Q1 2025 Thryv Holdings Inc Earnings Call

At 35 earnings 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'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.

Joe Walsh: Thank you.

Operator: With that operator, we can we can turn for questions. Thank you.

Speaker Change: If you would like to recharge. Your question Press Star one again. Thank you I would now like to turn the call over to Mr. Economy around US. Please go ahead.

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Yeah.

Speaker Change: Good morning, and thank you for joining us for thrives first quarter 2025 earnings Conference call with me today are Joe Walsh, Chairman and Chief Executive Officer, Brian Freeman, President and Paul Rouse Chief Financial Officer.

Operator: If you are called upon to ask your question and you are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: During this call we will make forward looking statements that are subject to various risks and uncertainties.

Speaker Change: Actual results may differ materially from these statements and discussion of these risks and uncertainties is included in our earnings release and SEC filings.

Arjun Bhatia: Your first question comes from the line of Arjun Bhatia. With William Blair, please go ahead. Perfect. Thank you guys and congrats on a nice strong start to the year here. Joe, you know, one of the things that stuck out to me this quarter was the net retention rate that you called out at 103%. And it sounds like that was a record high. It seems like the priority on cross-sell and expansion is working already. But can you maybe just elaborate a little bit on that? What are customers buying in addition to their core Thrive SaaS implementations?

Speaker Change: Today's presentation will also include non-GAAP financial measures, which should be considered in addition to but not as a substitute for our GAAP results. Reconciliations of these measures can be found in our earnings release.

Speaker Change: As a reminder, on this call SaaS revenue reflects the combined performance of thrive and keep.

Joe Welch: We will only specified keeps performance when discussing its revenue contribution for the quarter and fiscal year with that I'll turn the call over to Joe Welch Chairman and CEO.

Speaker Change: Thank you Cameron and good morning, everyone.

Speaker Change: <unk> started 2025 on really good footing, just continuing the momentum that we had in 2024 and for the first quarter, we delivered both the top and bottom line guidance speed. So we're really proud of that our execution has been excellent.

Arjun Bhatia: Which new products are you seeing traction for? And then for either your grant, I'd be curious to hear just in terms of how Salesforce readiness is playing out to be able to kind of sell these newer products that you've launched relatively recently.

Speaker Change: Our team are working really hard to develop additional products and additional services in the marketplace is responding well to that so pretty happy with what's happening with thrive as we continued to develop.

Joe Walsh: Thanks for the question, Arjun. We have been investing the last couple of years, not just in developing new software centers to build out the platform, but also in our actual go-to-market motion. We've been doing a lot of work on go-to-market, and we're able to give the sales reps in their Salesforce automation tools, and each morning, go call on this customer and have this conversation, and here's why. And I think you're seeing a lot of that come through, and you might say, well, haven't you always had that? We haven't. We've worked really hard on that the last couple of years, and we're seeing the fruits of that.

Speaker Change: Software platform when.

Speaker Change: When we look at the actual results for the first quarter, we had 50% year over year revenue growth and when you normalize for the <unk> acquisition, we had 24%.

Speaker Change: Growth, so that EBITDA margin expanded to 10%.

Speaker Change: SaaS revenue is now 61% of revenue for this quarter. So if you think about that.

Speaker Change: Our transforming this business from marketing services to SaaS and I know there are a lot of people waiting for us to become completely SaaS.

Speaker Change: We're just about there I mean, we are majority of SaaS revenue now that's a big big milestone for us as a business.

Joe Walsh: In terms of what those plays are, we are running very specific plays against the base, and with a good effect. The simplest one is adding additional centers. They'll have a business center, we'll have a marketing center, or they'll have a marketing center, we'll have a business center, or we'll put a reporting center in, adding additional full-on centers. But even shy of that, we have been offering development. Some simple add-ons to help boost the amount of new businesses that they need, basically boost their presence in the market and help drive additional leads, additional new customers. I mentioned on the, on the call that that's been really strong lately.

Speaker Change: The other thing that happened is our <unk> increased three.

Speaker Change: $335 a month with the <unk> that we deliver.

Speaker Change: Up nicely from the last period, I think youre going to see that trend throughout this year as we continue to go back to existing customers and add more more products on <unk>.

