Q1 2022 Thryv Holdings Inc Earnings Call
Attributed $23 million in the quarter on a reported basis first quarter total marketing services adjusted EBITDA was $95 million.
Resulting in an adjusted EBITDA margin of 35%. Please note that our recent acquisition of <unk> Holdings had a negative drag of approximately 380 basis points on adjusted EBITDA margin in the first quarter.
First quarter total marketing services billings, excluding Vivian.
With $222 6 million a decline of 19% year over year as is consistent with previous earnings calls, we are providing billings and additional operational metrics to give our investors better insight into our operational performance billings data will show.
So a very consistent and steady decline in our marketing services business, which is shown to be lumpier on an accounting basis, given the extended lifecycle of our directories. This is provided in our first quarter investor presentation available on our Investor Relations website.
Turning now to profitability leverage for the consolidated business first quarter consolidated adjusted gross margin of 67% first quarter consolidated adjusted EBITDA was 83.
$7 million, representing adjusted EBITDA margin of 27% finally, our net debt position was 567 $5 million in the first quarter after accounting for the $22 million, we borrowed for the acquisition of <unk> Holdings, our levy.
<unk> ratio for the first quarter in accordance with our credit facility was 155 times net debt to EBITDA and well below our covenant of three times.
Let's talk about guidance for 2022 for the second quarter 2022, we expect total.
SaaS revenue in the range of $55 million to $51 million, representing growth of 22% to 23% year over year.
And an adjusted EBITDA loss in the range of six to $6 $5 million for the full year 2022, we are raising our guidance for total SaaS revenue in the range of $208 million to $209 million representing growth of 22% year over year, we are reiterating our SaaS EBITDA.
<unk> loss in the range of $21 million to $25 million.
For the full year 2022 we are raising our guidance on total marketing services revenue in the range of $905 million to $920 million and raising adjusted EBITDA range is $315 million to $320 million, representing an EBITDA margin of 35.
5%.
<unk> with previous calls we will provide quarterly ranges for marketing services revenue for the remainder of the year, which can be found in our first quarter investor presentation on our website. We provide these figures because sales cannabis process allows a strong visibility into future revenues.
<unk> print publication timing is not generally consistent quarter to quarter now I will turn the call back to Joe Zhou. Thanks, Paul a few more items before we go to Q&A first I'd like to start with video we made the <unk> acquisition in Q1.
We're off to a really great start with video we picked up some excellent people people that really understand the local market have good customer relationships and theyre going to be really additive to the overall drive story. We're really excited about the video employees. We also picked up was aviall, a bunch of great customers and they're already beginning.
By SaaS products. So when we look forward to 'twenty three you will see strong growth coming through from this additional leg. We just added this big customer base from videos that we added were really flat or our growth as we go into 'twenty three and.
Another area that I think will be very strong next year is international the recently hired Marie Carone. She came in as President of International markets, where he has a lot of SaaS experience. She has worked around the world created partnerships affiliates and it'll be her job to really rapidly expand.
Drive internationally and she's got the chops the experience to do it. So as you look at your models and our plans for 'twenty three international is going to become a bigger part of the story. In addition to the very strong results, we're continuing to get from the U S. So pretty excited about what international can do and can add so with that I'd.
Like to turn it over to questions operator.
Yeah.
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. We ask that you. Please limit yourself to one question and one follow up question and we will pause for just a moment to compile the Q&A roster.
And we will take our first question from our June <unk> with William Blair. Your line is open.
Perfect. Thank you.
Joe I think if we can start with you I just wanted to get a sense for what youre seeing in the customer base and the broader SMB market in terms of <unk>.
Sentiment and appetite to invest in software at this time I know, there's been obviously a lot of macro headlines with.
Inflation and interest rates in a recession risk et cetera, but I'm curious it seems like.
So it's a good quarter from a customer adds perspective, but would love to hear what you're seeing and hearing from customers.
Thanks RJ.
Youre right Theres certainly.
A lot of.
External noise from that.
The warrant.
Interest rate changes.
Certainly challenges in hiring than we do here.
Things.
I would say that.
Small business morale small business mindset is not quite as bright as it was maybe back earlier when we were totally on the gas with all the.
Quantitative easing and all of the.
Other incentives.
Going on out there, but it hasnt affected sales I mean customers are we're.
We're seeing still really strong.
<unk> and that Matt.
Macro unstoppable trend, we talk about people moving from analog to digital.
Moving to the cloud is it's very much still in play and I would say if anything that the challenges around hiring.
