christmas. I'm gonna add new software. So, anyway, that that was that was sort of the I wouldn't get overly alarmed about it. Keep in mind how huge the games were coming into that, and we were anxious to get to those, you know, new customers and and and talk to them about more stuff.

Scott Berg
Managing Director at Needham & Company

Understood. Thanks for taking my questions.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thanks, Alex.

Operator

Your next question comes from the line of Jason Kreyer with Craig Hallum. Please go ahead.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Great. Thank you, guys. Maybe I'll start with Grant. You'd highlighted some changes in the sales motion. Just curious, you know, if we go into a more challenging macro environment, is there a different product suite that you think resonates better with your customers that you're that you would try to lean into?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Well, you know, it's it's funny. There have been times in recent memory when the economy was so hot that our guys were booked solid. So when you would go to them and talk to them about, you know, putting in additional marketing instrumentation or better ways to run their social media or just different things that would be marketing oriented and help them grow, they weren't necessarily at the very top of their list. And if if there's a threat that things are gonna slow down or or let's say things even do slow down a little bit, they're much more anxious to prioritize meeting with you about that stuff and and focusing on that stuff so that they can get work. So I mentioned I I almost feel like the current environment is sort of only locked because it's not bad at all.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It's more than it's supposed to get bad in the future. And and I think it's that supposed to get that in the future thing that that's causing them to really pay attention. So, yeah, I I guess the answer to your question is answered directly is, you know, all of the grow your business type stuff that we offer is particularly in demand if things slow down. You know? And and then when when things are hot as a firecracker, you know, we we maybe are leaning a little bit more into the run your business stuff, you know, getting into the you know, I sometimes use the expression, the broccoli or stuff you should be doing, you know, CRM type stuff, working on your schedule or your estimates, invoices, billing, working on your ratings and reviews, all that stuff.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And at at the moment, the the marketing and sales kind of stuff is is really in both.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Appreciate that. Just wanted to see if you can unpack. You gave a lot of good commentary on what you're seeing right now. You haven't seen incremental pressure, things like that. But can you maybe pair that with how you're thinking about the guide, your decision to to to maybe pull back on expectations for SaaS revenue this year?

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Is it just auctioneer for what may come? Or just any more thoughts there?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yes. You just you just answered your own question. That's exactly what it is. We just we feel like, you know, a more cautious stance is appropriate given, you know, the really just the tremendous uncertainty that's in the market. You know, our I mentioned before our guys fix the broken things in the world, but they have to get, you know, sub zero refrigerators from from somewhere.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

They have to get, you know, fancy window packages. They have to get stuff that, you know, potentially gets affected by tariffs. So there's a lot of concerns about that. And then there's, you know, just overall, you know, the the, you know, economic noise and and sort of scary media headlines. So I think it was just prudent in all honesty.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It's not linked to anything specific that we're seeing. We delivered, I think, nicely on our first quarter, and we have great line of sight into the next quarter. But, you know, the whole rest of the year is a long time. And with all the prognostications look. You've read some of them about, you know, recessions and other things.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It just seemed prudent to back off a smidge. We we didn't move it very much all on all, honestly, but we just thought it seemed to make sense to take a little bit more of a cautious stance.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

That makes sense to me. Thank you. Appreciate it.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thank you.

Operator

Your next question comes from the line of Zach Cummins with B. Riley Securities. Please go ahead.

Zach Cummins
Senior Research Analyst at B. Riley Securities

Thanks. Good morning and appreciate you taking my questions. Joe, I wanted to ask about just retention of many of these marketing services customers that are moving over to the SaaS customer base. I mean, you talk about I know you had a huge influx of those customers coming over in 2024. So can you just talk about the the initial conversations and and kind of the success you have of of maintaining those customers, for for kind of a year plus after bringing them over last year?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yes. Thanks. That's a wonderful question. Same. We we we we there we haven't been able to tease out any difference in the churn rate.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

I mean, it's the same. You know, same as as the other customers that we're selling that we've sold before, you know, it's the same. You know, we we are dealing with very small businesses. So, you know, when you're dealing with DSPs, you're gonna have a little higher churn. And, yeah, I think we've we've talked about that.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

