Q4 2021 Thryv Holdings Inc Earnings Call
Good morning, My name is Emma and I will be your conference operator today at this time I would like to welcome everyone to the thrive Q4 and full year 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
You would like to withdraw your question again press the star one. Thank you Cameron Lazard you may begin your conference.
Good morning, and thank you for joining us today and good morning, and thank you for joining <unk> fourth quarter and full year 2021 financial results with me on today's call are Joe Walsh, Chairman and Chief Executive Officer, Paul Rouse Chief Financial Officer before we begin I'd like to remind you that shortly before today's call we issued a press release.
<unk> announcing our fourth quarter and full year 2021 financial results. We also published our Q4 earnings supplement on our website I would like to remind listeners that some of the comments made on today's call and some of the responses to your questions may contain forward looking statements about the operations and future results of the company. These statements are subject to the risks and uncertainties described in the <unk>.
Company's earnings release, and other filings with SEC thrive has no obligation to update the 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.
A reconciliation of those measures to GAAP will be posted on our Investor Relations website at Investor got drive dotcom with that introduction I'd like to turn the call over to Joe Walsh Joe. Thank.
Thank you Cameron and thank you all for joining us on the call today I am pleased to report we finished the year on an exceptional note with revenue and EBITDA, beating guidance.
The beginning of 'twenty, one I outlined our growth strategy for our SaaS business and additional areas of investment needed to scale the organization looks.
Looking back I'm really proud of the drive organization and the way, we executed and implemented those investments into product into engineering and improving the product and the impact can be seen in the results, let's take a minute and just jump into the headlines. We grew total SaaS revenues for the fourth quarter by 36%.
And for the full year at 32%.
For context, we grew revenue in the SaaS segment, 1% and point so from 1% we jumped at 36% So really strong performance there SaaS.
SaaS ending clients for the year 46, thousands. So we ended the year with 46000 SaaS customers up 5%. So there's been a lot of discussion about whether or not we can grow our subs because we made such huge progress on <unk>. This last year I think in the year ahead, you're really going to see balanced between <unk> growth.
And subscriber growth.
In fact, we expect that kind of 5% subscriber growth to accelerate to double digits in the year and in a minute here Paul will walk you through the detailed numbers, but I would like to highlight some of the progress that we've made on some of our strategic priorities since.
Since the beginning I have been talking about this was the decade of Smbs fast that last decade was enterprises moving to the cloud and this decade will be the decade of mom and pop and small businesses running their business on mobile devices by the end of this decade that will be just standard fare and at the beginning of the decade for the most part.
None of them were doing so it would be a massive transition and that move will actually be bigger than when enterprises went to the cloud because there are so many more small businesses and we are positioned thrive over the last seven years in pole position to lead that gigantic transition. So this is an unstoppable mega trend that Youre planning.
By investing in bonds.
Just from a macro basis, what we're seeing now is we're seeing small businesses that had been experimenting with perhaps a point solution or two or three become frustrated with logging in and out of all of these things. The fact that the data doesn't share. They all talk to each other he got sticky notes everywhere they have a hard time.
Including their employees.
To use these tools and they're looking to move upmarket to something Thats more complete end to end client experience and end to end solutions, and that's where <unk> sits in that aspirational spots. So as people sort of try a few of these little point solutions total premium tools that will add demand and they realize that this is.
The way to go I want a modernized they sort of find their way moving up market into it.
<unk> is quite a bit more expensive than a lot of those little point solutions that are out there, but it does so much more its more powerful tool to increasingly I'm talking to customers. Just in the last couple of days I've been doing calls into Australia speaking to customers in Melbourne and Sydney.
They are experienced with drive soap bar yesterday spoke to a client who had been a pretty big mail chimp user and see upgraded now mail it's chip.
<unk> and <unk>.
Got so much more capability to do social posting to set up automated messages to go out to our customers.
Buying into our customers through the chat feature.
Really pleased with the power and she knows it does even more things that she hasnt accessed yet but she is excited about the completeness of the solutions he doesn't need to keep buying other software had.
I had a pretty rigorous look to figure out what to use and concluded to go with drive so hearing that story more and more in the weekly customer conversations that I have.
Hearing people really beginning to take two or three point solutions and gets them and go to thrive and I end up saving money when they make the transition.
More power and a lot more capability, so drive as an aspirational brand, it's nowhere near as expensive as an enterprise tool like Salesforce, it's not even as expensive as of mid enterprise tool like the hotspot, it's more of a small business tool, but it is a complete powerful tool, making a big difference for us.
Lot of small businesses, so by investing with US you are playing in that macro trend.
Small businesses are going to want to go with almost like a salesforce dot com type of thing the Big company would do they're going to want to do that more complete solution that they can share with their staff make it all communicated on that one tool that can have a centralized inbox, where all their messages flow in and it simplifies and organize their lives where they can do.
Estimates invoices billing payments they can use drive pay Dave on transaction fees. It can manage social media. They can even deal with ratings and reviews and they can nurture their customers and keep in touch with them and remind them to come back all in one very simple tool. So we've been recognized this year for a lot of innovate.
<unk> <unk>.
<unk> business, helping Smbs get found online we've got a very deep integration there so even though its software it's not advertising because it's so SCO friendly at work so well Google My business, it's actually helping our customers get more leads get more customers, which is an unexpected benefit not necessarily the way we position. It we've launched the verdict.
<unk> platforms with enhanced CRM, So five home five legal five health, we're beginning to really customized product that once you come in and you tell us <unk> you tell us your plumber you tell us your lawyer.
We begin to configure everything very quickly around what you are so it feels very bespoke.
And that's really helped with client satisfaction and you can see it in the engagement right through the numbers the amazing.