Sort of caution one a modernized because it actually is labor saving some of them.
Elements of thrive our key marketing automation tools, our appointment taking and scheduling tools are reminders. Some companies have people fact, just before this call started I got two different calls from my dentist China.
Appointment.
Later.
This week.
And by.
By the way my dentist Hasnt thrive. They are just 100 years old I'm, having a hard time getting them to use an example.
Anyway.
I think it's very much labor saving.
And I think it's making a difference.
In terms of them realizing that adopting this technology.
We can actually help them with that issue. So overall demand continues to be strong and obviously reporting here out on what happened in the first quarter and we're well into the second quarter.
I think things are continuing to go really well, we're very bullish on the year as seen by the fact that were.
Upgrading increasing our targets for the year.
<unk>.
Perfect.
Thank you and maybe I'll introduce you to my dentist to install that additionally, adept at this point.
Yes.
Maybe a follow up.
Paul I think you mentioned that in fact, EBITDA there were some product and engineering investments that were delayed into the future.
Should we is there.
Net hiring environment that drove that maybe just give us a little bit of background and then is there anything that we should think about in terms of impacts on the product roadmap as a result of those of those delayed investments.
Paul and I are going to share this answer because I am trampling all over him like always.
One of the big pieces of that with video.
We had planned higher product people and engineers.
We plan to hire some additional sales reps.
And the <unk> acquisition in early January we got all of that we've got a whole bunch.
It allowed us to.
Tobacco hire those in and Jumpstart our plan for the year. So that's part of our real bullishness on how.
How we're going to do this year and.
It happened at the part of the acquisition price as opposed to whole launch of individual expenses do you mind, giving you a follow up question it might be what does that mean youre going to talk about under your belt not spend that money most of the spending.
We're pretty excited about what's happening here at Merck.
The targeted amount that we're going to invest for the year I think we're going to stick with.
Just smooth it through the year, so Paul sorry to trample on your butt.
Can add to that answer only one perfect.
Perfect. Thank you very helpful. Thanks, guys.
Thanks Archie.
Your next question comes from the line of Scott Berg with Needham <unk> Company. Your line is open.
Hey, everybody. This is Jonathan on for Scott Berg I appreciate you taking my questions.
First just wanted to Peel, the onion on engagement a little bit.
Some of the things that Youre seeing resonate the most we're thinking in the context of add on module.
Newer features that you've launched investments across customer success, maybe drill into that a little bit more that would be helpful. Thank you.
Yes, I mean, the progress on engagement it is just stunning.
We had a board meeting last couple of days when we were looking at.
The growth in engagement relative to the growth in customers.
Engagements outpacing customer growth by 5% wanted to it's spectacular.
Consider it a really firm.
The leading indicator on retention and low churn going forward and our ability to really bad these customers down and grow our per byte.
Delivering more products to them over time.
I would say the biggest driver of this really strong engagement.
Continuing perfecting our onboarding process, we have a very slick onboarding tool all morning, widget now thats, helping people get up quicker and get going.
Really altered and improved our onboarding process and just getting a lot more people using the tool more quickly. We also have kind of focused our sales call and our onboarding on the specific problem that small business is trying to solve.
As opposed to kind of make it a product or going into a lot of different areas. We know going into it there is a prep call before we do Onboarding. We know that this is why is the sky box because he is trying to get scheduling figured out I'm just trying to deal with payments I'm, just trying to fix social.
And that's where we go and then we confirm at the end of the call firm at the beginning and Thats, what they want to do it at the end, we confirm that we have accomplished that.
And then we say on future calls, we will build on that.
And so thats really getting people right in and using it and it's just.
We're using a rifle instead of a shotgun, we're really getting right at the topic that's an issue.
No we are innovating the product we've had.
So far this year, we've had more product releases and product innovation than we had all of last year or in any year.
Because of the level of investment we've got now in product and engineering.
The product is getting better and I can't point to any one product improvement.
Driven and as much as just.
Bill its a process I think.
Got it that's helpful and then second.
Wondering if you could give us an update on the mix of new customer growth from conversions versus some of the new channels that you guys have been ramping.
Yes. Thank you simple way to think about this.
Our customers come in three buckets.
Approximately one third are coming from our existing marketing services legacy customer base, sometimes we call it the zoo or something in the zoo or existing customers.
An additional third our referrals coming from those happy customers. There. So it's our local sales force just selling the friend of the customer that already bought.
And that the pace of those referrals is really picking up as we are driving our net promoter score is up and as our churn numbers are driving down and our engagements going up we're seeing more referrals than ever so occasionally.
