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01/10 16:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong SaaS revenue growth, subscriber increase, and ARPU improvement, indicating a healthy business trajectory. Although there is a conservative guidance approach due to potential economic challenges, the company shows optimism in business momentum. The reduction in net debt and leverage ratio, alongside exceeding cost synergies from acquisitions, further support financial health. Despite some strategic shifts causing short-term subscriber declines, the focus on cross-selling and upselling is expected to balance growth. The positive sentiment from analysts and the strategic plans for future investments contribute to a positive outlook.
SaaS reported revenue $115 million in the second quarter, representing an increase of 48% year-over-year. Keep contributed $17.7 million in the second quarter. Excluding Keep, Thryv's SaaS business grew 25% year-over-year. The increase is attributed to scaling a profitable and durable software business.
SaaS adjusted gross margin Increased 430 basis points year-over-year, reaching 74%. This improvement reflects progress in scaling the software business.
SaaS adjusted EBITDA Increased to $23.4 million in the second quarter, resulting in a record adjusted EBITDA margin of 20%. This exceeded guidance and underscores the progress in scaling a profitable software business.
SaaS subscribers Ended the second quarter with 106,000 subscribers, including 14,000 from Keep, representing a 25% increase year-over-year. The growth is driven by a focus on increasing spend per customer and driving adoption of more products and solutions.
Overall SaaS ARPU Reached $352 in the second quarter, with Thryv at $340 (up sequentially) and Keep ARPU at $431. The increase is supported by a broad platform and redesigned compensation plans incentivizing increased monthly recurring revenue.
Net revenue retention (NRR) Achieved 103% in the second quarter, indicating strong client retention and growth in spending among existing clients.
Clients with 2 or more Thryv SaaS products Increased to 17,000 at the end of the second quarter compared to 13,000 in the prior year. This highlights traction with existing clients and adoption of more products.
Marketing Services revenue $95.5 million in the second quarter, above guidance. This performance is attributed to the dynamics of the print schedule, which performed better than expected.
Marketing Services adjusted EBITDA $27.8 million in the second quarter, resulting in an adjusted EBITDA margin of 29%. This exceeded guidance and reflects normalization of shared expenses.
Marketing Services billings Totaled $78.4 million in the second quarter, down 38% year-over-year. The decline reflects an intentional shift in strategy to upgrade legacy digital marketing services products to the SaaS platform.
Net debt Reduced by $24 million to $274 million, bringing the leverage ratio to 2.2x. This improvement is due to making two additional quarters of required amortization payments, effectively eliminating two years of required amortization under the new term loan facility in just 13 months.
Thryv for HVAC: A new product designed specifically for the HVAC industry, leveraging Keep's automation tools. It focuses on marketing and managing the funnel for acquiring and retaining work, rather than back-office operations. Early sales have been promising.
Workforce Center: A new product aimed at helping small businesses manage payroll and tax compliance. It integrates seamlessly into the Thryv platform and is designed for scalability, catering to businesses with varying numbers of employees. Initial sales have been positive.
Vertical Market Expansion: Thryv is deepening its engagement in specific verticals, starting with HVAC, and plans to expand into other successful verticals in the future.
Channel Diversification: The company is investing in new partner channels, franchise channels, and agency channels to broaden its market reach and reduce reliance on direct sales.
SaaS Revenue Growth: SaaS revenue reached $115 million in Q2 2025, a 48% year-over-year increase. Excluding Keep, Thryv's SaaS business grew 25% year-over-year.
ARPU Expansion: Annual ARPU increased to $4,200, with seasoned clients spending $5,400 and U.S. direct channel clients spending $6,000 annually. The company aims to increase ARPU to $8,000 over the next few years.
Client Product Adoption: Clients using two or more Thryv SaaS products increased to 17,000, up from 13,000 in the prior year. Net revenue retention was 103%.
Transition to Pure-Play Software Business: The company is phasing out its Marketing Services segment, aiming to exit by 2028 and fully transition to a SaaS-focused business model.
Capital Structure Flexibility: Net debt was reduced by $24 million to $274 million, with leverage ratio improving to 2.2x. Lower required amortization payments will enhance financial flexibility.
