Q2 2022 Thryv Holdings Inc Earnings Call
Good day my name is Savannah, and I will be your conference operator for today at this time I would like to welcome everyone to the second quarter.
Earnings call today's call is being recorded all lines.
Mute to prevent any background right. After the Speakers' remarks, there will be a question and answer session.
We'd like to ask a question during this time and we cross sell.
One on your telephone keypad, if you would like to withdraw your question. Please press star one again.
Thank you and I would now like to turn the conference over to Cameron with Baird. Please go ahead.
Okay.
Thank you for joining us on today's conference call to discuss <unk> second quarter 2022 financial results.
With me on today's call are Joe Walsh, Chairman and Chief Executive Officer, Grant Freeman, Chief Customer Officer, Paul Ralph Chief Financial Officer.
Before we begin.
I would like to remind you that shortly before today's call. We issued a press release announcing our second quarter 2022 financial results. We also published a Q2 investor presentation on our website at Investor day thrive Dot com.
Please note that the information regarding our quarterly performance and guidance can be found towards the back of the presentation.
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 they.
These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the 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.
Reconciliation of those measures to GAAP will be posted on the Investor Relations website.
With that introduction I would like to turn the call over to Joe Walsh.
Thank you Cameron and thanks to everyone for joining our call today, hopefully you have seen our press release and the strong financial results, we delivered in the second quarter, which exceeded all our guidance measures. We've made tremendous progress on our strategic priorities that enabled this quarter's performance and our outstanding performance for the first half of <unk>.
<unk> as a result, we're raising our full year guidance.
Total SaaS revenue for the quarter was up 26% over last year.
The $52 2 million in quarterly sales figure.
<unk> the highest in the history of <unk> SaaS.
We hit 50000, SaaS subscribers up 11% year over year with the strongest growth. We've had in a couple of years. We said for this year. It would have more of a balance between subscriber growth and <unk> growth.
Both are double digits in this quarter.
We also meaningfully over performed on adjusted EBITDA and SaaS.
This happened in part because of some progress we made really kind of over delivered on our ability to hire some engineers to our video acquisition. We picked up a couple of excellent while a number of excellent react developers that would've otherwise been a recruiting process. So that saved us. Some money. We also have been much more efficient with our overall.
<unk> marketing efforts and so that's allowed us to invest less spend a little less than we thought we would need to we.
We initially guided to a loss of SaaS or 21% to $25 million for the year. We now believe the SaaS EBITDA loss will narrow and Paul will provide updated guidance in his remarks.
Marketing services continues to show a predictability and resilience in billings with high EBITDA margins we've.
We've made some really big gains and are active users of our software. This year. It's been one of the big stories of the year one of the things I've mentioned before it's our North star the thing that we're the most focused on and so to make such a quantum jump that we've made this year. We think is a leading indicator on how we're going to do in the future and so to update you.
On some of those recent engagement trends, our chief customer Officer Grant Freeman is with Us Brad.
Thank you Joe and good morning, everyone I'm excited to be here today to update you on the progress being made as our clients continued to increase and deepen their engagement with our software platform.
As I've shared before our North Star is an engaged client and.
And I am pleased to report that we have seen a 30% increase in engaged users over the first half of the year. Now. This has been accomplished by first focusing on selling to the right client, making sure that they are ready to implement our software at the point of purchase.
Next we clearly identified the problem that they want to solve and help them understand the impact that problem is having on their business.
After that we create a customized onboarding experience, ensuring we deliver our best in class time to first value and finally, we deploy additional human and tech touches that encourage deeper engagement in our software across the entirety of their journey with us.
One of the great things about our client base is who we sell to we don't have a ton of restaurants and retail establishments are clients tend to be those who are almost always needed in.
An example that comes to mind is if you have a plumbing issue, you're probably still going to call. The plumber, regardless of economic conditions or if you have a dental issue like a cavity or a toothache youre probably going to contact a dentist.