Investors will ask me well what are you going to run through the whole zoo at the zoo is self generating because it keeps.
Generating more referrals and of course, we keep selling new businesses into the zoo.
So one third from our local traditional base <unk> referrals out of that base.
Final third is coming from all of the various new channel activities.
Frankly.
Sure.
Still learning at and still improving in each quarter, we get a little bit better at.
Our inbound.
<unk> activity.
We're doing all kinds of content marketing online or are directly advertising online driving people to our website, they're clicking on hey, I wanted demo and theyre coming down through our funnel and they are buying or we've got.
Partner channel or working with partners and affiliates resellers and then we've got a.
Multi location franchise channel and.
Our franchise channel in particular is off to a super fast start this year.
But those.
Those areas are all developing at various speeds and improving they're not perfect I wouldn't I wouldn't point to those as our as our absolute best areas, we're making really good progress in those areas and sales are breaking out about a third a third a third.
Awesome. Thank you guys.
Yeah.
And your next question comes from the line of Zach Cummins with B Riley Securities. Your line is open.
Yes, hi, good afternoon, Joe and Paul Congrats again on the strong results here and thanks for taking my questions. Joe in terms of ARPA growth in the SaaS business I know you've outlined.
We're supposed to have a more balanced approach between new customer growth and <unk> growth. This year, but can you talk about some of the opportunities to continue to grow that our pud number and.
There's a lot of that really dependent upon rolling out these new centers that you outlined at your Investor day.
I mean, certainly new centers are going to be a big part of it.
If you think about kind of a long range targets, we laid out at our Investor day broadly speaking, it's sort of imagined average revenue per customer going from about $4000 a year for a customer to more like six over the next say five years.
And I would contrast that with like a hotspot, where theyre getting nearly 12 right now.
So we don't think that Thats, all that high step and we think thats very very possible and we see our customers as they engage more.
Using more of the product, they're getting more of their employees license one.
The things I'm really excited about is our customers are growing.
In the local marketplace to drive customer is at a tremendous advantage to a small business that's unclouded.
They're going to be found easier online, they're going to they're going to be really easy to do business with.
Going to do better they're going to compete for more carpet cleaning jobs or whatever they do.
So our customer base is growing and they are adding locations are adding employees. Good things are happening for our customer base. We've just been looking at a board meeting last couple of days looking at case studies.
Individual customers, who spend with us is expanded FIFO.
As <unk> been growing with us.
Harvest genuinely helping them succeed is helping us grow in their <unk>, but adding new centers is certainly is an important piece of it.
Dry pay we don't talk about much but its the sleeping giant.
$100 million climb and fast and there is a little teeny bit of revenue attached there and we never talk about them at all positioned ourselves as a payments company you're thinking of it more as a retention tool you never cancel software that's paying you let's be honest.
Good money.
Actually it's driving revenue too so that's another element.
And there are a bunch of add ons. There are a bunch of cool things that we offer for people where they can buy a HIPAA compliant version, if they really need that extra level of security et cetera, there's lots of things that we're able to do for customers. So.
Centers is an important part of it.
We are planning at least the Big Center a year as we look at the roadmap for the next few years.
Yes.
Understood and final question for me is around video.
Can you talk about the revenue contribution we saw here in Q1, it's definitely I think above what I would add in my model, So pretty hot start out the gate, but can you talk about the opportunity there just synergies within your existing domestic marketing services business and maybe potentially the opportunity you see to convert some of their customers over to the SaaS platform.
The last thing you said is why we bought them.
We wanted to be able to get SaaS customers. So some of you that might seem counterintuitive because theyre not SaaS customer they are buying marketing services, but we've sort of perfect that process of getting in there and having that conversation and we're off to a really good start.
Hundreds of video clients have already bought SaaS and it's been literally weeks, we just try and salesforce, but the sales force. So excited about having this new future. This new mission of guiding small businesses into the cloud and helping them really be competitive in the marketplace, helping those businesses have a strong advantage.
Against everybody else in the local market.
The sales force is really excited about it and they are signing up people very fast.
So.
I think the reason that we did the deal.
We think that we will get thousands and thousands of additional SaaS subscribers out of the <unk> base over the next three years. That's why we did the deal on the marketing services side. It was a slam dunk, but we were able to crystallize a bunch of synergies because there are a bunch of duplicate costs and those marketing services fulfillment just run over our <unk>.
<unk>.
It's just it was a homerun as far as that goes.
So it's actually Couldnt honestly be going any better we're really really happy with video.