We've launched a lot of free online tools.
You get help businesses with lots of simple things, creating invoices different.
Simple things and Thats been a theater pool, driving new customers to our website driving new leads in.
Free content marketing play this is a very powerful.
We've really focused also on faster implementation and getting people to value very quickly that has been challenging but amazing results that our team has done and thats just shortening up the time from when you realize you want to do this when you are getting value from the software and we're seeing that in higher engagement and lower churn right through.
We've had some external recognition this year <unk> crowd cap Terra and the appealing awards recognized for thrive product is number one in a number of categories were placed very highly really external recognition about what a consumer grade easy to adopt easy to use tool. This is a fast time to value is how good.
Value for money is and I would invite any of the listeners here to go to these review sites and read the reviews on drive their outstanding and we've made such incredible progress here in this process right.
<unk> pay did north of $60 million in payment volume and has now become the most popular choice of all the payment tools that are available.
Switzerland, we operate with everybody of inter operate with everybody. So you can bring whatever tool you're using when you come on to thrive.
Lots of people then switch to drive pay along the way to save on fees to recapture convenience fees from customers and because it has a lot of small business friendly elements to it that allow you to set up occurring payments and appointments and classes and lots of things that we've custom built for the clients that we actually serve.
So interestingly, 70% of our clients coming in now are new to the company and I know, we talk a lot about hunting resumed working with our standing base and Thats still producing about a third of all of our customers, but theres a subtle nuance here and thats because we have made so much progress with client satisfaction.
Engagement and usage, we're now getting loads of referrals from those clients.
They are actually bringing up their business adviser and saying I want you to talk to my friend he needs help like this.
So that's really driving that sort of referrals driving a lot of the growth that we're seeing a third or so of our customers are coming from our new channels.
Actual inbound marketing and some of those other new areas that we've spoken some about and as I mentioned earlier, we're seeing subscriber growth accelerate analysis sort of outrun the lower priced offerings, we had a few years ago.
Retention, we're seeing right now seasoned churn is one 5% one 5% season churn. So if we're really proud of that we think that sort of world's best when you're dealing with very small businesses. Our season net dollar retention is now 94%, which is strongly better than the prior year and were.
Continuing to see progress there, it's not a straight line because of different anomalies in the customer set but we've been asked many times do you think you can get to a 100% net dollar retention and we really do we don't think it's a one quarter or two quarter journey, we think it'll take a little while because we are dealing with very small businesses.
We have lots of additional product offerings coming on our product roadmap that will continue to propel that net dollar retention and customer <unk> increases. So we are highly confident that this is a 100 cents on the dollar types of term.
I'd like to talk about engagement for a minute time in the year.
On year is up user frequency is up clients using multiple features is up that CRM inbox schedule or social posts sales module of all up app downloads and installs have doubled.
I'd like to turn now to an update on our census acquisition, we now call. This drive Australia.
The focus with census in this first.
Half of the year or so was to really focus on client engagement getting customers bedded down getting them using the product getting them happy with the product and we have hundreds and hundreds of customers that are dishing out referrals now.
And happy about the Onboarding experience and the difference that we're making in their business.
Bodes well it kind of gives us a broad clean foundation to really accelerate growth I think one of the things Youll see if you watched 22 as youll see the sensus acquisition really come on stream as a source of subscriber adds and revenue growth. So really excited about that.
Finally, I'd like to talk about a small acquisition that we made recently, we acquired a company called <unk> Holdings. The ABL is a marketing services company that publishes directories that was sort of the last bit of the telephone company yellow pages ecosystem that we needed to fill in that we needed to cover and it brings us Hawaii Alaska.
Rochester, Cincinnati, some markets that fire companies that we acquired did not cover while we do have some customers in those areas. We didn't have much customer density. There. So this brings US 25000 digital clients that we can now penetrate with our SaaS offering is sort of expand Brazil. If you will we paid 21 million.
We used available cash to fund the acquisition, we didnt borrow or go out and do anything big here very simple deal and in terms of the discipline that we always talk about when we make this type of acquisition. We have said that we would be approximately two times EBITDA on a post synergy basis and this one is prudent.
As well as I mentioned it just closed in January so integration processes getting cranked up and underway, we're getting everything setup. So they can begin to offer the drive solution to their customer base and that will actually begin to flatter or numbers as this year unfolds. So really excited about the progress that we're making in the business vis vis.
<unk> acquisition Synergistically fit perfectly onto the <unk> platform here in the U S. So really.
Really pleased about that.
Anxious to turn this over to Paul Ralph Let me give you a run through the financials. So Paul. Thank you, Joe, let's turn to our fourth quarter and full year 2021 financial risks.
First cover our U S business segment, starting with SaaS.
Quarter.
SaaS revenue was $47 1 million, an increase of 35% year over year.
For the full year SaaS revenue was $175 million, an increase of 31% year over year and ahead of our guidance.
When adding the contribution of revenue from <unk> International.
SaaS revenue increased 36% year over year in the quarter.
And 32% year over year for the full year.
Fourth quarter U S. SaaS EBITDA loss was $6 $7 million and within our expected guidance range for the full year, you SaaS EBITDA loss was $14 million, representing a negative EBITDA margin of 8% total SaaS <unk>.
$351 for the fourth quarter, an increase of 20% year over year.
Total SaaS clients ended at 46000 for the fourth quarter, an increase of 5% year over year fourth quarter season, SaaS churn was one 5% a 60 basis point improvement year over year, and a 20 basis point improvement sequentially.
Susan net dollar retention reached 94% for the quarter.
A 400 basis point improvement year over year.
As a reminder season churn and season net dollar retention represents clients.
Been with us for over one year.