Speaker Change: Our season net revenue retention reflected that motion to 103%.

Speaker Change: It's a pretty solid outcome there for net revenue retention, we are pleased with that.

Speaker Change: Subscriber growth was 37%, bringing the thrive totaled 96000 and if you include the keep subscribers and there is one.

Speaker Change: 11000 overall.

Speaker Change: One of the key drivers in acquiring keep well.

Joe Walsh: And I, and I think, and, you know, I know we're supposed to be crying in our beer about the economy and supposed to be terrible, but our guys are chugging along doing just fine. We aren't, we aren't really experiencing a whole bunch of macro issues. We're, we're chugging along and. I can't really point to anything that's happening there, which sort of, I guess, you know, great thing for all that we're reading about, but we're just not seeing. I mentioned on the prepared remarks, I mean, our, our customers break everything that or fix everything that breaks in your life.

Speaker Change: The partner channel they have an excellent partner channel has been added for a long time.

Speaker Change: A few weeks ago I was able to attend our partner Con conference out in Arizona, which was a combined thrive and keep partner conference with more than 100 of our partners in attendance some from as far away as Europe and Australia.

Speaker Change: It was great to have a chance to talk to them about what they're thinking and what they're thinking is they want to sell the full fry product catalog.

Speaker Change: The idea that they can.

Speaker Change: The top of the funnel.

Joe Walsh: When that stuff breaks, you're still going to fix it, even if the economy is a little bit softer. So they're, they're definitely, you know, interested in trying to make sure their order books are full.

Speaker Change: <unk> thrive is really good at helping you build your list, helping you meet new customers, helping you be found.

Speaker Change: To the very strong key product in the middle and bottom of the funnel, where you nurture your list.

Joe Walsh: So, I hope that helps. Yep, yeah, very helpful. And then the second question, you mentioned an increased traffic expense from from I think customers seeing, or you guys seeing elevated demand for marketing center, is that largely just kind of your, your, your inbound marketing costs, your, your lead gen costs? What's, what's exactly going into the incremental traffic expense you're seeing here? One of the tools that is an add-on to Marketing Center is a platform that instruments all your marketing, allows you to make data-driven decisions. You can manage your social in there. There's a whole bunch of good things you can do.

Speaker Change: Convert sales and then follow up post sale for more business in the future kind of gives them a more complete marketing funnel and they feel like it's going to help them grow their.

Speaker Change: Their business.

Speaker Change: And they are excited about that so gives me a lot of hope for what 26 and 27 are going to look like in terms of us beginning to really build out that partner channel that they have the full.

Speaker Change: Catalog of driving key products to sell.

Grant: So I'll tell you more about the progress of our business I'm going to bring grant payment on our President Grant.

Grant: Thanks, Joe and thank you all for joining us in 2025, we're entering a new chapter of growth for our SaaS business. Many of you track, our progress cross selling and upgrading marketing services customers to SaaS products as you probably know most of the legacy customers. We converted to SaaS were upgraded to our marketing center product, which as you probably remember helps clients.

Joe Walsh: We've added on top of it now some add-on tools where we'll help you optimize your position of your website to help you show a better and more organic result. We've also added some things that have traffic in them. We're actually driving some search into your business as well. That product has continued to sell well. It's actually in the mix of things, outstripped actually what we thought it would do. We had planned for a little bit of tech in there. There's just a little bit more. It's not a giant thing. I just wanted to bring it up as one of the moving parts.

Grant: Booster online presence gives them lead attribution tools. So they know what marketing and advertising is working and also helps them manage their social media posting across multiple platforms. In addition to other features that are tied to growth.

Grant: Our sales strategy will remain focused on growing our SaaS subscriber base through upgrades cross sales and new sales of course are most efficient path forward is deepening relationships within our existing software based and expanding their spend as of the end of the first quarter 17, 2% of our SaaS subscribers use multiple paid products are nice.

Grant: Increase from where we were.

Grant: As we've analyzed retention trends across our customer base. One thing has become glaringly clear expansion within our existing clients is one of our most compelling opportunities when a customer adopts a second paid product their churn rate dropped significantly recently, we see it dropping as much as in half compared to just those with one product.