Understood great to hear well, thanks for taking my questions and best of luck here in Q2.
Thanks, Ed.
Yes.
As a reminder, I just wonder if you would like to ask a question and your next question comes from Nick <unk> with Baird. Your line is open.
Yeah.
Hey.
Go on for Rob.
Firstly, congratulations on the entrepreneur award so that's very well deserved.
Bob.
Five SaaS ARPA was kind of flat.
Flat sequentially and I guess the point by design.
Let me reiterate again.
Customer growth is kind of picking up nicely SAARC grew like 6% year on year from low single digits previous quarter. So.
Danny will talk a little bit about the dry weather factors, especially from the Verticalizing I'll do offering standpoint, I know you highlighted the dentist example here.
You guys talked about carving out specific offerings for different verticals candle.
And so on so can you kind of talk about the traction youre seeing there in terms of customer adds.
<unk> contribution.
Sure, Yes, I mean look.
Thrive.
As set out to be.
The platform for small businesses will run off we believe that.
These guys are sort of dipped our toe in the water and try one point solution or two little point solutions.
Quickly get frustrated.
With having to buy all these different point solutions from different vendors and log in and out of them and sticky notes all over their desks and the data doesn't share and they want to graduate to a more complete platform a more complete tool and we're just sitting there waiting for and it is.
Trickle right now it'll be a wave over the next couple of years. So people, graduating because it's more all in one big Big platform.
Look being a platform probably wasn't cool a few years ago. It was actually hard to sell a platform because they were barely ready for a point solution, let alone the platform, but where everyone's every dog has this day.
In the right place as this market unfolds over the next couple of years.
So we go into the market with that advantage the way some people would compete with US is they go in and say well, we're at especially for pest control guys. Like this is what we do.
Keep track of when you apply the chemicals and what the humidity was that day and the temperature and that's right there in the customer file.
And so taking our tremendous strength within home services and begin into vertical is that just seems like a logical step to us both from the way, we present and the way we market to them. The way we fulfill when you deal with the product. So as you come through and you tell US who are a plumber or you tell US you a roofer or whenever we start to enter.
<unk> with you that way.
The product the whole experience start to starts to customize that way, we're still honestly pretty early in that journey.
<unk>.
I think there's a lot left for us to do there, but it is clearly beginning to get some traction you can see it in the customer growth numbers, we said that we would balanced growth this year between.
One of the criticism last year was well Geez you grew a lot you had really strong growth, but a lot of it came from arco growth that scares us and I said don't worry.
The initiatives to drive subscriber growth are kicking in right now because we have a lot of forward visibility and I promised that we would be able to grow double digit and really balance those two this year and I can tell you sitting here in May I mean, thats exactly whats happening, it's playing out we're seeing sub growth come on very very strong and I think it can.
<unk> to be scope for more ARPA growth as we go through the year. So that's going to drive strong growth and some of it will come from the vertical nation.
Got it got it clearly.
One quick follow up on the price paid so it seems like the traction.
Kind of continues to grow I saw that typically have a number.
$100 million annualized which was I think.
From $60 million that you guys kind of highlighted last quarter. So just wanted to kind of get a sense of the attach rates and the market share.
What kind of progress thus far I remember you mentioned it was greater than 50% last quarter. So just some status update there.
Yes, the trend continues within our customer base within thrive subscribers. It's now the most preferred payment option you're allowed when you come in to.
Bring your square or bring you or whatever you're using no problem. We are Switzerland, we will take anybody we're totally an open shop.
Pretty quickly.
<unk> seen the switch to drive that.
Because it's just so slick and so fully integrated the fees are lower.
And it just works so well so that's that's a continuing trend, we see more and more and more of our customers coming over that way was earlier.
Life at much earlier in its success is our thrive paid premium app and that's when you haven't yet bought a thrive.
Theyre knocking around on one of the App store is looking for a payment option and you find drive pay which is free it's a freemium tool downloaded and begin to use it.
That is beginning to bubble up now it took us a little while to sort of work out the getting people approved and getting it moving but.
We're seeing strong momentum there and I would expect.
In the coming year or two.
That's going to be an important contributor and we're hoping honestly it may even actually helped us find some new SaaS.
SaaS subscribers for the software too.
Although I don't I can't point to any of those just yet just saw just early days, but.
Let's drive pay doesn't more than anything is it just locks customers in I mean is your software is paying you.
Sure.
Got it got it thanks, Good luck Joe I appreciate it.
Thank you thanks for your questions.