Moving over to U S marketing services fourth quarter revenue was $153 $5 million.
As we discussed on prior calls there is lumpiness in the print publication schedule, we expected lower revenues associated with fewer print publications.
For the full year U S marketing services revenue was 797 $5 million a decrease of 19% year over year and ahead of our guidance fourth quarter U S marketing services EBITDA margin was 26, 5%.
Full year U S marketing services EBITDA margin was 40%.
Representing a 330 basis point improvement when compared to our prior year.
The improvement in margin is due to a shift in higher margin offerings within our marketing services product mix.
Fourth quarter <unk>.
Marketing services billings were $181 million.
A decrease of 22% year over year and consistent with previous quarters.
Full year U S marketing services billings were $797 million a.
Kris a 21% year over year.
As is consistent with previous calls we are providing billings and additional operational metric to give our investors better insight into our operational performance. The billings data will show a very consistent and steady decline in our marketing services segment, which is shown to be lumpier.
On an accounting basis, given the 15 months lifecycle of our print directories. This is provided in our fourth quarter investor supplement available on our Investor Relations website.
Moving on to drive international.
Quarter, where hybrid international revenue was $60 million in Australian dollars and ahead of our guidance.
On a reported basis given the effect of FX rates drive International revenue was $43 8 million U S dollars.
<unk> International fourth quarter EBITDA margin was 28, 5%.
For the full year drive International EBITDAR margin was 31, 8%.
On a pro forma basis and backing out acquisition accounting adjustments EBITDA margins would have been 38% for 2021.
Turning now to profitability for the consolidated business fourth quarter adjusted gross margin was 66, 1% for the consolidated business.
160 basis point improvement year over year.
For the full year adjusted gross margin was 68, 2%.
30 basis point improvement year over year.
Fourth quarter, adjusted EBITDA was $46 $5 million, representing an adjusted EBITDA margin of 19%.
For the full year adjusted EBITDA was 350.
$5 million, representing an adjusted EBITDA margin of 31%.
Finally on capital allocation, we repaid $17 5 million of.
Of our new term loan in the fourth quarter.
Which brings our cumulative.
New term loan repayments to $158 million since the refinance associated with our Sensus Holdings acquisition in March.
Our leverage ratio for the fourth quarter in accordance with our credit facility.
Is one four times, our net debt to EBITDA.
In addition to the progress we made on our long term debt.
We have made significant progress in reducing our pension liability over the course of 2021, our pension liability has been reduced by $51 million and our funded status improved 600 basis points to 76%.
We will continue to evaluate our net pension obligations each quarter.
Let's talk about guidance for 2022.
As an update we will continue to report each segment SaaS marketing services and driving international.
However, going forward, we will provide outlook for total SaaS and total marketing services.
Which includes both domestic and international operations.
This should be helpful in modeling the business.
Okay now, let's talk about our outlook for 2022.
For the full year 2022, we expect total SaaS revenue in the range of 206.
The $208 million.
Representing growth of 20% to 22% year over year.
And an EBITDA loss in the range of $21 million to $25 million.
For the full year 2022, we expect total marketing services revenue in a range of 872.
<unk> $890 million and EBITDA in the range of 305.
$312 million, representing an EBITDA margin of 35%.
We expect Australia to contribute approximately $160 million to $165 million in revenue and expect an average FX rate for Australia of 73 to the U S dollar.
As Joe alluded to earlier.
We closed the <unk> transaction in January .
We expect video to contribute approximately $70 million to $75 million on a full year basis.
We will represent.
A headwind of approximately 200 basis points to total marketing services EBITDA in 2022.
Consistent with previous calls, we will provide quarterly ranges or marketing services revenue for the remainder of the year, which can be found in our fourth quarter investor supplement materials on our website.
We provide these figures the cross sales canvas process allows for strong visibility into future revenues and because print publication timing is not generally consistent quarter to quarter.
Now I'll turn the call back over to Joe.
Thank you Paul.
So as you can see we're really proud of 'twenty. One we made a lot of key investments that paid off beautifully during 'twenty, one and that growth carry through to 'twenty, two and we will benefit mightily from the stance that our board has authorized to be more on a growth footing as we go into 'twenty. Two I think we can deliver durable.
Fast growth the investments in engineering.
<unk> International expansion and go to market are driving growth on more and more vectors, we're hitting on more and more cylinders as we move forward here and I think we're doing a really good job of balancing the tension between delivering profitability and staying on top of this unstoppable trend that I've been describing today.
We were very familiar with kind of the rule of 40, and you will know that this business in the second quarter of 2020 was delivering in the teens EBITDA margins. So it is really a fairly recent choice that we've made to step on the gas and accelerate that investment. So our path back to profitability is crystal clear we can do.
Sort of let up a little bit on how fast we're investing in that international expansion and some of them engineering things that we're doing and returned to profitability and delivering 20% of the EBITDA line and 20% growth.
Not out of reach at all for US we've chosen to really stay on top of this because we see this unstoppable trend that we really feel that we can ride. So the path to profitability is crystal clear for the company.
Got an investor day coming up in early April registration materials are on our website.
This event will be focused on the long term, we're going to be looking at the decade of SMB SaaS talking about helped drive will lead small businesses in the U S and around the world onto the thrive platform and then have interconnectivity with lots of other tools and functions that are out there. So that you can really live in your thrive and run.
Run a small business reach in your pocket manager business from your pocket and we think that that is where the marketplace is going and we are out in front of it. We're in pole position to lead that we're also going to talk about our marketing services business and how it evolves.
Over the balance of the decade, and how the interplay between the two companies work make no mistake. These two businesses belong together, they're benefiting mightily by being together.
We'll talk about that and lay out our strategy and our thinking.
