Q1 2021 Thryv Holdings Inc Earnings Call
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At this conference IBM from seven zero fixed 859, and five at this time I'd like to introduce the conference T. J J Christopher drive a VP of Investor Relations Treasury and tax.
Good morning, everyone and welcome to this reported management discussion of <unk> first quarter 2021 results by now you Should've received a copy of the company's first quarter 2021 earnings release, and Investor supplement, which is also posted on our website at Investor day thrive Dot com.
And me today are Joe Walsh, Chief Executive Officer, and President, Paul Ralph Chief Financial Officer, and Ryan <unk> VP of product and marketing.
Before we begin I would like to remind you that some of our comments made on today's call and some of the responses to your questions may contain forward looking statements. These statements are subject to the risks and uncertainties described and the company's earnings release and other filings with the SEC.
Brian there's no obligations to update this information presented on the call.
Also on today's call our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors reconciliation of those measures to GAAP will be posted on the investor relations website at investor that thrive Dot com.
With that introduction I would like to turn the call over to Joe Welch.
Thank you pay day.
Good morning, and thanks to everyone for joining us on our first quarter 2021 earnings call.
Over the past few quarters as a public company.
Demonstrated drive category leadership, and and and cloud software.
<unk> this.
And this quarter validates and other point showcasing the massive opportunity for cloud adoption within the SMB space and the strength of our strategy and execution.
We're off to a strong start to the year and our SaaS business.
<unk> growth and revenue and client.
Our revenue accelerated to 17% year over year and the first quarter.
This acceleration and fueled by a demand.
Small businesses to modernize and transition to the cloud.
And we feel that we're in pole position to seize the market opportunity.
We continue to penetrate our captive legacy client base, as well and activating new clients through our new channel.
Even in our existing client base.
More and more of those customers that day now is the time move to the cloud customers. We may have proposal two a year or two ago that are now realizing okay. This cloud thing and rail I need to I need to modernize and.
And that's working really well and now.
And then we are methodically scaling our new channel our inbound channel each month, we add more leads at the top of the funnel, we build out more SCR as we do more demos and we closed more each month, it's becoming a very large part of our sales volume.
And then we're adding partners through our reseller channel each month as more and more partners and bought from new technology and to make our reseller channel.
Really going well and beginning to scale nicely.
And then of course, we sort of stumbled onto the multi location franchise opportunities.
By having one changed us down and buy and that's now become a really big part of our plan or did very well with franchises and multi location.
And these new channels are growing very nicely.
We feel very good about where we are and as a result, we are updating our guidance accordingly.
And we'll walk you through that a little bit later in the call.
And the metrics I'd like to share with you.
<unk> continued to grow and it's a result of that move upmarket and see that and the data our churn and stable in the mid 2% range and this is really good F&B churn.
We're revealing today net dollar retention and hadn't reveal that and the past its a new metric for us, it's up 16% year over year to 89% and I know youll and sometimes the enterprise churn that over 100 and so on.
Still a very young software company, and 89% and very strong and sort of a 16% growth momentum and year over year.
As we solidified our strategy, we expect that thats going to continue to grow moving out and time will put.
And excited about the opportunity to do that.
And then Paul.
The point I would make to you as you compare us to the enterprise desktop there is that we're in a much earlier inning. The small business is moving their cloud maybe top of the second inning and.
Enterprises are probably in the fifth or sixth inning and much deeper into that transition.
So I'd like to just talk to you about.
And what this means in terms of client.
One of our customers and the robo from Treme, Aster, and Berlin, New Jersey and.
Seven staff members.
And they are and our App every single day and the mobile App.
And then a customer with us for a little over two years and they're used to just steadily growing looking at last months. They were up around 11 hour in the App and I appreciate that seven employees or in and out of that App and a few seconds.
And then you can sell something but collectively over the course of the month 11 hour delay.
And then they signed up for 510, and we're one of the early people signed up a switch from stripe.
And we've seen steady volume coming out of them and steadily growing volume.
Over 400 transaction, so far with an average ticket up $612. So.
We're seeing that sort of engagement.
Both teams are completely running their company within the App and that's sort of usage thats driving.
And what's driving the MBR growth driving improvements.
That we're seeing from.
And so engagement was the big priority from the last couple of years and watch it like a hawk. It's on our call are everyday that goes across the screen and the morning, and we watch that and we've seen really nice gains and daily weekly active usage.
Our goal is to be at least 20% below and that away logins are up time, and the app has more than doubled and the last year.