Leverage Ratio and Amortization Payments: The company faced challenges with a rising leverage ratio and high amortization payments, which created financial pressure. Although they have made progress, these factors previously constrained cash flow and operational flexibility.
Decommissioning Legacy Systems: The transition away from legacy systems tied to marketing services added short-term costs, complicating operations and increasing financial strain during the transition period.
Keep Business Performance: The Keep business experienced softness, particularly in the demand generation side, leading to reduced profitability and cost-cutting measures. This underperformance could impact overall SaaS revenue growth.
Marketing Services Decline: The intentional shift away from legacy digital marketing services has led to a managed decline in revenue from this segment, which will persist until its planned exit by 2028. This creates a transitional risk as the company moves to a pure-play software model.
Customer Churn: Small business customers inherently have higher churn rates, which poses a risk to sustained revenue growth and customer retention.
GICS Misclassification: The company is currently misclassified under advertising instead of software in the GICS system, potentially limiting visibility among investors and affecting its valuation.
Free Cash Flow: The company expects to generate free cash flow starting in Q3 and Q4 of 2025, allowing for decisions on allocation.
ARPU Growth: Annual ARPU is expected to increase from $4,200 to $8,000 over the next few years, with seasoned clients already spending $5,400 annually.
Net Revenue Retention: Net revenue retention is expected to remain slightly above 100%, with the current rate at 103%.
SaaS Revenue: For Q3 2025, SaaS revenue is projected to be between $116 million and $117 million. Full-year SaaS revenue guidance is updated to $460 million to $465 million.
SaaS Adjusted EBITDA: For Q3 2025, SaaS adjusted EBITDA is expected to range from $18.5 million to $19.5 million. Full-year guidance is raised to $70.5 million to $73.5 million.
Marketing Services Revenue: Full-year Marketing Services revenue guidance is raised to $323 million to $325 million.
Marketing Services Adjusted EBITDA: Full-year Marketing Services adjusted EBITDA guidance is raised to $78.5 million to $80.5 million.
Vertical Market Strategy: The company is focusing on vertical markets, starting with HVAC, and plans to expand into other verticals using tailored solutions.
New Product Launches: The company has launched 'Workforce Center' to help small businesses manage payroll and tax compliance, with early adoption already underway.
Future Growth Initiatives: Plans include a free trial motion for a product, investment in partner and franchise channels, and leveraging the agency channel for growth.
The selected topic was not discussed during the call.
Despite strong financial metrics and optimistic guidance, concerns about execution issues in the SaaS segment and unclear management responses temper enthusiasm. The company's strategic shift and ARPU growth are positive, but missed guidance and a lack of specific details on future initiatives create uncertainty. Without market cap data, the prediction remains neutral.
The earnings call highlights strong SaaS revenue growth, subscriber increase, and ARPU improvement, indicating a healthy business trajectory. Although there is a conservative guidance approach due to potential economic challenges, the company shows optimism in business momentum. The reduction in net debt and leverage ratio, alongside exceeding cost synergies from acquisitions, further support financial health. Despite some strategic shifts causing short-term subscriber declines, the focus on cross-selling and upselling is expected to balance growth. The positive sentiment from analysts and the strategic plans for future investments contribute to a positive outlook.
The earnings call highlights strong SaaS revenue growth, significant subscriber increase, and improved EBITDA margins. Despite concerns about transitioning from Marketing Services and temporary cost headwinds, the optimistic guidance and successful Keap acquisition synergies support a positive outlook. The Q&A session reveals confidence in product offerings and customer retention, though management's vague responses on customer additions could temper enthusiasm. Overall, the financial performance and strategic direction suggest a positive stock price movement, especially in the absence of a market cap to gauge volatility.
The earnings call highlights strong financial performance with a 41% increase in SaaS revenue, exceeding guidance. The Keap acquisition contributes positively, and debt management is proactive. Despite competitive pressures and economic risks, the strategic focus on SaaS and shareholder return plans are promising. The Q&A reveals positive cross-sell feedback and plans for growth, though some guidance is vague. Overall, the combination of strong results and strategic initiatives suggests a positive stock price movement.
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