So with that let me turn it back to the operator.
Great.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Your first question today comes from the line of Arjun Bhatia with William Blair. Your line is now open.
Perfect. Thank you.
Thank you for taking my questions.
Joe You mentioned and then I saw the slide deck in the presentation about all the awards.
Steve for SaaS platform in 2021, they're sticking chapter.
Many others I'm curious what role you are seeing that playing in just building brand awareness for thrives SaaS solutions and then for the new customers that you are attracting to the platform.
Do you have a sense for how much of that is.
Pettitte consolidation, meaning they are using a SaaS solution already and they want more.
More full platform that they're getting with thrive versus a greenfield opportunity where customers are adopting <unk>.
<unk> software solutions for the first time.
Thanks, Art, and it's kind of a mix.
I'll start with the second part of your question.
We are still everyday bringing a lot of unclouded into the cloud for the first time these tend to be.
A lot of our service based customers.
Maybe people who.
Are very skilled at their craft to their industry, but didn't have super high educational attainment.
Maybe maybe werent.
We're thinking about modernizing our business advisor working with them on their advertising their marketing services stuff.
He has been suggesting that they solve some of their business problems using drive software, yes, perhaps for a couple of years.
Moving over and so a lot of times, we're introducing people to the potential of what's possible in the cloud and I would say that's still the majority of customer acquisition.
But increasingly we are finding people who have started to use the point solution, particularly the ones that come in through our website.
Your first question was does winning these awards help us at all and what we're seeing as a company is very strong growth in our organic traffic.
Coming into our website and.
That that's people hearing about us in the market that people.
Maybe looking at the reviews its people that are beginning to source something like this.
And it's nice because youre not out advertising to get them Theyre, just sort of coming to you organically, which is really nice.
One other area I just want to highlight that.
No.
All of our investors have thought about but as we sometimes talk about.
Serving our standing accounts as hunting in the zoo, calling on our brands.
There's one piece that is just really impressive to me that just keeps growing and.
And that's the amount of new business.
That's coming from that base.
Meaning they're referring their friends.
So you guys out on a Saturday morning Golf group and his body is complaining about how difficult social media is and how he.
He's struggling to try to figure out digital or electronic payments or whatever and theyre strolling down the fairway and the Guy says well I'm using thrive I should introduce you to my business advisor, who can who could help you with that.
And we are getting.
About a third of all of our business coming in is coming in from that referral out of that base and.
And it's growing it's growing really nicely so.
Just to sum up the answer to your question the <unk>.
Towards or just the tell tale piece of the reputation that is growing around rod and I think.
You ask how many people are coming from other software solutions.
That was a tiny tiny trickle.
A year ago, we're seeing it a little bit more now where people have maybe experimented with a point solution and are now moving up to a more complete kind of.
Small business enterprise wide things sort of like a little Salesforce dot comment for a small business, where they're they're able to do a lot of things under one login and they can share login credentials or provide a login credentials to.
Their staff and they can all communicate and see the same details about their customers. So.
Yes, I think the awards are helping.
Awesome that's.
That's very helpful. And then just one follow up for me.
On the SaaS guidance.
Seems like.
The numbers imply theres going to be a pickup in.
Net revenue added in the back half of the year or at least in the last three quarters of the year I am curious is that.
Are you seeing international in Australia, and maybe Youll start to layer in in the back half of the year or are there other drivers that we should be thinking about that.
That will come after after Q1 in the SaaS business why we should that we should consider when we're thinking about how the year unfolds.
Yes, you're leading the witness that's exactly you got it exactly right.
Australia is really beginning to hit stride, we were very careful.
Sure.
Got high engagement and happy good users establish there last year.
And we're beginning to really accelerate now the growth there and we are hunting in a very big zoo, it's a large customer base there we have.
The company that we bought.
That's it.
With more than 100 years old and iconic brands and the trusted.
Company within that market that allowed us to become big and important there right away. So we wanted to really tread lightly it would be absolutely sure.
Everything worked and worked well in that market.
So, yes, we anticipate that accelerating through the year, we're seeing it as we speak.
This morning sales reports from.
From the overnight there Australia, another really good day yesterday, it's accelerated nicely. So that's one piece.
<unk>, we only just acquired so.
Sure.
Any benefit we get from that will be in the second half as we get everything wired up get everybody trained and get going on that so so that'll be a lift in the second half.
And you're I think aware of that.
We've been building a.
Our franchise multi location.
Hub for franchise and we've been building out that functionality.
For two years, we Couldnt go franchise shows and that's really the <unk>.
Heart and soul of the franchise business is going to these big.
Franchise shows and conferences there was one weekend before last in.
In San Diego, and we were there and we were there was a booth we were there in spades.
Lots of people in.
That business is really beginning to develop now come back online in person.
We've got a pretty big.
Pretty big reputation within.
Franchise I'd just on Monday.
Checking in with a 48 location franchise company that joined US last year and he has got.
Very clear plans to grow his franchise operation to 100 locations over the next couple of years and after an exhaustive search they looked at a dozen different platforms.
They selected thrive as they are for the operating system that theyre going to use and.
And this guy couldnt be more happy with with the Onboarding process and the service has been getting.
And he had I discussed a couple of things.
He has got suggestions that we are working on four of them.
Really happy with how thats going and what's exciting about that is that these.
Franchise is typically sign up for three year contracts with us and they escalate on their own I mean talk about MBR I mean, this guy if he realizes his plan.
More than double.
The size is it relationship with us over that period of time so.
That's been a big part so in terms of kind of growth vectors, you threw out a couple of them.
And those are going really really well and we've also been innovating our local sales channel.
