Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thryv Holdings Inc (THRY, Financial) reported a 29% year-over-year increase in SaaS revenue, reaching $87.1 million, which was above guidance.
- The company's SaaS adjusted gross margin improved significantly, reaching 72.2%, driven by high-margin SaaS offerings.
- Thryv Holdings Inc (THRY) achieved the Rule of 40, reflecting strong growth and expanding EBITDA margins.
- The acquisition of Keap added over 15,000 quality customers and is expected to generate $11 million to $12 million in revenue for the fourth quarter.
- The company's leverage ratio reduced to 1.66 times net debt to EBITDA, well below the covenant of 3x, indicating strong financial discipline.
Negative Points
- Marketing Services revenue declined by 35% year over year, impacted by the transition of clients to the SaaS platform.
- A non-cash impairment charge of $83.1 million was recognized due to the ongoing structural decline of the marketing services business.
- SaaS ARPU decreased from $333 to $307 quarter over quarter, due to introductory pricing for new customers.
- The company anticipates continued pressure on ARPU as it brings a substantial volume of customers onto the platform at lower price points.
- There is uncertainty regarding the timing of book publications in Marketing Services, which could impact EBITDA in the first quarter of 2025.
Q & A Highlights
Q: Can you elaborate on the Keap automations and how they help SMB customers? Also, what mix of Thryv's current SaaS customers would be a good fit for cross-selling these automations?
A: The automations began as marketing tools but have expanded to include service operations, sales, recruiting, and more. They bring consistency and precision to repetitive business tasks. These tools are ideal for slightly larger small businesses with more revenue, as they can justify the cost for the efficiency gained. Within our 96,000 subscribers, many could benefit from these automations, which would also help prevent them from graduating to larger platforms like HubSpot or Salesforce.
Q: How do you plan to integrate the Keap platform with Thryv's existing platform?
A: We plan to fully integrate the Keap platform with Thryv's, leveraging our combined 300-person product and engineering teams. Initially, we'll create interoperability through APIs while working on deeper integration. This unified platform approach will enhance our product offerings and improve customer experience.
Q: With the recent success in converting marketing services customers to SaaS, how should we think about future conversion rates and their impact on marketing services revenue?
A: The conversion rate has accelerated, exceeding our initial plans. This is due to offering tools that help customers grow, which has been more successful than anticipated. We expect this pace to continue, leading to faster cannibalization of marketing services. Once customers transition to SaaS, they tend to spend 10% to 15% more, indicating strong growth potential.
Q: How do you see the go-to-market strategy evolving with the Keap acquisition, considering the different sales approaches of both companies?
A: Keap's strong partner ecosystem complements our direct sales force. We plan to leverage Keap's partner network to offer a broader product catalog, enhancing income opportunities for partners and growth for us. Keap will benefit from our extensive sales force, which will help distribute their products more widely. This synergy is expected to drive growth, although it will take some time to fully integrate and optimize.
Q: Can you discuss the progress and future expectations for gross margin expansion in Thryv's SaaS business?
A: We've seen significant improvement in gross margins, now surpassing 72%. This is due to increased volumes, additional center sales, and the integration of Keap, which has higher margins. We anticipate continued margin expansion as we further integrate and upsell our products, with more detailed guidance to be provided at our upcoming Analyst Day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