And your next question comes from Daniel Moore with CJS Securities. Your line is open.
Thank you, Joe and Paul and Thanks for all the color covered most of my questions maybe one more.
The analyst day, you talked about the franchise customer penetration as being kind of a key driver.
Longer term in terms of growth just talk about how you plan to go to market. There and is there any can you maybe scale the size and scope of the opportunity. Thanks.
Yes, I'd be glad to.
It's off to a really good start this year.
Dan one of the weird things as debt.
When you are trying to work the franchise market and you can't go to the franchise shows because there arent any.
Or they are all virtual it's just really tough to get traction. So those came back last fall.
And they are meeting in person again those franchise shows are happening all over the place and where they're at.
We've built some great social media presence in and around that and we're seeing.
Lots of signings of new contracts of new franchises come through so we're really encouraged about the momentum there.
One change that we haven't really announced externally, it's an internal thing, but <unk>, our new international leaders is actually going to take that on.
She's got a lot of experience in working in this type of space, such as fresh thinking and a bunch of new ideas.
So she is excited we're excited about.
Her potential future impact on that and also give us one moshe not just domestically, but internationally as we go about this and a lot of these franchises have designs on moving outside the U S. A lot of them already are actually.
So we think that will work really well so more to come on this but.
Yes.
Yes.
Our little internal number it's about to get blown away for the year here in another month or two.
We're really doing well in this area it took a little while to gestate.
Pandemic didn't help but it is coming on nicely now.
Perfect maybe one more if it's in the prepared docks forgive me if I missed it Vivian what are we thinking for sort of the revenue and EBITDA contribution embedded in the full year guide. Thanks again.
Paul I don't I don't know what that number is to you.
Broken out significantly and we intentionally since we're planting the two organizations.
Maybe it was going to be selling <unk> products and vice versa and also we're merging the operational expenses. So I think it's best to think of it as one organization and not as a separate one really not going to China.
Talk about video going forward, it's just part Frank yes.
US is taking video and just pouring its customers over our rails.
So it's going to be pretty hard to track what the heck happened to video in a minute because it's just going to be the.
Marketing services Duffel go off in the marketing services.
And they are digital customers.
Largely convert to SaaS or in some cases keeps our digital offering but.
Fulfilled over the thrive rail so it's just sort of going to go away.
It's definitely in a flatter our numbers for the year no doubt.
Alright Thats helpful. Again, I appreciate it best of luck on Q2.
Okay. Thanks.
And there are no further questions at this time I will now turn the call back over to Mr. Joe Walsh for closing remark.
Thank you very much.
No.
And wind up here we are.
In a really good spot, it's fun to deliver numbers that are better than the promise.
And it's a lot of fun to be able to raise your guidance and we got to just do both of those again, we've been able to do that a bunch of quarters.
We are pretty conservative with what we guide.
We hope to be able to do that in the future as well.
But there is a mega trend happening here.
So big.
The trend in the 2010 was enterprises moving their computing into the cloud it was a big deal and a lot of big businesses or build a lot of money was made.
This next trend.
Of small independent businesses moving to the cloud will be many many times bigger than the enterprise trend was just so many more of them, it's a big and perfect market. They will come on for different reasons at different times, but they will come on and it will be an enormous way and it's really important.
Because those independent businesses.
In order to compete with global ecommerce in order to compete with these.
Roll ups by private equity and all that kind of says they're going to need those tools and we think it's a noble mission that we're on and we're deadly serious about guiding small businesses into the cloud and helping them take full advantage of the devices. They already on the phone in their pocket the tablets that they are carrying around <unk>.
Run their business type of freedom to move around.
Where they want to keep track of what's going on in their business when it's time.
Do their taxes or whatever they pushed a few buttons in there at all.
It's just that simple when customers column on the right in the middle of providing service to one customer.
There can be an auto respond and respond to them. So they can get back to them. So they don't lose that customer all of those simple things and.
We're providing those thinks its important work and our employee base to drive employee base.
Is so passionate about the service that they give us.
It's easy to keep regenerating that passion, because the feedback that we get from our customers every day. It's just one giant. Thank you. Thank you. Thank you.
<unk> gone from me has made such a difference in my business and it just makes you want to kind of run three miles and chop a quarter would when you get off the boat when these guys because.
We are making a big difference in their business.
So that's the mission that we're on and is conveniently is turning into an incredible business and we're so glad that you investors that are with us have supported it and helped us get to here and we're really excited about the balance of this year. So thank you very much.
And this concludes today's conference call you may now disconnect.
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