The number of clients using our core feature.
RM payments Communications campaign management.
February and tool, we see more and more of them using more and more features.
And that's part of what gives us confidence as we look forward part of why we feel good enough to actually upgrade our guidance.
We think and to pay off of us improving our onboarding process, improving the software itself and just looking at the results that our customers are getting.
Next I want to bring and our head of product volume and cancer.
And to share with you from product improvements and.
And talk to you about what we're doing on the vertical reservation front before I do that I want to touch on and announcements that we put out this morning and regards to five day.
<unk> pay has up until now and sort of soft launched it it's only been available within that drive customer base.
But as you now know if we saw the announcement, we've now rolled it out as a standalone app.
It's available at no monthly charge, you do make a little bit when customers use it but we think that there'll be a terrific feeder pool, helping us identify.
<unk> of new small businesses that are interested and modernizing and interested and more efficient payment method and we'll be able to help drive client acquisition going forward.
Finding that our existing customers that are using broad pay absolute level and.
We're seeing volumes grow week over week month over month and.
And there is no question that it is driving more engagement and best and other add ons are driving the <unk>. So look it's still early days, but we're really excited about five day and I think with the price pay free.
Up out there, it's only get and increase the footprint and increase our brand.
So with that I'd like to now bring Ryan Cantor on volume.
Thank you Joe.
COVID-19 pandemic drove thrive to adjust our product roadmap prioritization around the most basic needs of the everyday small business line.
We focused on both improving existing functionality and adding new functionality to make it easier for small businesses to maintain a healthy and safe cash flow.
And we improved our estimating and Invoiced functionality, we improved how the system handle taxation and other back and services.
We added new features to manage and sell product.
Packages for the ability to sell bulk services was created.
And near the end of 2020 relaunched drive paint.
<unk> was developed to fill the void and supporting growing service based small businesses.
These businesses often need to process large payments with more affordable options, while still providing convenience and safety and consumers.
<unk> is already processed more than $15 million and payments with an overall average transaction size greater than $400.
Just yesterday, we announced the launch of a dedicated drive pay mobile app available and the iOS and Android App stores now.
Not only does this app and convenience to our existing five and price paid subscribers, but it is available at no monthly charge to all service based small businesses are flat rate credit card fees cost effective ACTH payment option schedule payments tips dispute.
Dispute assistance services and optional pass through convenience fees are all included in our free App.
We know that not every growing business is ready for the full price solution, yet and so we are excited to offer the <unk> pay app to these businesses, providing a safe and convenient way to get paid while also providing frictionless upgrades to the full five platform from the time is right.
To further support the financial needs of our users five has also recently announced our completed integrations with Quickbooks desktop and my op accounting software.
These two additions to thrive at market and make it easier for small business owners to run their day to day businesses.
While simplifying their accounting and tax profit.
Earlier this year after a full year of development and five launched our enhanced CRM functionality.
This product improvement provides and industry specific CRM across 20, plus industries, while adding support for important are complex relationships.
This enables contractors to manage multiple jobs per customer per lawyers, who have multiple cases per client and for animal services, who have multiple pets per owner eight specifically tailored and pre configured to make getting started with thrive even easier.
This effort is already showing dividends with our data showing that over 85% of users of our enhanced CRM functionality are becoming daily active users within the platform.
While some and the F&B SaaS based so vertical is marketing tactic thrive unwavering commitment to delivering and exceptional customer experience propelled us to ensure the product was properly verticalizing first to not disappoint post sale.
Next we have vertical I start demo experiences and we will continue to move up the client experience journey into our website and online marketing activities and the coming periods.
Lastly over the past 18 months drive has been strengthening our integrations with all things Google to centralize and simplify.
Recently, we announced our dedicated Google My business section within price, which makes it easy for small business owners to automatically claim their listing and optimize their information except online appointments via a reserve with Google monitor and manage their Google My business post and quickly respond and App to Google reviews, and with that I will turn it back over to Joe.
Thank you Brian.
Next I'd like to turn to our recent census acquisition, we're off to a great start it's just been a month and a half and we're finding that the central team love, but they love the software.
Demonstrations and then they have been and our company store buying five gear and we're all aware and five outfits.
They are pretty excited about the whole idea of the big ticket for them.
And to become a category leader and Australia, and the software business and.
All the plumbing is being hooked up and people are being trained and the processes and always actually.
Onboard and a couple of customers and we're getting some from that.