We've extended the life of our print directory out a little further which has created even more selling time for our local sales force we've been introducing some other innovations and how we how we sell and how it works. So the productivity on a per day basis per business adviser basis, it's been steadily rising.
So as we implement the balance of that plan, we see that continuing to accelerate through the year. So.
Really.
I wish everything what happened instantly, but it kind of takes time when you're when you're developing some of these things and we see them continuing to grow through the year. So thanks for that question.
Perfect. Thank you, Joe and great job on the quarter.
Thank you.
Your next question comes from the line of Scott Berg with Needham. Your line is now open.
Hi, everyone. Congrats on a good quarter.
I guess two questions for me, let's start off with the Euro heavier Joe talks about your SaaS subscriber growth up 5% in the fourth quarter and expecting it to increase to a double digit level here in calendar 'twenty two how much of that kind of increase or shift do you think is related from some of the smaller market.
Excuse me smaller steps customers that churn starting to kind of peak and get in the background versus your increase in sales and marketing efforts over the last year, just driving that net net new customer increase higher.
I think there's some of each.
Many of you are aware.
Now several years ago at this point experimented with a lighter version of thrive offering at a lower price point with a kind of sign up by it yourself.
Motion online.
It did bring up a bunch of customers, but it also brought us an engaged customers and.
Churn, we didn't want and we just really came to the conclusion thats not where we want to be in the market. It would be like selling an iPhone for two.
200 Bucks, we just didn't want to do that this is an aspirational product.
It's by far the highest quality product in the market.
It's the iPhone pro in the market, it's a really really high end high quality products. So we decided to just nip that in the Bud after that experiment and we took a took it out and sit out for now for quite a while.
But the.
The bulge of customers that have brought us took allowed us to kind of churn off and we have been in the prior couple of years kind of running on a treadmill, where we would add.
$349 subscriber.
Subscriber and.
Luiz.
Three of the $99 a month guys.
And we were probably a little bit ahead on money, but it looked like we were going backwards in terms of subscribers.
And so that that's mostly done now and so part of what Youre seeing in the <unk>.
Scriber acceleration.
We're not running on that treadmill anymore.
I'm, not saying there aren't a handful still rolling off but for the most part that's out of the numbers. So that's a piece of it and Thats a piece of why in the second half of the year you saw it get stronger and stronger.
And then the other piece is as you say we have been.
Building, a more robust dedicated sales motion around this product.
I know I've said, it a minute ago, but I want to I want to give props to R V.
Very large local sales force they have really innovated and really figured out how to.
Increased productivity on a per business adviser base very steadily.
Year over year almost quarter over quarter, they have been expanding there.
Sales throughput and Thats continuing to happen in the innovation and the marketing services business.
We've extended the life of our print directories.
They used to be 15 months publications Theyre now 18 months publication and that extra time.
<unk> gives a lot of open real estate, we call it kind of opportunity zones for.
Our reps to really focus more on the SaaS products, so between that and the other innovations that they've done.
Getting more productivity there so.
We are quite confident that you will see.
Desirable blend of subscriber growth and <unk> expansion this year.
We were asked more times than I can count last year, while we see that you're expanding our flu we see our revenues growing very nicely, but we're worried that it's coming from the same site base and you can't sustain that and we of course realize that and are working very hard.
Here in the U S to grow our subscriber base. In addition to that we're expanding internationally.
Obviously.
Australia, We've just entered Canada, and we have designs on additional markets and where there's a lot of investment going into building international because.
Those market needs drive as well.
Yes.
Shoe per helpful. There, Joe and then from a follow up question perspective is on thrive PE.
I believe you've had the product in the market a little bit more than a year now.
How should we think about the traction in the products. Obviously are more customers are using it then when it first got launch, but if we think about I don't know ticket sizes or frequency of use.
Per customer basis, any other details around some of the maybe.
Underlying trends or traction in that solution that youre seeing that might be helpful to us. Thank you.
Sure Yes.
It's continuing to just melt up in a relatively steady way.
<unk>.
I think talked about before it's not these are not like buy a pack of gum.
And from cigarettes.
Transactions. These are more kind of $400 a month.
Transactions on average. So these are these are people.
Getting a deposit for a kitchen remodel and theyre running 500 or $2000 through it or a plumber or coming out to a new hot water heater and for you and you're paying overdrive.
That kind of stuff. These are good sized transactions and we're seeing the number of transactions.
Steadily and slowly rise and we're seeing the number of merchants.
Signed up and actively using it.
Right.
The one area that has been.
A little more treacherous and.
We've we've gone a little more slowly with it.
Thrive paid premium meaning you can go get dry pay in the in the App store.
Either Google play or iPhone, app store and download it and sign up and begin to use it.
We've had to go really slowly and really carefully there.
Just to avoid any kind of fraud or any kind of problems and thats been.
We kind of thought before we started into it that we would be able to really ramp that quickly and we've decided.
We've ended up realizing that it needs to ramp a little more slowly, but it is ramping and.
In rough terms.
The volume that we saw in 'twenty, one coming over the transom on driver pay in very broad strokes will double at least going going into 'twenty. Two just based on the trends that we're seeing and the and the gradual but steady uptake of private pay premium, which we think is a little bit of a Trojan horse to help us meet new.
Commercial that will eventually by the broader drive solutions.
<unk>.
The thrive.
A big Big positive for us and something that we're really excited about we don't make very much on the revenue I don't want to get too excited that Theres 100, plus million dollars of revenue what does that pencil out to we're really doing it at the convenience for our customers as a lock in.
When Youre software is paying you you don't tend to churn.
You just don't.
So the driver pay is a big strength for us.
Great. Thanks for taking my questions and congrats again.
Right.
Thank you.