We've established that. But we're not seeing any difference in churn with the folks that, you know, we've selected and brought over from marketing services. And furthermore, what we are seeing is good, strong add on in spending habits when you look out six months, a year, you look at that second year. We're having success adding additional things. And as Grant said in the prepared remarks, when customers buy, you know, more products, more than one product, they end up, you know, having a few different things.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Their churn pro profile meaningfully comes down. And the most recent data that we were looking at, it's like it's cut in half kind of thing. So we're really optimistic that, you know, we've moved them from a legacy old platform that we wanna shut down, that we're trying to, you know, turn off, that we we've been maintaining for years that probably came through an acquisition somewhere and had limited capability. And we're giving them a real improvement where they're getting a lot more functionality, a lot more a lot more value for money in in the change. And they are responding by beginning to use some of it and access some of that and and being receptive to have conversations about adding more products.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So I think that's the big success story that you know, of the last, you know, recent period is the success we've had with those. Now, you know, obviously, on the map, if you're adding big numbers like that, you know, you are you know, you you are gonna have a little bit more churn. You're poking the bear. Right? You're taking money and you're moving them over, and you're moving big numbers over.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So we have to outrun that a little bit. And, you know, you saw a little of that in the last quarter where between seasonality and just that that that, you know, that the big quantity, you know, we we were sequentially down a little bit. And and I've said very clearly that we we don't expect this year to be anywhere near like last year in terms of a big surge It's gonna come more from expansion of spend this year. Our long term guide on this is that our roughly $4,000 per customer will expand to 8,000 over the next couple of years now that the platform is more close to being built out.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And a lot of our energies and attentions are gonna go into expanding that spend. And quite frankly, as investors, you should love that because that's a more efficient motion than out prospecting. You know, it you get your return on your time is better. Your return on the investment of energy is better when you're selling to existing customers rather than having a prospect. So I hope that answers the question.

Zach Cummins
Senior Research Analyst at B. Riley Securities

Absolutely. Really, really helpful on that front. And and my one follow-up question, I I know your core Thrive SaaS customer base and and just all of those customers tend to be pretty resilient despite whatever the macro environment is. I was just curious if there's any meaningful contrast with the Keap customer base. And really, as we think about the updated guidance, are there any changes and assumptions for the core SaaS business versus maybe what Keap is going to be contributing this year?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yeah. The Keith acquisition is going really well. We I mentioned before, you know, we had some promises around, synergies in the combining of the businesses, and we, you know, crystallize those and and feel really good about, you know, delivering on the profitability and EBITDA there coming out of the key business. And operationally, all those things that matter when you're running the business, like, you know, people's, you know, computers or email sign on and their phone systems and their benefits. You know, we've gotten all that stuff, you know, sorted out in a great big hurry.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So we're really proud of that. And I I think we're also proud of the cultural merger and integration that we've had. We've spent time talking with those folks about the mission they were on, the mission that we were on previously, and how that those missions together are stronger and better. And we've had very little turnover, you know, people leaving or something like that, not not excited about the future. And so it's really set us up very, very well.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So we're excited about the key back position. I spoke at length before about the channel partner, you know, approach and all that stuff. Looking deeper then into your question into the customer base, you know, Keep's customers tend to be more online businesses. They tend to be more coaches, consultants, you know, guides, people that, you know, you know, do do things on the on the web. Or as I mentioned, some agencies that then help terrestrial businesses with their business.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And, you know, it it it's a it's a it's definitely not a lot of overlap. There are only 50 customer overlap between the entire two customer bases for this precious little overlap. But so far, their customer base has has proven to be very strong and resilient too, and they also are not involved in too much discretionary stuff, you know, fine dining or whatever. I did meet at the partner conference a few travel related partners, you know, that that that conduct specialty trips for certain demographic groups or certain niches. You know?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So, you know, maybe there's a a little bit of that, but I think it's a handful of people. And none of them indicated any problem. They seem to be they were actually one of them was a speaker up on stage talking about the growth that she's experienced year over year and is and is planning for this year based on all the automations and the power of them and what she's learned from the partner network about how to how to market her her travel offerings and so on. So no. I'm I'm at least not yet looking for anything.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And, again, it they have 15,000 customers, so it is a smaller part of our base. I don't have as much experience with this group yet. I I'll certainly keep you posted in the coming quarters, but so far, I don't see any any you know, there there's not a whole bunch of high end restaurants in it or something like that. Got it. Well