And you take customers to test everything out and make sure our localization is right.
We will begin selling and the second half of this year and as I.
Clay and the folks.
And prior acquisitions total about 10% of the customer base come over pretty quickly and low hanging fruit.
And becomes data customers and we're really looking forward to that and 'twenty two and 'twenty three our expectations are pretty limited for this year, just because even if we get customer sold and onboard and we're really only going to have a couple of months and revenue before the calendar year runs out, but we're off to a great start we've been really impressed with that next layer.
Of management that we've gotten to know <unk>, Don Allan and even beneath the sea level people as we've been interacting functionally back and forth.
And having a lot of fund and we've created a.
Accompany dictionary.
Sharing back and forth American Australian terms and.
A lot of fun and interesting people and with a really high morale and this combination and international expansion.
And good about that can't wait to update you more on that and the future.
Next I'd like to bring Paul Ralph back and take us through the.
Financial results Paul Thank you Jeremy.
As Joe alluded to it's been a strong start to the year and we're excited to share the results from here.
Okay, now, let's turn to the U S business segment, starting with SaaS.
First quarter SaaS revenue was 37 $3 million.
And increase of 17% year over year.
First quarter, SaaS billings were $43 million and increase of 22% per year.
First quarter SaaS RFP was 304 factors and another significant increase when compared to $240 and the first quarter from 2020.
First quarter SaaS churn was two 5% and <unk>.
Significant improvements in retention and compared to three 4% and the first quarter 2020.
A significant improvement and churn despite a tough business backdrop brought on by the pandemic.
Moving over to marketing services for the U S first quarter revenue was $227 $9 million and decrease of 21% per year.
Yes.
First quarter marketing services, billings, and $216 $2 million, a decrease of 22% per year.
And this is consistent with previous calls we are providing buildings and additional operational metric to give our investors better insight into our operational performance. The business data will show and very consistent and steady decline and our marketing services segment.
Which is shown to be lumpier on and accounting basis, given the 15 months lifecycle of our print directories.
This is provided in our first quarter investor supplement available on our website.
Turning now to profitability for the consolidated business first quarter adjusted gross margin from 69%.
60 basis point increase and compared to the first quarter and 2020.
First quarter, adjusted EBITDA was $104 $9 million, resulting and an adjusted EBITDA margin was 37%.
Marketing services EBITDA margin increased 43%, a nearly five point increase year over year.
The acquisition of Sensus Holdings on March one.
It is now included in our consolidated results.
Going forward census will be reported under the new segment titled price internationally.
Now moving to guidance.
Let's first start with the U S. Given our strong first quarter results and momentum.
U S SaaS business and we are raising our 2021 revenue guidance to 151 and $153 million.
Implying year over year growth.
And <unk>, 16% to 18% previous guidance was $140 million to $145 million.
For U S marketing services, we are maintaining 2021 revenue guidance from 742 $760 million.
And one.
As previously mentioned U S marketing services, EBITDA and margins will be consistent with prior years on an annual basis.
The SaaS, we do expect continued EBITDA margin compression, primarily as a result from the investments we are making the product and sales and onboarding.
Now for our new segment.
Broadband connection.
And you expect revenues to be and a range of $180 million to $200 million measured and Australia.
This guidance reflects 10 months ownership since we acquired the business and March one and this year.
Censuses and long run assets with 40% plus EBITDA margins historically.
We expect to maintain strong margins.
I'll now turn the call backlog and retail.
Thanks, Paul.
So it's been a really good quarter for us.
Sort of assessing where we are and our SaaS business, we finished up last year and.
With 8% growth and that quarter, and 17% and this quarter. We're now comfortable guiding into the high teens for the year growth is accelerating and I want to move back and time, a little bit the last fall and we entitled a New board we brought in SaaS.
Elsewhere expertise people who'd scale businesses like this before and they've been instrumental and and really encouraging.
And to grow this business faster and.
And really allowing us, giving us the green line for some additional investment to begin to scale, our new channel to invest more in and our engineering and product areas. So our product roadmap is coming along faster and now we're delivering something ahead of what we had planned and our longer term loan that value.
And our bandwidth grew more and improve the product more quickly is there based on the investment and the support and so on.
And I'd like to thank our new board for that and I'd like to point investors realize that that that was a big catalyst September versus buy it and then and within a few months, we have that green light and direction. So there's more good things to come as we get some of the fruit coming out of these investments that we can make it so real side of it.
Where we are there and are prepared to now take questions operator.