Your next question comes from the line of Daniel Moore with CJS Securities. Your line is now open.
Good morning, Joe and Paul and thanks for the detail and taking the questions.
Maybe digging into the <unk>.
The SaaS growth guide a little bit for 'twenty, two I think you mentioned double digit client growth.
Can you just talk a little bit more about your expectations, both for our <unk> growth and client growth.
What's embedded on the SaaS side in Australia.
Somewhere in the deck and I missed it I apologize, but just trying to tease that out a little bit more thanks.
Yes.
I don't want people to think Australia at the same size as the United States. It's more like the same type of Texas.
It's going to be an important growth driver for us this year, but it's not like a whole another U S coming on stream or something like that.
So theyre growing theyre growing nicely and they're going to they're going to really flat or our growth because the comp for last year. So small.
It'll be.
Very important.
Yes back to your question about how we see <unk> and sub growth working together.
There's a lot of momentum and a lot of reason that <unk> growth is going to continue to rise I think I've mentioned before.
If you look at.
Like a hub spot that's above us in the market they get about $11000.
<unk> subscriber per year.
At four.
Theres, a long long gap between there.
We have a roadmap with.
Additional products coming we have an investor day coming up in April we're going to bear some of that.
That we believe will continue to propel <unk> up and our current offering even before we add anything we see customers coming in at the entry level, there's kind of a good better best construct here.
And they often pretty quickly upgrade themselves to higher levels of thrive.
Also many thrived add on that we're able to offer them.
And we see people.
Self upgrading to those add on which is pretty exciting and then of course, we have a monetization team.
It was actually teaching coaching showing people how to use more aspects of the software.
And they tend to take a lot of orders for upgrades to so.
The general upgrade motion and momentum is very much underway and building.
<unk>.
The big <unk> gains that you saw over the last most recent period part of that came from burning off those lower value. Once I mentioned in the earlier part of the call maybe a $99 customer going away replaced by a $3 49, and thats going to move your <unk>.
As I mentioned that trend is mostly behind US now we look at it more just genuine people upgrading.
As you see us integrate these acquisitions.
The Sensus acquisition.
ABL acquisition.
They had there.
Various digital product offerings, some of which we have been mapping over to our products and we will be doing some migration, bringing some of those customers over.
And depending on how all this plays out still early days, but.
That could end up adding a few subscribers that are.
Less than the full full rate card as we're trying to kind of offer them a migration and.
Finding a way to map them over.
And so.
<unk> may not just go straight up at a rocket ship straight line.
If we add.
A little burst of some some lower value ones are subject, but these are not we're never ever going to offer the product.
Like we did kind of a stripped out lower price version would be more just finite groups of people as we're integrating these products together.
I wouldn't be surprised if our food doesn't go in a perfect straight line it might be a little bit bumpy as we swallow some of these.
Some of these customers, but I.
I think overall for the year, you will see a nice.
Kind of two horse race there.
Subscriber growth.
Into the double digits and <unk> continuing to move forward. So that it will drive us to that 20% growth that we're guiding to.
Very helpful.
I think you partially answered my next which was just in terms of globally thinking about SaaS pricing do you see opportunities to take pricing given that.
The big gap between yourselves and the hub spots of the world.
Or is it more likely to come through additional functionality.
As we move forward.
I think it's more.
Additional functionality and.
And add on sales I will concede to you as our investors here.
There is a little bit of unbundling going on and drive when we started.
We sort of put the kitchen sink and.
And made that sale and as time is going by.
There is sort of a very subtle unbundling going on.
And that unbundling has the effect of driving <unk> and driving rate, even though the basic prices.
Of the thrive offerings.
199, $3 49 at 499.
Same for quite a while.
We haven't been imputing a rate up into that.
One of the things we're really proud of is we think we have the world's best churn when you look at.
Feeling in the very small business.
Sector, we don't have any big companies at all and our basis is all very small businesses.
And our seasoned churn at one 5%, which we've never seen anything like this we've looked and talked to everybody we possibly can.
And that's been our focus is just scale.
Not just serving but literally thrilling one customer's time and they become now sources referrals.
<unk> are a big source of the melting up growth that we're seeing so.
We.
Aren't anxious to take the base prices and you start stacking them up.
Say, we never would.
We just.
I mentioned before we're an aspirational brand in the market.
Quite a bit more expensive than a lot of these little point solution and the point solution providers.
Exaggerate the capabilities of what they have a lot of time and try to make it sound like they were just like drive we do advice.
Even though maybe they do 120th or 220th of what's driving that.
And so we are conscious that it's a competitive market.
In such a.
Yeah.
With so much.
Liquidity in the market you have got a lot of money out there financing all kinds of deals we wanted to make sure that we remain really competitive so.
We've decided at least up until now not to raise the base rates, but theres very strong rate coming through that unbundling.
And the.
The upsell motion that you see.
Really helpful last just a quick clarification.
That was lifting and typing, but video 70 $75 million revenue did I hear that correctly.
What was the projected EBITDA for 2022.
And those are.
Not included in your marketing services.
EBITDA guidance I assume just wanted to clarify that thank you.
Yes.
We said, we paid $21 million for it we've been honest about that we'll talk about that.
And we've told you that we'd like to bring these acquisitions and on a.
Two times post synergy basis. So for 2022, you don't get a full year of the deal because we bought it at the end of January So it's sort of like 11, well. So it's not it's not.
Tricked masked otherwise you could take.
Got it.
And our $10 5 million divided into your 'twenty, one and it would be all done it's more like eight or nine and it will be for the year because it's.
It's just sort of a partial year.
But.
And yes, you had the revenue right.
It will bring us.
I forget the precise number but right around that $70 million to $75 million of revenue.