Operator

Your next question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

Analyst

Hi, this is Will on for Dan. I think you said that your long term net revenue retention goal is staying at a %. As you shift your sales focus to, you know, recurring revenue, increasing average spend per account, would you evaluate, you know, raising that goal?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

That's a really good question. You know, I think there's gonna be ebbs and flows to where our focus is. We had a massive ad last year of of new new subs as we selected marketing service people to come over, you know, to to have these upgraded experiences. I I spoke about it, Mike, earlier. And, you know, the the the job now is to sort of bed them down.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Go see him, talk to him about how to use it, what they can do, and all that's going on. We we invest a lot in taking care of these customers and making sure they have a great experience after they've migrated over, and that's just a real point of focus. But there could come a a a a fiscal period in the future where the focus is more on bringing new people on or whatever. That that's just the the the focus, you know, during kind of 2025. So I think what in our Investor Day guidance and in our investor materials, we've sort of talked about think of us as around a % net revenue retention business because we wanted to underscore that we're selling to BSB.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

You know, these aren't enterprises. Some of them do actually go out of business. Some of them do actually fail, and there's an uncontrollable loss that's always gonna be in our numbers. That's offset by the fact that there's such a gigantic supply of them, you know, that our and in the markets that we're trying to serve, like, 8,000,000 businesses. So we've got you know, we can very easily, on fairly short sales cycles, replace one that leads.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

And the the DSP segment is just now migrating to the cloud. It's still pretty new for them. So I think it's a wonderful market. I think, in a lot of ways, a better market than enterprise. And I know you're probably, you know, putting your eyebrows up on that, but it's just so big, and it's just so early.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

There's just so much growth there. It's so exciting. But it comes with, you know, a little bit higher churn and a little lower net revenue retention. So it's not a crazy question at all. And, you know, we probably will have some pretty high step in on that revenue retention, you know, over the next, you know, couple of fiscal periods just because we're putting such focus in the base.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

But that focus could also swing, you know, much more to expansion in the future at some point. So I I think I'll stick with the guide that we're gonna be there or thereabouts around a hundred. And, you know, if we keep blowing it away every period, you can ask that question again in a couple of quarters, and we'll have the champagne conversation about, yeah, maybe we should raise it. You know? But right right now, I think I'll hold where we are just out out of conservatism.

Analyst

Thanks for that. And then just one more. You know, now that you've accelerated the migration to a fully SaaS based business, what is your target leverage range over the next two to three years?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Paul, why don't you take that one?

Paul Rouse
Paul Rouse
CFO at Thryv

Yeah. Right now, with leverage, we we are we plan to continue to pay down debt. So I think you would expect leverage to improve consistently as we go out in time. That's our plan at the moment.

Analyst

Thank you.

Operator

And your last question comes from the line of Matt Watson with RBC. Please go ahead.

Matthew Swanson
Matthew Swanson
Director - Equity Research at RBC Capital Markets

Yeah. Great. Thanks for taking my questions and congrats on the strong start to the year. You know, Joe, as you see more success cross selling, can you just talk a little bit about how you're working to kind of ensure that continued success post implementation and make sure customers are seeing kind of the compound compounding value of the combined platform?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yes. Thanks for the question. That's a good question. We that's that's probably our one of our, you know, number one areas of investment because if you if you look at the profile of our base, you know, you'll see that that that it it's it's been, you know, getting bigger. There's a lot to take care of.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So we really prioritize their experience, and we we go at it with a CX, the customer experience team that uses a variety of tactics. I mean, they they literally are calling them. They're on Zooms with them. They have what we call tech touch, meaning they're sending them in app messages. They're sending them emails.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So that we're we're reaching out to them, and and it it's in the hundreds of thousands of, you know, reach out kind of things just to make sure. And then we will schedule time with them. We'll jump on Zoom with them, share a screen with them, go through it. So that's happening. And then our business advisers are, you know, visiting them in person and and spending time with them, trying to do the same thing.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So small businesses are busy, and, honestly, their lives are hectic, and they, you know, I'm honest. They sometimes break appointments with some things like that because the truck broke down or, you they have an emergency on a job. So it sometimes can be a little scattered. You gotta really work at it, but we are really working at it. And I think for evidence of that, you know, I would look at the fact that the, you know, the churn profile of these people that have been, you know, upgraded to this other stuff have have has been similar, and they're spending more when you look back six months, a year later.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