And as a reminder, in order to ask a question you will need to press star one on your telephone keypad to withdraw your question press the pound or hash key please standby, while we compile the Q&A roster.
And your first question comes from the line of Arun <unk> with William Blair.
Yes, thank you very much and congrats.
So you guys on the great results.
Great to see this acceleration.
Joe one of the things that stuck out to me and was that the SaaS client base I think it increased sequentially for the first time and a couple of years.
And would love to hear if you've noticed any change and how customers are landing with the SaaS product whether the problem. They are trying to solve is changed at all as you've built out the product a little bit and you being able to communicate the value proposition.
A little bit better and then going off of that.
Is there anything that you would point to in terms of organic marketing versus cross sell from the legacy base and in turn.
And of how that customer acquisition.
Has shifted over the last couple of quarters.
Absolutely.
Sure.
Let's start with the first question and the problem.
We were arguably early.
With our all in one approach small businesses were just.
Beginning to warm up to the idea that they could use cloud tools to solve their problem.
And.
And if they were buying some fairly narrow point solutions to experiment with it and here. We came along with this great Big thing that did it all.
And so what's happening is with the pandemic.
And the.
I guess, the realization that you need to be able to work remotely you need to be able to accept contactless payments.
You need that you need to be able to.
Update the entire Internet on your service offerings or safety protocols your store hours when they change all that stuff came really and this sharp focus and.
And not everybody reacted instantly, it's taken a little time, but but theyre definitely.
And out to be able to do those things now think about the big move to remote work over the last year.
Lot of small businesses had lot of adapting to try to figure out how to do that.
And that drove a lot of the demand I would say that if I'm really honest and I go back.
Two or three years ago, we had a lot of customers buying our software and we were telling and the software and we're telling you it was to run their.
Business operation and improve their client experience.
Think honestly they were thinking about it as advertising and marketing.
And increasingly now we have customers that really grasping that theyre buying software to run their company.
And so I think the <unk>.
It is better that way.
And I think the market's really ready now for what we have offered and we were too early but I think that the way it was really coming now and we're feeling it every day as far as the source of the sales and your questions very astute.
If I go back several years ago, we really got all of our sales from the traditional marketing services sales force as it was making its rounds.
And working with marketing services customers and they were.
Offering drive those customers and there was a steady uptake what's happened now more recently and has definitely seen and these numbers as we are building the traditional channels.
A lot of startup software companies would have and inbound channel with.
The funnel with lead coming down through to SDR is coming down through the demos that gets that coming down through the close and we scale that.
Inbound channel every month, we had more leads at the top we add more SCR as we add more do more demos every month. So its math right. We're just we're scaling it and the numbers are holding up really well and we're getting better at what we do there.
Each piece of it and so that scale and we will continue and that's been probably the primary driver of the predictability that we have here on.
Adding more subscribers. Additionally, we have a.
Reseller channel that we've begun to build and we've been steadily adding resellers and really professionalizing, how we do that we've installed the technology now to really facilitate the reseller channel.
And that that's beginning to run on four out of eight cylinders and were tuning and probably if you ask me again and six months I'll tell you. We're on six out of eight cylinders, but we're getting there we're starting to get that figured out and it's building and some of this volume is coming out of the reseller channel.
And then we've got another channel that.
It is coming together for us and that's our franchise channel and working with large multi location and emerging franchises and we're signing long term. They are typically three year contracts with these customers, where it's kind of built in escalators as they grow and.
That's something that we're really excited about and that's sort of.
And just an incredible fit.
We designed what we what we call the <unk> hub, so that master franchise or and.
One of the thrive and one of the.
Software and one of the franchise experts said that this was the Holy Grail.
For.
For our franchise business. So those new channels are a big part of where this volume is driven from at the moment.
Okay.
Perfect. That's very helpful very helpful color and thank you Joe.
But one of the things you mentioned I think in your prepared remarks, if I remember the name of the customer correctly I believe it was treat masters and I might be getting that wrong.
But.
They had switched from.
Strife over to thrive.
Can you just.
Help us understand what are the benefits.
And you can drive K versus stripe and square or one of the other partners that integrate with and that example, specifically or even just more and more broadly and if you look at how thrive a differentiator versus what else within the market.
So we designed thrive.
Especially for our service based businesses and our stock and trade they've been our customers for the life of our company and so we have a pretty close dialogue and relationship with them and we basically asked them.