This year.
Alright, Thats helpful I'll follow up with any others. Thank you.
Okay. Thanks.
Your next question comes from the line of Zach Cummins with B Riley Securities. Your line is now open.
Yes, Hi, good morning, Paul and Joe Thanks for taking my questions and congrats on the solid end of the year.
Joe can you talk a little bit more about some of the planned SaaS investments that youre, making this year I mean, obviously continuing to still lean into the momentum that youre seeing on that side of the business.
Yes.
One of the things that.
Youll notice if you really study the numbers.
Little Frontloaded the way we've made the investment.
We're really putting a lot into.
Engineering and product and trying to get some of these things done quickly and early some of the integrations that we've that we've come up with that make the product much easier to adopt and use you meet a customer already says well I'm on that point solution and you're able to say no problem, we integrate with that.
Really it really makes the conversation flow from there because I don't know if you know this but small businesses hate data entry and data entry. So when they hear that the two bill just connect to an API and integrate it makes adoption that so that's been really good. So it is a little frontloaded. We also.
I'm not going to make any secret of it.
Our working hard at international.
At the moment and so there are some.
Engineering things that we need to do their GDP, our compliance that we need to do there is a lot of things that we're working on that we kind of front loaded a little bit into the year. So.
I think most of you are aware that this is a fully scaled already profitable SaaS company we.
We have just made a recent choice to step up investment that's pushed it into a small EBITDA loss, which is no big book, because we're making 300 plus million dollars on the other side of the house, it's just a choice.
Yes.
So we have even if you look at this year by the time you get to the back half of the year.
Losses in the final quarter, it'll be very small because we kind of frontloaded. It.
So.
Basically those are the areas.
Product and engineering.
International a little bit on go to market. There were some things we need to set up and to do that we kind of pulled out of the front part of the year. So if you get the benefit the whole year.
That's your answer.
Understood that's helpful and nice to see.
Strong SaaS guidance, especially in the current market environment, Comping, a pretty tough year from 'twenty to 'twenty one but.
Just given the current environment with some of the inflation numbers have you seen this impacting any of your customers in terms of sentiment or willingness to spend in the current environment.
Look sales are very good at the moment.
First thing I do every morning, as I get up and look at the at the volumes from the prior day, which I get early early in the morning, and I've already gone through them today, and we had another really great day yesterday. So we are building momentum beautifully.
But I talked to customers every week.
Part of my week every week.
Have a free flow and chat with our customers and I never stopped most of my other executives do the same thing I'm just trying to stay really close to our customers and we spend time talking to our business advisers about what they are hearing and what theyre seeing we're not getting this from reports or these are live conversations we're having with people.
And.
I hear gas prices being brought up by a lot of people have trucks on the road.
Because there are sort of freaking out at the rate, they're going up and one only needs to turn on the news.
And see that they are going to stay up for a while and so that's got people just grousing uncomfortable.
Supply chain issues have caused a lot of the contractors just trying to get a sub sub zero refrigerator right now.
11 months later or something like that or any kind of other.
Fancy or custom things adjust.
It's just really tough to get things to the supply chain and thats something that we constantly here.
The great resignation, we hear a lot about people have a tough time right now keeping their staff and are having a tough time attracting.
Attracting employees and so we here we hear a lot about that.
We don't hear curiously is.
People complaining that they don't have enough work.
They're getting they're getting jobs are getting calls we're getting sales.
More fulfilling it.
The hard part they feel a bit of a squeeze so I would say in my in my Little survey, which is ever ongoing talking to these local businesses.
All business sentiment is medium at the moment not terrible, but it's certainly not great. It's not as good as it was at points over the last year.
And we took all that into account when we guided the way we got it we want to we.
Take very very seriously the promises that we make.
To our investors.
This is not my first public company.
Experienced.
Paul and I spend a lot of time, making sure that we can.
Fully deliver on the commitments that we make so yes, we took all that into account when we set guidance, where we did.
Understood that's helpful and Paul for my last question in terms of capital allocation. How are you thinking about free cash flow generation and potentially using that excess cash for either debt paydown versus additional M&A.
Yes, we get this question just about every call.
Yes.
Right now we're focused on paying down the debt as rapidly as possible.
We haven't come across another Vivien, where it's very attractive when we consider that absolutely.
But at the moment.
To be focused on debt repayment.
Understood. That's helpful. Thanks for taking my questions and best of luck in the quarter ahead.
Hey, if you don't mind I'd like to just expand on that just a little bit, but I think it might be helpful for the broader audience.
To be clear that acquisitions are not our plan, we feel like we can accomplish the entire mission here without acquisitions.
We have an organic plan to.
Grow around the world and build our SaaS business.
I would I would describe acquisition for us it's more opportunistic.
If we can get them and Paul strike zone, which Paul it's cheap by the way if we can get them at his stripe zone.
Then we do it and.
We had actually been talking with video about this combination for six years.
Next year.
And then just finally decided that it made sense to do it at a price that we could do it.
No.
We have such conversations going on all the time, we're pretty active out there, but I just wanted to be clear don't don't take this the way that they were a roll up or that there they're going to just make one acquisition. After the next.
It's been a year since we made an acquisition of sensus and it might be a year or more before we make another one that we're not.
Sending all of our time looking at deal.
We are planning to grow our business organically, we have the engineering talent to develop our software the way we want.
And we.
We feel confident that we can expand and we figured out how to do that without acquisition.
No.
You hear us talking about an acquisition it'll be because it hit our very disciplined stripe zone.
Your last question today comes from the line of <unk> <unk> with Baird. Your line is now open.
Hey.
Hey, Joe Paul just trying to go on for Rob.