Arjun Bhatia: It's sort of contrary to at least what I read sometimes in the media that small businesses are going to just roll over and stop. We're finding that they're marketing, they're out there doing their thing, looking ahead, trying to make sure their order books are full. Okay, yep, that's super helpful. Perfect.

Not only does this increase revenue per account, but it dramatically extends customer lifetime, making expansion of far more efficient growth lever than relying solely on net new customer acquisition.

Joe Walsh: Thank you guys. Thank you, Arjun.

Scott Berg: Your next question comes from the line of Scott Berg, please go ahead. Hi, everyone. Pardon me. Nice, nice quarter here, everyone. Thanks for taking my questions.

Grant: At the start of the year, we Reoriented, our sales organization around growing monthly recurring revenue rather than prioritizing new account acquisition.

Grant: Each business adviser now manages a large book of business with improved cadence is better automation as an enablement tool to help them efficiently increased average spend for each account. The result is a more consultative value led approach that is meaningfully improved per rep productivity in recent quarters. This shift was deliberate and the results are really.

Scott Berg: I guess a couple questions, Joe, let's start with the KEEP Partner Conference. It was your first one. My guess is that you've been to, obviously, with the acquisition just less than six months ago now, but, or almost exactly six months ago now, but what were your takeaways from that conference? What were you hearing from partners of that platform, you know, with regards to, you know, how they think this, you know, combination can work going forward? Well, first of all, thank you for attending. Appreciate that. The The partners. have been. I'm thrilled with Keap's Automations and the way they're flexible, the way they're able to put them in.

Grant: Encouraging we did things like overhauling the compensation to reward MSR or an expansion, we've encouraged reps to focus less narrowly on selling individual centers and more broadly on selling the full scope of SaaS solutions that may benefit a given customer and we encourage reps to focus on existing customers, where wallet share expansion as more.

Grant: Efficient.

Grant: This strategy is working our productivity is improving and importantly, we spend less to acquire higher quality growth from within our existing SaaS client base customers are responding positively to our growth oriented tools like marketing center growth packages and other customer acquisition add ons that we offer.

Joe Walsh: And it's a key part of the service they provide to various customers. And I'll illustrate this. A lot of our partners are people that will specialize maybe in a particular vertical. So maybe they help wellness people, or maybe they help dentists, or maybe they help gyms stay packed, stay full, and they help them with all their marketing and so on. And what they do is they use the Keap tools to build automation for their marketing, in some cases, not even for their marketing, for other things like hiring automation for service fulfillment. But one of the things that Keap never did and doesn't do is it doesn't help you build your list.

Grant: These products serve as a natural springboard for introducing CRM and workflow automation later on in the journey.

Grant: We're also seeing encouraging results moving up market with modestly growing average customer size and higher acd's through more consultative sales approaches and multicenter deals.

Grant: This is particularly important as we go deeper into specific verticals and higher performing SMB segments.

Grant: Maybe what's most gratifying is that our clients are happy and they are bringing their friends to learn about our platform. So we have a large referral flow as such a large portion of our new clients come via these referrals, which continues to be a strong motion for our business advisors on.

Joe Walsh: If you have a list, it nurtures the list, and it helps you work your way through. So they're super excited about. thrive the ability to help them build that. meet new people, add new people to the top of the funnel. So if you picture a marketing funnel where you meet people and they start the process, Thryv is really good up at the top of the funnel and Keep is really good in the middle and bottom of the funnel, the nurture and convert and then follow up, follow up, follow up stuff. So for them, it's just the completion of that funnel.

Grant: On the product side, we built five robust centers and added more product to bring to market with the introduction of keep automation. This phase focuses on deepening adoption rather than just expanding subscribers.

Grant: Finally keep provides strategic advantages through its automation engine is partner network and R&D capabilities. We're just beginning to explore cross selling opportunities between our customer basis and at the end of the day when we help clients do more they stay longer creating compounding growth.

Joe Walsh: And they're super excited because they feel like for a very high percentage of their customers, they're going to be able to add some of the Thryv offerings. So they're very anxious to get the full Thryv catalog at their disposal. And like any acquisition, we didn't instantly have all the back office plumbing done so that they could do that. So they're sort of, how quick can we have it? We want to go right now. And happily, the teams have worked really hard and that's beginning to come together. So I think they're going to be pretty happy about that.