And we're getting into payments initially, we put on square and stripe and the usual suspects onto our platform and we have designs on trying to put something together and we ask them.
What would be the perfect payment solution and they were pretty focused on the fees.
And pretty focused on instant instant.
Instantly, knowing where they stood on the money.
So anyway.
As I've been calling these customers and finding a lot of them are switching from strides per square and one of the other tools to ours, and we have Ryan cancer with us today and.
And Ryan it's been working really closely on the payment and saying I'd like to let him make a few comments about the advantages of using thrive pay versus some of the others Orion can you pick that up.
Sure Ken and Joe. Thank you. So obviously these types of businesses are low transaction volume, but high dollar amount and that requires a specific set of features and benefits and any specific product. So for example, we launched the.
And the ability to accept electronic bank payments and if you think about the average transaction size of a larger service business and may charge $1000. If that person were to key that transaction and to another credit card provider. They can be paying three or even more than 3% of a fee on that particular payment, but with our service and side drive pay.
We charge, 1% up to a maximum of $9 per transaction. So the savings is pretty clear and in some cases people are saving 70 to $80 per transaction by using thrive peg. We also added features like scheduled payments, but not just the reoccurring payments that you might have come to expect where.
The average use case would show someone charging on the first of the month every month for $40, we allow installment plans and scheduled payments.
<unk> payments all types of configurations that really helps service businesses manage their cash flow and a predictable manner and.
So when you couple all of that together into a bundle of features and set and product we really find high adoption and we are keenly focused on supporting the kind of high dollar transaction amounts.
These types of businesses. So thats, our biggest focus is to help them process. These larger ticket items with more affordable processing fees and features.
Understood. Thank you and then.
One last one from me.
For Paul a little bit tomorrow, and the guidance.
Obviously, good to see the SaaS guidance raised are you factoring in any any benefit from the dentist cross sell into the SaaS, the SaaS product, yet or is that something that.
And we should wait for 2022 and 2023.
And to really kind of that trough and the numbers.
Yes, Youre exactly right there are and there's very little.
Pending.
Drive sales related to census at this time.
Okay.
All right perfect. Thank you very much and congrats again on the quarter.
And your next question comes from the line of Daniel Moore with CJS Securities.
Thank you Jill Thank you Paul.
Thanks for taking the questions.
Wanted to follow up on census, a little bit more.
And you gave good color, but anything more that and kind of learned since you closed the deal and I think you referenced the 40% plus EBITDA margins given.
Likelihood of increased investment to drive thrive.
Are those kind of 40% a reasonable thought process for the remainder of the here and you feel a little pressure given the incremental investment.
And they have incredible margins their white paper business.
Is.
Unique and the world it.
It enjoys.
Tremendous consumer usage and brand awareness and the advertiser base and the white pages is largely made up of the government.
Institutions giant companies.
And there and they.
Pay for the white pages on their <unk>, which is the telephone company, there and our Telstra telephone Bill So it's almost like a utility and it just rolls on think of like the ALLL of $14 95 things as ran on and on and on that type of thing where.
<unk>.
They there.
Marketing services revenue decline is.
Lower than than ours is our slower even and they're yellow pages. It because of that big White page business and it really flat or is the margin.
<unk> been delivering margins actually into the mid Forty's.
And to your question about setting up five and getting the SaaS business started and Australia, how much that will eat into margins.
And I don't think Youll see a material move it might be a point or two but it will and won't knock it.
And Australia down into the thirty's or something like that and.
Yes.
It's a point or two.
But they will still deliver.
<unk> deliver much higher margins and we have and the U S and as we blend them together.
The sensus acquisition nicely flatters, our marketing services.
Margins and revenue decline because of the better curve there.
And really when you think about sensus, while the enthusiasm is sky high over there and they are really anxious to get into the market for its element. This is really a 'twenty two 'twenty three story.
For revenue there we will definitely have sales this year and we will have some revenue this year, but.
It.
Do you think about SaaS sale.
If you make the SaaS that late in the year you maybe have one month of revenue of two months of revenue, it's not going to be huge and this year.
We are pretty much focused on 'twenty two 'twenty three.
That integration and the revenue there.
That's super.
Helpful and then switching gears.
Exciting news with really.
And relating to the launch of the thrive.
And then I know, it's early days, but.
Can you.
Think about what type of attachment rates, you would expect to generate over time.
Sure and the goal is to obviously drive penetration of SaaS solution as you expand.
And the small business relationship base by using that.
<unk> payout.