So that's really important. And then once they you do engage with us, they do dig in, and and and hopefully they add something to it, then we see the churn profile really improve. So that's that's a point of focus for the company has been in the recent past and and will be this year and and and a place that I I think we're good at getting better at. We're becoming more and more innovative in how we do it, and I think we're we're doing a really good job.

Matthew Swanson
Matthew Swanson
Director - Equity Research at RBC Capital Markets

That that's really helpful color. And then we we've mentioned a couple times on the call the the Goldilocks moment, for the customers. But I guess just maybe acknowledging, like, how your customers see the same news articles we did. Like, does this change your go to motion go to market motion at all? Maybe, like, emphasizing the ROI of the platform more, or or is there any any way you can kind of incorporate that into actually, like, a a positive or a tailwind for the company?

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Yes. It's a wonderful question because there's different flavors for different days. And I sometimes liken the the growth aspect of our software to piping hot french fries and the kind of run your business aspects of our software to steamed broccoli. We all know that steamed broccoli is really good for you, and you should eat it, and you'll you'll be healthier, better, and so on. But it's it's sometimes done.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

It's fun and exciting. There have been periods where we were out there flinging the broccoli. They're really doing a lot of work on how your scheduler runs, you know, just in in your in your operating your business, you know, and CRM in the back. At the moment, the the flavor that is really hunting is talking to people about growth, and we're we're seeing a lot of a lot of uptake growth. And that's where the Goldilocks comment come came from.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

I remember in the period when the the the government kinda took a helicopter and threw money at people right after COVID, you know, every one of our guys that built decks was booked out for a year for decks. And if they built swimming pools, they were booked out in swimming pools for a whole year and so on and so forth. Everything was just they were so full. It was hard to talk to them about anything marketing. And so the thing that you did is you talk to them about operating stuff.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

But right now, there's more trepidation about that order book into the future. And so they're really anxious to take a meeting, keep the meeting, and really focus on you on on, you know, how can I make sure I've got the work going forward? And so that that's my comment around Goldilocks. They're not broke where they can't they can't write a check and, you know, buy it. They're still doing alright, but but they're they read these headlines and it causes them to be more focused on their marketing.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Does that does that resonate with you?

Operator

That concludes our question and answer session. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Joe Walsh
Joe Walsh
Chairman & CEO at Thryv

Thank

Executives
    • Cameron Lessard
      Cameron Lessard
      Vice President, Corporate Development and Strategy
    • Joe Walsh
      Joe Walsh
      Chairman & CEO
    • Grant Freeman
      Grant Freeman
      President
    • Paul Rouse
      Paul Rouse
      CFO
Analysts
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Key Takeaways

  • Strong Q1 Results: Thrive delivered a 50% year‐over‐year revenue increase (24% ex-Keep), beat top- and bottom-line guidance and expanded SaaS EBITDA margins to 10%, with SaaS now representing 61% of total revenue.
  • Accelerating SaaS Transformation: Monthly ARPU rose to $335, seasoned net revenue retention reached a record 103%, and total SaaS subscribers grew 37% to 111,000 (including Keep), highlighting robust customer engagement.
  • Expansion-Focused Sales Model: The sales team was restructured around monthly recurring revenue and upsells, driving adoption of multiple products per customer (17.2% now use more than one) and cutting churn rates in half for multi-product users.
  • Keep Acquisition & Channel Momentum: The integration of Keep’s automation tools and partner network complements Thrive’s top-of-funnel capabilities, and 100+ global partners at PartnerCon expressed enthusiasm for selling the combined full-funnel marketing suite.
  • Conservative Outlook & Financial Discipline: For Q2, SaaS revenue is guided at $113m-$115m and full‐year at $460.5m-$471m with a 15% SaaS EBITDA margin target, while net debt sits at $298m (2.2x leverage) with plans to deleverage in H2 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
Thryv Q1 2025
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