Paul Routes: With that I'd like to introduce Mr. Paul routes.

Paul routes: Thanks, Brent, let's dive into the numbers.

Paul Routes: SaaS reported revenue was $111 1 million in the first quarter and above guidance, representing an increase of 50% year over year and 7%.

Paul routes: <unk> sequentially.

Paul routes: Contributed $18 9 million in the first quarter.

Paul routes: Excluding key drive SaaS business grew 24% year over year.

Joe Walsh: The other thing that they wanted is that, you know, toward the tail end of the prior administration at Keep, they were in kind of a little bit of a harvest mode. They weren't really growing. They weren't really investing a lot in nourishing their partner channel or even innovating their product as much as they had in previous years. And so a lot of the partners have got lists of apps of things that they would like from Keep that they are waiting for. And immediately when we got the keys, we leaned into trying to speed some of that up.

Paul routes: <unk> adjusted gross margin increased 490 basis points year over year, reaching 73%.

Paul routes: The first quarter total SaaS adjusted EBITDA increased to $10 8 million exceeding our guidance range and resulting in adjusted EBITA margin of 10%.

Paul routes: This performance underscores the progress, we're making in scaling our profitable and durable software business.

Paul routes: We noted last quarter first quarter included a temporary headwind of approximately $2 million to $3 million tied to share cost allocations with fewer print publications scheduled in the beginning of the year a greater portion of operating expenses were attributed to the SaaS segment under occur.

Joe Walsh: And we were able at the partner conference to unveil some things that are now done. and then to make some near-term promises for additional improvements, API hooks, other things that they're, you know, some technical things they're looking for that will make their experience with KEEP better. And so I think there's pretty high morale. I mentioned they traveled in from all over the world, so we needed to give them something or they would have flown back to Italy or wherever they came from, pretty disappointed. So we feel like it was a real success. And the sense of community that they have built, a lot of these people have been coming, working with KEEP and coming to these conferences for, you know, more than a decade.

Paul routes: Allocation methodology.

Paul routes: Which follows revenue activity.

Paul routes: This dynamic will begin to reverse in the second quarter as revenue recognition Rams shifting these costs back to the marketing services segment.

Paul routes: This will also begin to smooth out for the remainder of the year and beyond as we extend the majority of our print publications grew to 24 month cycle.

Joe Walsh: So there's a real, there's a lot of people that are personal friends, you know, a lot of the, and the other thing we did that they did, it was really cool, was a networking session where they had people sit at a big table and kind of move every three minutes and just meet all these different people that they hadn't known before, if you kind of scooted along, almost like speed dating. And I think they really appreciate the power networking that happened there as well.

Paul routes: That change improves visibility and leads to a more consistent cost attribution across the business.

Paul routes: We remain focused on driving profitable growth in SaaS balanced.

Paul routes: Balancing top line expansion with disciplined cost management.

Paul routes: And we expect continued adjusted EBITA margin improvements as we move through the year.

Scott Berg: So anyway, the conference was a big success and we're planning a customer event in the fall that will be many, many times what PartnerCon was, which was just for parts. Understood, helpful. And thank you for that, Joe.

Paul routes: We concluded the first quarter with 111000, SaaS subscribers, including 50000 keep subscribers.

Paul routes: This reflects a substantial 59% increase.

Scott Berg: I guess that last question for me is your, your SAS customer additions were down 3000 in the quarter, looks like it's kind of related to the core Thryve customer base there is, I guess, maybe can you add a little color in terms of why that's down quarter over quarter? I know you're focusing a little bit more on expansion activities and top of the funnel and bringing customers in. But I would have thought maybe even with with that focus, we'd see something that was closer to the flat quarter over quarter. Yeah, good question. Look, the The holiday season is always tough for us.

Paul routes: Our subscriber base year over year as grant mentioned in his remarks, a key element of our go forward strategy.

Paul routes: Involves focused effort on our existing customer base to drive increased value and revenue with.

Paul routes: With a significant portion of our current subscribers utilizing only one paid product.

Paul routes: We are strategically positioned to expand their engagement and adoption of our <unk>.

Paul routes: Broader offerings.