Is there a way to sort of think about conversion over a long period of time are still early days at this point.
Yes, I mean look.
And there is no question that having a free app out there that's delivering exactly what.
Small businesses and particularly service based small businesses are looking for.
And is definitely going to drive brand awareness and bring people to thrive and and the drive to drive.
Brand and the <unk> company, whether or not once theyre doing payments and they'll jump over and say Oh, I actually want a full.
Full CRM and I want to improve my client experience and yes.
And to manage my presence all over the all over the web and all of that whether they're going to want to do those other things, we do not know yet.
Since most small businesses are on a journey to.
Automate and modernize.
And our hunch is that there will be our hunch is that this will be a great feeder pool of leads and conversions into the full software, but we haven't gone as far as to model or project exactly how that will turn out.
All of the.
Revenue guidance, we're giving you now and all of our current forecasting is just around the known things that we have.
Expansion of our new channels, our existing sales force doing its thing.
And this year's guidance.
And you don't really have any.
And you drive pay revenue to speak of or any census revenue because those would be icing on the cake.
Understood makes perfect sense and last from me.
In terms of the SaaS segment margins.
Q1, EBITDA margin kind of a reasonable proxy for how do we think about modeling the rest of the year given the.
Obviously intention to invest and drive growth there.
Yes look I think your read of that is right. We were our margins were rising throughout last year, just based on the operational leverage and having a fully scale of national <unk>.
<unk> software product.
And.
Now.
We've got this new board too.
See the merit of growing this little faster and a green light and some additional investment and engineering and product and marketing really we're nourishing the entire business and investing to scale it up.
And that's not free so there is some some expense to that so.
The way to think about our SaaS businesses margins is rather than the margins growing higher and higher and higher.
I think they actually youre going to kind of come down a little bit as we step up that investment and really accelerate growth, but it will remain profitable, we're not planning and run it at a loss or anything like that we're not going to go.
Come along and have a couple of points of faster growth and then say Oh, we lost money, it's been profitable since 2019.
On our EBITDA and a cash flow basis, it's fully repaid our investment to start it.
And it's cash flowing and it's going to continue the cash flow, but in terms of margins not our goal to grow them. So I think.
<unk>.
Mid single digit kind of margins.
And we'll be there will be and I wouldn't take a lot directionally from it if it pops up and down a point or two one way or the other we intend to run it at a profit.
And not lose money, but but not grow the margin so.
And Thats.
And the low to mid single digits and whatever that's probably the ZIP code that will be in and I would say I'll bounce around because it's hard to be super precise quarter to quarter with that but the green light that we have is to reinvest.
Those significant profit that is generated into growing it faster both domestically and internationally.
Alright, it makes perfect sense and entirely consistent thanks for the color and look forward to product and on next week. Thanks.
Thanks Pat.
And your next question comes from the line of Ryan Macwilliams with Stephens.
Thanks for taking the question and nice quarter.
With right for home services that the rollout and the second half of this year can you just talk about the game plan, there and the expectations around the critical product line.
I'd love to thank you.
If you think about our company has.
I've been around a long time, we have a large customer base and it's very heavy and the service based businesses and.
Everything to do with working on your home working on your car and working on your body, we're counting dogs and cats and all.
The services out there we don't tend to have as.
And as much in high end and retail and travel and entertainment and Thats part of why while the pandemic was a bummer that didn't hit us directly because the kinds of businesses that were whacked by the pandemic werent really our customers and the service based businesses and actually done quite well.
So when we look at our current.
Subscriber growth.
Very heavily concentrated around the service based businesses just naturally because that's who our customers are that's who we have relationships with us through our business advisors in the field and had relationships with so thats, who came on and we had a pretty general product it wasn't.
Really verticalizing very much for them and.
We've had some feedback.
And I call customers every week and talk to them about the product.
That's the feedback that.
And we could do more to customize it for them or vertical is it for them and.
So we actually made a decision to do this last year and.
And with the pandemic.
Pause that investment.
And in the interest of hunkering down, but we're very much on the game now we hired.
Someone to run the first set of verticals.
The home services vertical actually last fall he has been hard at work pulling all the bits together.
Creative and technology and put it in and now.
And are prepared to roll it out and we really think that.
The client satisfaction and side are very large service space, that's already and the client base will improve and we think that the referral pass along.
And a thing we'll accelerate film and.
I'd like to have Ryan cantos with it.
Comment a little bit on the virtualization and.
And our thoughts and plans and Ryan can you pitch in here.