We find that these businesses are more resilient to any softening of demand in the marketplace. Now we also see these businesses as being prime for modernizing the way they operate so they can gain efficiencies and accelerate growth.
You know every thrive prospect receives a customized demo of our software where we show them, how our platform will solve their problems before they purchase we have found that this notion yields higher engagement and low churn. It ensures our platform is a fit for the needs of that SMB.
Cause of this when we dive deeper into the data one of the things. We noticed is an increase in usage of thrive software features that help businesses be more efficient when dollars are tight let me go ahead and share a few examples.
We help businesses make sure their calendars are full our scheduler and automated reminder, features ensure customers of our clients show up for scheduled appointments whether out of beauty salon or for roofing estimates, we helped eliminate no shows.
We offer far more than tech support we offer coaching to our clients recently, we have been working with owners who have been impacted by supply chain shortages and example that comes to mind as a garage flooring company that was not receiving the epocrates supplies needed to run his business, we brainstormed with them and encourage them to communicate with existing and new customers sharing with them that he now.
It provides garage clean outs, which requires no supply chain impacted supplies. This allowed him to generate revenue and keep as crews busy while waiting for oxy.
We've also been helping clients with cash flow a great example of this is because of our integrated CRM and are estimating an invoicing tools customers can more quickly issue estimates and then invoices upon completion of services. This reduces outstanding balances and gets them paid faster. Furthermore, if they offer thrive PE.
Their customer can also pay quickly and efficiently and in many cases help them save on fees, which goes straight to the bottom line.
It is important to understand that our entire client success team knows that our on boarding and 24 seven service is a key differentiator for thrives model.
We have the attitude that no small business should be left behind we coach and inspire small business owners during onboarding focusing on solving the main problem. The client is trying to resolve within the first 10 days, we focus on their engagement with our software because we know that at the end of the day it helps them succeed.
Recent industry study amongst small businesses found that four out of five SMB cited increased productivity increased profitability and a better customer experience for those businesses, who had shifted to cloud based tools and that's really no different than the feedback that we get from our own clients. So let me just share with you a couple of quotes about a couple of their experiences with inverse.
<unk> and technology.
One of our clients said no more repetitive reminders to staff less phone calls to clients more time spent giving spectacular client service.
Another one shared.
From allowing potential customers to book their own appointments to receiving payments to sending follow up confirmation messages to reviews. Among many many other aspects IC thrive benefiting my business and categories Dang near across the board all of these efforts culminate in our highest engagement numbers to date and corresponding low churn for the first half of the year.
Clients are using the product more than ever and they are staying with us because they realize that thrive they have more than just a platform.
Have people, helping them succeed and that's something we're very proud of so with that let me turn this back over to Joe.
Thank you grant.
You and your team have done an excellent job of helping our customers find time to first value and getting them onboard in a smooth way that's contributed to strong usage.
And that usage that engagement for me as a forward indicator as to how we're going to do in the future. It's also a great indicator of how we're going to do on net revenue retention going forward because as those customers become more engaged and as they succeed they tend to buy more and growing.
<unk> growing our revenue per customer, having those add on sales a big part of our product roadmap going forward into the future. So thank you for that thank you for enabling that appreciate all that you guys are doing.
Next I'd like to turn to Paul Rouse, our CFO Paul.
Thank you Joe as a reminder, we are going to focus on total SaaS and total marketing services results, which includes both domestic and international operations. This is how we provided guidance to start the year and we will.
It will be the case going forward, we do feel this will be more important in modeling the business. Okay, let's talk about our second quarter results, starting with our SaaS business.
Second quarter total SaaS revenue was $52.2 million ahead of our guidance range.
This represents an increase of 26% year over year.
And 8% quarter over quarter.
Fueling this increase in revenue was a balance between opco and subscriber growth.
With increasing 11% year over year Andrew.
Annualized spend per client was approximately $4300 for the second quarter.