Great quarter, and an exciting shift towards subscriber growth versus just our boys the growth lever.
Thank you said, 70% of our field.
Lines coming in now are new to company owned and inbound marketing partners et cetera on new channels contributing about one third.
If I caught that right up nicely from about 15% or so.
I'm tying back if I recall it right.
You can speak to the mix of that growth as a percentage and a little more granularity.
Partners when you sell those for our franchisee channel.
Marketing and Ralph Roche.
Great.
Okay.
Yes.
I don't know that I have.
Lots of really specific details for you I don't know Paul if your camera and the guys there.
Have that I can speak directionally to what we're doing but I don't know that I can parse that into the.
Pacific Little pieces for you.
I don't have it early or our franchise motion is building beautifully.
And they have already signed up.
And 22 more than they did in 'twenty, one I mean, their rocket and as I said, we kind of finally, let them out of there.
Home offices.
The people and has made a really really big difference in yes.
Our partner and affiliate network is building and we're seeing that and we have a lot of optimism about that and I've talked about this before our inbound motion is.
Really boring.
Sorry inbound team. If you are listening, it's just one foot in front of the other every quarter, we add a few more leads to the top of the funnel every quarter, we add a few more.
<unk> and people would talk to them and every quarter, we close a few more it's really really boring.
One step at a time and you might say well why don't you go faster.
And thats because it would get inefficient really quickly if you went faster.
We kind of can't outrun our supply lines, we can outrun the rate at which were growing organic traffic.
Because you have to have a really strong mix of organic traffic.
Into the lead flow or your.
Cost of acquisition to lifetime value start getting out of whack and.
That's the reason we just don't just don't just go straight up with this thing because we would be like a lot of other software companies that we've seen that.
Every new dollar revenue cost on the dollar which seems like mad to us.
So we are allowing that to <unk>.
Up at a rate that we feel comfortable with and I would say the blend between those three things, it's really a nice blend.
And each has slightly different economics, but overall they fits beautifully into our plan.
Got it got it thanks, a lot Joe really helpful. And then one quick one for Paul maybe thank.
I think you've talked about the strategic investment in go to market in the back end the call.
In the context of the medium term EBITDA margin target set out towards like low to mid teens.
Timelines should we be thinking of as of now.
Colorado.
I'm sorry.
I wanted more clarity on what the.
On the timelines around the medium term EBITDA margin target.
Got it out in the analyst day.
Just some rough ballpark timelines.
I think Paul.
Drilling in on the SaaS piece of it and when we're going to allow us to pop back to profitability.
Unless you're talking about.
On you, but I just wanted to be clear to the group here. It's just a choice that we make.
We sit in a room with our board and we decide.
What we want to invest if we were to decide that we wanted to EBITDA profitability within a quarter or two we could be back delivering in the teens EBITDA margin. This is the underlying drive software businesses currently fully scaled and fully profitable. We're just taking advantage of.
The fact that we make so much money on the marketing services side, and we have a lot of flexibility.
Our capital allocation and debt structure to choose to take $25 million to $26 million and put it on international expansion and faster growth for that we're not diluting our shareholders by raising new equity were not do inbound day around D. C without doing any of that stuff. This is just us. This.
Siding.
The benefit from these two attached businesses and if for any reason, we decided that what we it's very important that we run it at a breakeven or profit.
We could.
LOE down a little bit how fast we're pushing the international envelope or how fast we're pushing the product roadmap and allow that profitability to come through.
So I want to be clear choice right now we have it.
Instructed a plan that says we're going to we're going to switch to more of a of a profit footing.
We're kind of taking it one year at a time with our board and our.
Our board was.
Really very very happy with.
What we were able to do last year, they gave us a very.
Modest little investment and we turn that into an ROI return on investment that was extraordinary to the point, where during the year and they are available.
More and we put a little bit more Ed and that.
But the backdrop for 2002 was we were keeping losses at about the same level as last year as a percentage.
A little bit more is it.
Absolute dollars because the company is bigger but I just wanted to be clear. This is not a money losing business that we could.
Find a way to get a turn it on.
These are considered investments one of the time.
That we're making on our profitable business. So Paul I didn't mean to trample on your answer.
If you have more to add you can I just I wanted to make sure we're clear about that.
Thanks, Joe.
I appreciate it appreciate the color.
Yes, great quarter again thanks.
Thank you.
This concludes our Q&A as well as our conference for today. Thank you Ralph Ken I'll, just going to make a.
Yes, I'm, just going to make a rap up comment or two and then we'll we'll break away here. So we believe that this is the decade of Smbs that we think that last decade enterprises move to the cloud and small businesses kept doing things the way they had in the past. This decade, we think SMB is we'll move to the cloud by the balance of it.
The end of the decade, we think it will be standard operating procedure to reach in your pocket punch a button you thrive pop up.
Look at the details of the customer you are about to meet with many documents that have been shared.
What their last payment was what they bought last time, who the decision makers are it'll all be right there to touch of a button in your pocket and we think that that's where the market's going and we are working to keep up with that adoption curve. We think it's an unstoppable trend.
It's going to happen with or without thrive, we happen to be leading it we're in pole position to capitalize on it but the choice that our board has made.
To step up investment a little bit.
Stay on the front edge of that way and we think Thats a good decision. We're excited about it we think that there is durable growth available for this company for more than a decade looking out.
And the market adoption of tools that we offer.
We see a clear path back to profitability.
Anytime we make that choice.
So thank you very much everybody for listening to the call.
This concludes today's conference call. Thank you for attending you may now disconnect.
Please wait the conference will begin shortly.
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Okay.
Sure.
Sure.
Thank you.
Okay.
Okay.
Yeah.
Okay.
Yes.
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Thanks.
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