Sure Ken and Joe. Thank you. So I think it's five home services is an exciting opportunity for us.
As I stated in my statement, we did start with the products. So we feel that the product is.
And the first leg of virtualization, we use a lot of feedback from our existing client base a lot of them are in the home services segments.
To improve functionality within the product and specifically cater to them and with that CRM enhancement that we announced a couple of months ago.
Kind of a very big but important step towards that journey and so our product is vertical is today, we've done and started working upstream with our sales partners and our demos are now verticalizing with specific specific advertised demo tools. So that every client when they come in and sees a version of drive that fits their business needs and.
And as we and perfected that and every stage of that obviously comes with its learnings and things that we can do better and feedback. We then take that and bring that to the market and youll see changes to thrive dot com and our digital marketing content marketing and social media strategy and the coming period, where we then take that out into the marketplace to attract with the right message targeting.
And the right customer specifically for thrive home services. So hopefully that answers your question, but we really did start from a.
Quiet experience user experience and worked our way up the funnel so that add people buy this product we don't disappoint.
No I appreciate all the color and I don't think it took the blueprint and some of the other verticals and Walter.
And mobile apps.
Bob.
And it's around engagement and it seems like the improvement and RP and net dollar retention has check that improvement and daily and weekly active users.
And the fullness of time or how do you think about our long term target.
And net dollar retention as customers continue to get more seasoned and more integration solutions like thrive day to their existing.
And that uses.
Well it looks like a lot of.
Software companies and we've got.
Got quite a roadmap of.
Product modules and services that we intend to offer and like a lot of software companies, we bundled a lot of things together when we started that.
There are opportunities for us to unbundle as we move out into the future. So.
We do have a.
Pretty robust plan to grow our flow and to grow and Dr. And we made 16 points of progress year over year I'm not going to say, we're going to make 16 points of progress next year, but we have a roadmap it's going to deliver big progress next year and the year after and the year after that and so.
I think youll see and Dr steadily climbing and I.
No we certainly.
These literature and some of the other information that you've got some of these.
Land and expand Boyle.
Boil up things that are way past the 100%.
And making big sales real businesses. So we're not our model is and isn't as land and expand as some of those.
But but.
We do thank 100, pluses and site and the intermediate.
It's not something that we think will do and the next year, but we definitely think that this will be a 100 plus and Dr.
Business as we continue to build out our product roadmap.
Excellent color from quarter.
Thank you.
And your last question comes from the line of Lance Vitanza with Cowen.
Hi, guys. Thanks for taking the questions.
And actually I want to see if I can squeeze two and if you have time, but the first is on the SaaS are two to three four versus $2 40, a year ago, it's quite a jump could you talk a little bit more about the factors behind the IRR per Joe you mentioned the move up market, but is that is that new customers coming on.
And with higher price plans or is the pricing tiered based on size of company number of employees and usage et cetera, and we're just trying to get a little bit more context there.
Okay. So what.
And what you see happening lasted.
And we had and experiment.
A few years ago moving down market.
And it's serious they were and are engaged.
And they didn't you.
Use the product as much share and its intended way and we experienced a lot higher churn and we made a decision as a business that just wasn't our ideal client profile. We did a lot of work with some outside vendors and our own team on.
And really designing a crystal clear ideal client profile and that just didn't include these little tiny.
Hobby businesses solo printers, little tiny tiny businesses. There is a market out there for that I guess, but that's not our market and so we moved back up market and weak.
Timed it with a really dramatic upgrade and the software.
What was really enhanced and improved and we eliminated all those lower price point tiers and.
We actually we solidified our price and higher point, we actually raised the price a little bit.
Higher and and we locked down and started pursuing that higher price point.
And so what <unk> seen happening over the last.
Really.
789 quarters as you're watching the mouth moved through the snake Youre seeing there.
That little churn Bom that we and our customer base roll off and go through and Youre seeing those lower price customers factored out of the picture and Youre absolutely right. When you say a customer that bought yesterday.
Buying at a full price higher price point, and they were buying at and the path and so that's why you see the blend of that RFP going up up up.
Up.
When you layer on to that.
The fact that we've made leaps and bounds and client engagement and usage and the software has gotten so much better.
And then you have people buying more seat licenses you have people buying add ons and.
Extra things.
And so you've got spend climbing out of happiness and more usage for those are the two things that are driving <unk> up.