Second quarter SaaS, adjusted EBITA loss was a negative $2 $2 million and better than our outlook as Joe said in his remarks. The recent for the over performance was due to key engineering talent, we acquired an enviable acquisition and more efficient and effective marketing efforts, particularly.
In our new acquisition channels.
Season, net dollar retention was 91% in the second quarter as a reminder season net dollar retention represents clients are happy.
Been with us for over one year.
Monthly churn remained stable in this quarter.
Moving over to marketing services second quarter total marketing services revenue was 281 $8 million and ahead of our guidance.
The reason for the over performance was due to stronger than anticipated digital revenue and the addition of Vivian.
When we acquired Vivian back in the first quarter.
We assumed a higher level of client churn as we work to integrate the sales and client success teams. This did not happen.
And in fact, we have seen better renewal rates for video products than our original expectations.
<unk> contributed $30 million to marketing services revenue in the quarter.
Second quarter total marketing services, adjusted EBITDA was $118 $2 million, resulting in an adjusted EBITDA margin of 42% due to a strong print publication quarter.
Second quarter total marketing services billings, excluding <unk> was $216 4 million a decline of 17% year over year and within our expectations, which has been consistent for many years.
As reported in prior earnings calls, we are providing billings and additional operational metrics 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 business, which.
Which is shown to be lumpier on an accounting basis, given the extended life cycles of our print directories.
This is provided in our second quarter investor presentation available on our Investor Relations website.
Turning now to profitability and leverage for our consolidated business.
<unk> quarter consolidated adjusted gross margin was 71%.
Quarter consolidated adjusted EBITDA was $116 million, representing an adjusted EBITDA margin of 35%.
Finally.
Our net debt position was $542 4 million in the second quarter, our leverage ratio for the second quarter in accordance with our credit facility.
Is one five times net debt to EBITDA and well below our covenant of three times.
Our pension obligation is now $115 7 million.
Now let's discuss.
Updated guidance for 2022.
For the second quarter 2022, we expect total SaaS revenue in the range of 53.7 to 54 2 million and an adjusted EBITDA loss in the range of four eight to $5 $3 million.
Full year 2022.
We are raising our guide of total SaaS revenue in the range of $209 $5 million to $211 million.
Representing growth of 23% year over year.
Our updating our SaaS EBITDA loss outlook in the range of $16 million to $19 million, which is an improvement over our previous guidance of 21% to $25 million loss for.
For the full year 2022.
We are raising our guidance for total marketing services revenue in the range of <unk>.
$955 million to $970 million and raising our adjusted EBITDA in the range of $335 million to $340 million.
Ending an EBITA margin of 35%.
Now back to you Joe.
Thanks, Paul a few more items before we go to Q&A.
We hired Tammy Canada's arrow as our Chief Marketing Officer, Tim He comes to US with a proven track record in over 20 years experience building Tech companies building category leaders working within the SaaS space. She will play a pivotal role in our growth strategy going forward.
I wanted to comment on marketing center, we rolled out in the spring. The fact that we were doing centers as a strategy and that we would have a marketing center coming out later in the year, while the beta has gone really well we learned a lot in the direct.
Contact working with customers on the product. We now have got a couple of limited sales teams selling.
Selling marketing center and our plan is to rollout marketing center to the whole sales organization before the end of the year. So 23 should be a time when youll see marketing center come to life and start to see some revenue from that and we're looking forward to.
Additional centers, even beyond marketing center.
I wanted to talk a little bit about <unk>.
Growth.
There's a big debate out there in the market about growth and speed of growth and how much cash people use we're really disciplined stewards of cash we're really careful with cash and this is that moment every dog has its day. This is the perfect company for the climate that we're in we have a big edge.
The advantage of 400000 standing accounts that on average have been with us for over 10 years. So these are long established companies that provide vital services in their community. This is <unk>.
Air conditioning doesn't work these are the basics and our customers are very resilient, that's part of why our marketing services business performs in such a steady way.
And it's benefiting our SaaS company because the SaaS business has the ability to have a conversation with this giant xu of customers and those conversations are resulting in more and more conversions.
There isn't any way to stop the transition that's taking place where small businesses are following big ones into the cloud.
That's gonna happen that pace might speed up or slow down, but it is happening and it's continuing to happen and you can see it in our results year to date, we're doing really well and you can see it in the guidance that Paul has given you for how we're going to do for the year.
So with that let's turn it over to Q&A operator.
Thank you and as a reminder, that is star one if you would like to ask a question.
Our first question will come from Irene <unk> with William Blair.
Please go ahead perfect perfect. Thank you guys for taking the question, Joe maybe I want to start with you.
Obviously, one of the benefits that you have is you have a pretty broad platform that can kind of see this operating system for your customers.
We're talking to customers and Youre seeing the trends in this macro environment are you starting to see customers consolidate spend on thrive more because you do have capabilities because they do trustee or is that something that you anticipate will come in the future as they.
Eliminate some of these point solutions that there may be using.
Yes, there is.
Definitely a bit of that that goes on.
We find that if I can.
Go back a couple of years almost all the customers that we were working with what I call. The Unclouded. They had really nothing in the cloud and we were introducing them and bringing them in for the first time and there is still some of that but increasingly now we are beginning to find customers that have put a toe in the water they've used one or two point solutions.
Or they've done something in the cloud and they are asking the question isn't there some more integrated more complete solutions. So I don't have to have multiple sticky notes on my computer where I'm logging in and out of different things.
It's somewhat unwieldy to use many point solutions tape together, because the data doesn't share back and forth and it's difficult to train your staff know how to get into these user interfaces that are different and so on so.
So we very definitely are now seeing people that are using point solutions come on with US and then over time.
More consolidate with us at one of the positives to thrive as we have an.
And the App marketplace inside of thrive.
A lot of the commonly used tools that are out there.
And our App store, so theres a full integration already in place. So if you come to us and you say well look.
Im already using mail chip I'm already using constant contact I'm already using.
Quickbooks or my offer zero or whatever we can just connect and they work seamlessly the data shares. So we do find sometimes one of the conversations that comes up is im already using this and we say no problem that works perfectly that'll help you get off to a good start.
As far as.
Whether they are or could they are might they dropped that point solution I certainly have seen stories examples where that has happened.
I won't say, it's a massive trend, but I do feel like we're in a stronger place with such a broad application. There is true labor saving and drive and if youre looking to having a hard time hiring staff or youre looking to.
Make your business.
More efficient or cut costs drive is a definite way to do that.
Got it.
That's very helpful. And then just one more if I can.
In terms of your customer acquisition motion you mentioned just at the end there.
You have this advantage of the 400000 accounts.
With you for a decade.
When you look at your customer acquisition motion going forward do.
Hey, maybe we will lean more into that marketing services base and try to transition those customers faster.
Or is there are you still kind of keeping that a third a third a third framework.
Wanted to before in terms of new business, that's coming through the software side.
As of this writing as of right. This minute, we're still running that third a third and a third.
It certainly would be an option for us.
Read some of the stuff where people have all of these doomsday scenarios.
The market is going to be.
Also in the future or something that would certainly be a hide out for us to go deeper into that if we wanted to but I have to say, we haven't we haven't seen any doom and gloom. So far we're continuing with that third a third a third.
Going very very well right now.
And I would just also add that.
If times got really tight some of the loss, making SaaS companies that.
We're running around the internet how can they are worse.
They might actually have some of their losses curtailed and it may be less competitive out there.
To find prospects that are coming down through the funnel. So yes that could be another outcome. It may not all just be a bad thing and then maybe also some good guy to that.
Got it perfect. Thank you for taking my questions and congrats on the quarter guys.
Thanks, Bob.
Alright.
<unk>.
Our next question will come from Scott Berg with Needham. Please.