That's super helpful. Thanks, and then my last question just again from the outside looking in and I mean, I see a business, where you've got a revenue guide north of the $1 billion.
And includes $150 million plus a SaaS yet your equity market cap is less and $800 million Canadian some debt, but even adding the debtor and the enterprise value is about one three times sales, so clearly and how can it.
And credit for the SaaS business is there ultimately a way to separate the SaaS business, perhaps and a few years when revenues there are 300 million or more or.
How do you think about that.
Well, we think about it with a very relaxed longtime horizon to be honest with you.
We're doing really well you mentioned that are.
Our equity market cap $800 million well it was 306 months ago.
We are beginning to get credit there are I don't know 345, 10 portfolio managers out there that have found us and.
Doing a sum of the parts and are starting to value us and a reasonable way and we think that that number will grow and we are.
We're willing to go out and do some investment conferences and tell the story and we're pretty patient about it coming I mean.
The benefits of having the company together are quite quite dramatic.
And there's a lot of software companies out there and they're all battling cut.
Customer acquisition costs, it's tough to breakthrough, especially for small businesses, it's tough to breakthrough and have your message hurt for us to have hundreds of thousands of relationships. So these marketing services that we can go out and have a conversation and be a big market, leading brand that people stop and listen to it has.
<unk> ability.
Sets you apart, it's not even a fair fight it puts you in such a stronger position. So the benefits of having these things. These two things together are so incredible.
And we wouldn't even contemplate separating them and the short term I acknowledged to that and the long term it may be necessary to separate them to really crystallize value.
But.
My time horizon, and the management teams time horizon.
Many of our new investors that are coming and we're all thinking in terms of.
578, 10 years, we're thinking out in time, we think it drive can be the platform that you operate a small business on not just in the United States.
But really globally.
We're in pole position and the market's just unfolding and we think we're and the top of the second inning of a very very big way think back if you will to 4567 years ago, and the way cloud, which is coming on like gangbusters and the enterprise.
It's just beginning just started for small business.
And we already have a fully scaled international platform. It's best of breed that 114 awards and the most recent round of awards.
Yes go on cap per our GTO crowd look at our.
Best value for money best serve its easiest onboarding.
And a really good spot. So if it takes the market a little while to figure it out and maybe where an artist that's misunderstood.
The day and go away before.
Art is really value, but we're looking a little bit longer term.
And you will know I, just made a substantial personal investment and shares of the company just recently.
The time horizon for that is 578 years, and cool with that and I think I'll do real well with that so.
Yes.
Could we unlock some value if we hurt the company by separating it today, yes.
But we don't need to we're not up against it on any thing would be pleasant to have a higher valuation but <unk>.
Maybe that will just come and as people see growth accelerating.
Super helpful, guys and very exciting thanks for taking the questions.
Thanks Lance.
And at this time there are no further audio questions are there any closing remarks.
Yes, yes.
And just like to thank everybody for tuning in.
They're back to Lance's question and there are a lot of folks that looked at US and said well is this really a SaaS business have they fail and what's the story because we did have a number of quarters, where are both subscriber and revenue growth was flat to even slightly negative as we worked our way through what our young software company.
But during that time, what you don't know as we were focused like a laser beam on improving the software and.
Proving its interoperability with other software and the marketplace.
And easier for small businesses to adopt and use us building out and app marketplace, where the kinds of tools and small businesses needed. We're right in that they can just plug in and make the software go and all of that like like a.
Like a flywheel has been just driving more and more usage and more and more engagement and we've seen clients and leafs and time and App.
Days logged into the App and a number of messages sent and box things received.
As we make the software easier to use more and more of our small business customers are using it and recommending it to their friends. So.
It really has been a journey of making the software better.
Obviously this is a numbers oriented call. So we've talked about.
Raising our guidance.
The Big story here is the software got tons better over the last year.
And we show that were ex percent higher this year over last year and revenue, but this.
And the software got three times better.
And Thats, what has really driven it so.
Can hardly contain my enthusiasm I talked to customers personally every week I call them and talk about how it's going and the feedback I'm getting is you guys are getting this figured out this is really starting to work and people are running their companies on the software now and.
And that was only partially the case a year or two ago, we had a couple of outliers, but.
People were struggling with some of the glitchy net to the early days of the software and the fact that it didnt talk to some of the other applications that they wanted to use book.
Moving now and I think virtualization will only enhance that so thanks, everybody for your time really appreciate it we're excited about updating you and three months time on how this is all going.
Thank you everyone.
Goodbye.