Please go ahead.
Hi, Joe and Paul Congrats on a great quarter.
Joe I wanted to start off on the <unk>.
Customer growth in the quarter. Your subs adds was pretty positive you mentioned double digits plus in the quarter.
Are you seeing anything different in terms of the types of customers you are able to attract to the platform. Maybe I don't know initial size of customer you are landing cadence or maybe even something different geographically.
Not not hugely but you've asked the question so I'll try to parse a little bit to answer it.
As we continue to innovate the software and our roadmap is going faster and faster and faster because we've got a lot more engineers now than we had say a year ago.
One of the things, we're doing is making the software easier to use making it more interoperable with other tools in the market.
And also some of the things we're solving for our some of our power users and our power users tend to skew a little bit larger I don't mean, they have hundreds of employees I'm, saying that instead of having two or three they maybe have 23.
And so we are.
We are becoming a better and better tool for that really established a little bit bigger business.
So I would say, it's subtle but there is a there was a slight movement upmarket happening in our customer base now please don't write down that their move to enterprise.
Im saying.
I'm, just saying that the selection of us getting instead of Chuck into trucks, we're getting Chuck with seven trucks, a little bit bigger small businesses.
Or kind of being targeted by our business advisers and this is really making a lot of sense to them and is more suited so I would say theres ever slight ever so slight upward movement within that within that base and I think that bodes well longer term for more upsell selling more.
Licenses and all the things that go with it our long term plan as you know is to grow.
Our net dollar retention to be kind of a 100.
To drive a business with a little bit larger.
To.
Where we currently are.
Okay.
Alright, so the title of my note is thrive moves into the large enterprise satellite.
Thank you.
Yes.
Obviously alright.
Alright, and then.
A follow up I know Arjun asked the question before about becoming stickier, because I know theres a lot of concerns just in general about any software vendors selling into smaller businesses given that macro backdrop, but how do you think about the payments business right now.
You're still seeing nice growth there, but as you think about payments maybe on a per customer basis.
I guess like the <unk> trends for customer care.
It's trending and I don't know if its a valid.
Kind of a net metric or the thought process to think about your basis, but more holistically are you seeing any trends around maybe the invoices youre customers tablets, maybe might speak to help with their own business.
It's funny.
I see it every single day at noon.
I get a little automated reports of Pops onto my phone every single day at noon I can see how many transactions occurred in the last 24 hours for what dollar amount.
And so I can literally see like one fourth of July came along everything.
No doubt it quieted down.
You can see every little tiny pebble on the road. It's unbelievable overall the trend is strongly up.
For us.
Our payment tool is being adopted by more and more businesses.
The number of transacting per week per month is rising week over week month over month pretty quickly.
And we're continuing to see that adoption in that growth and so I don't have a perfect.
Parameter on the market, because we keep adding more merchants and keep adding more transaction. So I'm not looking at it but I have to say I can see things like that.
Then.
Like the fourth of July that whole beginning of July with was just Super soft people took off before the fourth I took after the fourth you just see it in the numbers, where everything just softened up coming into it states off through it and then you could see it come back in.
And the payment volume in payment transaction I think I would just.
<unk>.
A barometer on the.
People just taken some time off that was all but.
All in all I'd say is it is rock and managed just continues to pick up steam.
Okay, Great. That's all I have thanks for taking my questions. Thanks, Scott.
And as a reminder, that is star one if you would like to ask a question. Our next question will come from Daniel Moore with CJS Securities.
Please go ahead.
Thank you good morning, Joe Good morning, Paul Thanks for taking my questions.
Maybe sticking with the SaaS theme, if you could just update us on your vertical <unk> efforts.
More generally.
Generally and within that accelerated.
Net new customer growth that we're seeing.
Any verticals standing out where you're.
Perhaps having a little bit more success.
Well, our vertical <unk> program continues.
We continue to work around.
Drive home health.
Health drive legal.
There are.
Product managers around those verticals in <unk>.
And as we find out you were one of them we serve slot you into that whole kind of funnel process.
Two in the experience the same thing and when you when you bought drive early on and we find out what your vertical as well.
We customize around you and the term the terms and the.
The tools and the elements that you need and so it's a gradual process I have to say we have a lot of engineering priorities. That's not the only one that we're working on but it is continuing to get.
More and more attuned to those verticals and we're continuing to have a lot of success with it I can't say that we've seen any big change in.
In which verticals are leading we tend to do very well and service businesses.
Obviously everything around home services everything around personal services.
The chiropractor Doctor dentist, just everything around psychotherapists, just everything around personal services.
Lot around car services and things like that so which is not to say, we don't have anything other than services, but that definitely is our strongest area and that.
Part of why we feel good about resiliency.
And the potentially challenging market, because we really are not into op shell or luxury items. This is my tooth hurts kind of go get it fixed.
But I haven't really seen a lot of change in who is flowing in.
I have to say.
The video acquisition that we made we made.
In hopes of penetrating that base and bringing those customers over and that's going really really well. So we're delighted with that that would be I guess, one trend that we've seen but we did say for the year that we would if you remember last year you guys were asking Steve a lot of your growth is coming through from <unk> expansion. It would be better if you had a balanced approach.
<unk>.
I think this quarter, we were exactly 11% 11.
Double digital both so.
Maybe we hit the sweet spot on the balance beam now.
Very good and maybe just one more for me.
Yeah.
In relation to the updated and upgraded EBITDA guide, maybe just talk about free cash flow expectations for the remainder of the year as they sort of increased in line with projected EBITDA.
Working capital puts and takes et cetera.
I wanted to bring Paul and let him make some comments Paul.
Yes. Thank you.
Yes, we're pretty happy with the trend in free cash flow. So.
Yes, so thats moving along pretty nicely along with the guidance.
Okay.
And we will take our next question from Zach Cummins with B Riley.
Please go ahead.
Yes. Thanks, good morning, Congrats Joe and Paul on another strong quarter here, Joe since you mentioned it.
I mean can you give us any sort of update on the <unk> acquisition. It seems like it's off to a great start here. So just what you've seen thus far and what sort of opportunity is still available to you on the SaaS side.
Yes, It has gone really really well I want to caution that it wasn't a huge company or a huge acquisition.
But.
Our hope was to integrate it quickly and.
We have done that I say that.
Past tense.
Because.
Almost all of the integration is actually done.
There are some things that are just rolling out now, but we figured them all out and we're just executing in terms of the SaaS opportunity we've been pleasantly surprised.
And a couple of areas I'll start with the people we've picked up a lot of excellent people.
Think Paul mentioned in the prepared remarks that we picked up some great engineers that were just a really nice surprise to us we picked up people at all different kinds of functions that we've added to our team.
Which we're excited about but I think the most important is we picked up a large group of business advisers that.
Came to us from the deal that brought over their relationships that brought over there are customers that are delighted with.
How good the thrive product offerings are.
Right now I'm, referring to on the marketing services side and Theyre having.
Really good success at bringing those customers into thrive software, it's kind of a whole new.
A wing of the zoo.
Right.
We're hunting and it's going really well and it's still early days, there's a lot more to go.
The visual transaction happened at the end of January .
It took us a few weeks to get things organized and going.
They were they were selling by the beginning of May.
So we're really pretty early on and biting into that.
Video customer base, but it's going well and I expect.
Customers coming out of that cohort not just for a year, but beyond a year just as customers are still coming out of the original old decks media footprint I.
I think that that'll be coming out of the visual footprint for a long time to come so that'll be a source of strong growth for us for a while.
Understood and.
Anil question for me can you just talk more about your international strategy. It seems like everything with census has gone pretty well and now since you've hired a new president to lead those efforts.
Could we be looking at in terms of entering new markets.
So.
Thrive, Australia has gone really well.
The marketing services side of that business has outperformed.
All of our plans and all of our expectations. So it's delivering the cash the EBITDA all the stuff that we wanted to it's been stable as a rock and culturally it's a bit of a love and we really really like these guys and they seem to like US too it's gone really well. So we're happy with that on the SaaS side in Australia.
We've laid down a really great Foundation, we were really careful with how we started and we've got incredible client engagement incredible NPS scores very strong brand awareness of the thrive brand as we've rebranded from sensus.
<unk>.
<unk>.
Our recent employee survey that we did said that our employees are.
Super excited about about the future of the company and its chances of being successful in their career within it. So all of that is really good and then we're seeing strong strong.
SaaS uptake in growth when.
If we look at kind of quarter over quarter over quarter, it's accelerating beautifully there. So I think thrive Australia will be a source of additional.
Drive subscribers and additional growth for us for a long time to come and that should be feathered in and layering into your kind of your growth plans and growth models.
Earlier this year, we entered Canada, we entered Canada initially just online only.
With a small kind of online only sales process and.
We've had a steady flow of sales coming in from Canada, and Marie Carone, Our leader our President for International who is Canadian by background by the way.
Is very well connected in Canada and is working on a number of initiatives that we'll be announcing in the future.
That will amp up and ramp up the pace at which we build out in Canada.
So we're really really pleased with that and again I feel like that as we go into 'twenty, three you'll see Canada, each quarter contribute more and more and more to our overall growth and we do have plans for other geography other country entries I'm not ready to announce that right now, but you can.
When you're thinking about it or modeling or kind of doing your Lego work on how our future is going to go I think you can assume that youre going to have additional countries layering in.
And they will start at zero or very small and then they will start to ramp up and that's part of the sort of geometric pattern of how we see.
Building and sustaining growth Youll remember, we sort of gave at our Investor day.
We feel like there is a.
$1 billion SaaS business here.
And eventually a $4 billion SaaS business, and we're not going to get all of that out of the U S. We feel like these other markets. While most of them are behind the U S. In terms of SaaS adoption are coming along and there is an advantage to that first mover advantage getting in early getting established.
Right now if you do a poll of small businesses about what software is available to them drive now pops up in the top five of consideration of possible choices in Australia because of the marketing work that we've done there to set the table. So.
You can look at what we've done in Australia, there might be a little bit of a <unk>.
Analogy there for what we may be able to do in some other markets. So international will be.
When you think about international just figure that that's going to be growing.
Really briskly.
As Murray begins to execute.
Okay.
Understood. That's helpful well, thanks for taking my questions and best of luck in the coming quarter. Thank.
Thank you.
And our last question will come from Patrick Schultz from Baird.
Please go ahead, yes.
Hey, Thanks, and thanks for taking my question. So you touch on the macro environment, a little bit, but can you talk a little more about your efforts to push that net dollar retention closer to a 100% over time and what are the main drivers behind <unk>.
And how could these metrics be impacted in a macro slowdown.
Sure. That's a great question. Thank you very much for that.
Yes, I mean look let's be honest.
Our net dollar retention has been bouncing around a little bit it actually goes back a little bit.
And during this quarter.
It's not some big change of direction.
Our core.
Our core churn, which we measure our what we call our <unk>.
Season churn has been stable now for five quarters really we're getting down it's like a golf score were down around par.
When youre dealing with very small businesses, it's going to be tough to get much lower than kind of the one 7% churn season churn that we're running at.
And yes, you guys have asked me this before and I've said.
Could we get down another 10th of a point or two maybe but that would be flawless at that point. So that core season churn number has been very stable four five maybe even six quarters, just chugging along in that area were down down around par.
We did put a tremendous amount of emphasis on new subscriber acquisitions to try to drive in the double digits, which as I've said earlier, we were at 11% and we also put a lot of energy in the video integration.
And we crushed those and really over delivered on those so.
Very very happy with how the team has done on that.
One of the byproducts is there's a little bit of a bubble and that endear number. So you ask the question how do I see that getting to a 100% I'm really comfortable that we're going to be able to do that.
We mentioned at the Investor Day this.
Strategy, we call our centers strategy and Thats essentially building out more capabilities more functionality.
For our customers. So that we can grow with them as they are prepared to adopt more and more SaaS tools is there.
Prepared to put their payroll into the cloud and they're ready to use more sophisticated marketing tools and we're able to offer them cloud choices to do these things.
And we've announced and mentioned that we will have marketing center being sold by the wholesales for US before the end of this year and that will be a contributor to <unk> growth contributor to net dollar retention as we go into 'twenty three and we have other centers plant and beneath just centers, which are great big role.
Out of things.
We also have some smaller add ons to customers simple things like buying more seat licenses or.
Yeah.
There are some other.
Functionality I guess, we Havent announced some of these things so I'm just I'm pausing, because I guess I can't talk about them, but.
There are a couple of other very simple utilities that.
Are coming along that customers are going to be able to use.
That will help them with their day to day business that there'll be some small add ons and it'll be small for the customer, but meaningful across 50000 plus customers as they adopt it so.
Our roadmap is really all about driving net dollar retention.
100%.
And.
Alright, just a little over 4000 of customer.
I think youll see that gradually rise to five and then in 6000 over time, but I don't think thats a huge burden for really established.
Local business.
So.
That's kind of how we're thinking about it.
Great. Thanks, so much for taking my question and congrats on a great quarter.
You very much.
And that will conclude today's question and answer session I would now like to turn the call back over to Joe Walsh for closing remarks.
Thanks, Savannah I appreciate that.
So thank you everybody for your attention today and listening and we're really really proud of our results this quarter and more importantly, we're super excited about looking ahead to 2023 and the momentum that we have as a business I mentioned during the questions here that we've got a number of new vectors of growth.
That are just starting out that are going to be gaining traction and really building going into next year that gives us a lot of confidence of being able to sustain good solid growth through next year without a lot of crazy spending.
No.
We follow what's going on there is a desire.
For our path to profitability.
We've had some what we consider fairly minor investments in EBITDA loss that we had been running on our SaaS business you can see that we're actually narrowing that this year.
And as we look ahead to next year, we don't see a lot of brand New adventures and brand new investments, So I think that.
We're going to be able to harvest the investments that we've made in that path to profitability it should be clear and evident with us. So we think we can run a very stable stable business and we have tapped into the SMB trends I mean, the trend in software it really a small businesses moving to the cloud we think.
That's a.
Very big deal.
And we're sitting right in the center of it so.
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One of the questions I think that a lot of our sort of software peer companies faces do they need to raise capital and those of you are familiar with our story know that we're throwing off a ton of cash we don't need to raise capital. We have no plans to raise capital. We can go forever just the way we are chugging along on our own.
Self generation of cash so.
We think that I guess every dog has this day right there.
There is a moment for everybody, having a 400000 customer base with customers on average more than 10 years with you that like you that you have a strong relationship we have NPS to prove it.
Got a seasoned.
Business adviser force, that's got relationships with those people and they are adopting the cloud in a steady way nobody's going to put that genie back in the bottle people aren't going to go back to paper.
The pace at which that revolution happens might speed up or slow down what's going to keep coming.
So we think that there is a.
A really substantial opportunity for us as a company, we think that we're in pole position to tap into this enormous global.
Total addressable market.
We already have a fully scaled.
Based on this quarter 200 plus million dollar.
Fully scaled SaaS business.
Already been cash flow positive, we are making small investments now but.
It's a already a profit making machine so.
We think this is a very low risk place to invest in.
We think that there is an enormous upside so thank you very much for following US. We appreciate it and look forward to talking to you in the future. Thanks.
And that will conclude today's conference. Thank you for your participation and you may now disconnect.
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