This initiative to drive greater spend within our existing customer base is not only a pathway to our crew expansion throughout 2025, but also represents a more efficient and significant contributor.

Joe Walsh: You know, in Q4, you know, we're usually doing fine in, in the beginning of Q4. But as we get to, you know, that Thanksgiving to New Year's, you know, even a little past New Year's run here in the US, it's harder to get small businesses to sit down and have a conversation with us. You know, they're, they're, they're doing their own lives. They're doing they're taking vacations, they're doing their own thing. Trying to finish up, you know, home services jobs for customers under a lot of stress that's ready for the holidays. And then our own employees, a lot of times have personal plans to.

Paul routes: To our Bottomline profitability.

Paul routes: In the first quarter. Our overall SaaS are approved reached $335 drive contributed <unk> <unk> of $320 showcasing positive quarter over quarter growth keeps specific are approved was a robust $428.

Paul routes: Similar to last quarter.

Paul routes: Looking ahead, we have good line of sight for continued <unk> expansion throughout the year driven by the inherent strength of our software platform with its multiple adaptable products as well as our recently updated compensation plan designed to incentivize and drive increased and R&R.

Joe Walsh: You know, take extended trips because it is a soft period. So it seems to feed on itself. That's here when you get over to Australia and New Zealand, it's next level because it's the middle of summer for them. And it's their big mid year break and, you know, they pretty much pull the rip cord. A week or so before the Christmas holiday break. And they show back up in late January. I think they're gone for a while. They do a lot of international travel. They live life to its fullest, which is great. We love them.

Paul routes: We reached our highest reported seasoned net revenue retention this quarter of 103% emphasizing the differentiated value, we create and the sustained return our clients' experience with <unk>.

Paul routes: Discussed previously that our long term goal is to maintain retention near 100%.

Joe Walsh: But it just makes that period a little softer always. And if you go back and you look at prior years, we've been soft there. Or, you know, relative to our business isn't seasonal other than just the ability to sit down and talk to people and get it done. So I think that's always always a part of it. And then the 2nd thing is, we really put an enormous amount of emphasis on running these plays into our base, like, on purpose. And so we've kind of eaten up some of the available sales time that they might have spent.

Paul routes: Which we expect to continue to achieve additionally, clients with two or more drive SaaS products grew to 16000 at the end of the quarter compared to 12000 in the prior year.

Paul routes: Further highlighting the expansion we are seeing with existing clients.

Paul routes: Thrive centers per client also grew to 14% at the end of the quarter compared to 8% in the prior year further highlighting the traction we're seeing with existing clients.

Joe Walsh: You know, out prospecting, you know, with going into the base now, the thing that's an energizer bunny that always keeps going for our business advisors is referral. So, we, we're always getting more and more referrals and.

Paul routes: Moving over to marketing services first quarter revenue was $72 million and above guidance.

Paul routes: First quarter marketing services, adjusted EBITDA was $10 1 million, resulting in an adjusted EBITA margin of 14% and just above guidance.

Scott Berg: that that's that's they serve those referrals whenever they come in but even that motion flows a little bit during the holidays it's just not top of mind always to add new software hey it's christmas i'm going to add new software so anyway that that was that was sort of the story i wouldn't get overly alarmed about it keep in mind how huge the gains were coming into that and we were anxious to get to those you know uh new customers and talk to them about more stuff.

Paul routes: As anticipated this quarterly performance is subject to the dynamics of the print schedule.

Paul routes: And we project a return to normalized levels starting in the second quarter.

Paul routes: First quarter marketing services billings were $81 4 million, reflecting a 42% year over year decline.

Paul routes: This trend more closely aligns with our strategic direction for marketing services as we continue to convert many of our legacy marketing services clients to our SaaS offerings.

Scott Berg: Understood. Thanks for taking my question.

Jason Kreyer: Your next question comes from the line of Jason Kreyer with Craig Hollow. Please go ahead. Great, thank you guys.

Paul routes: The pace of this transition impacts the rate of decline in marketing services billings.

Grant Freeman: Maybe I'll start with Grant. You know, you'd highlighted some some changes in the sales motion. Just curious, you know, if we go into a more challenging macro environment, is there a different product suite that you think resonates better with your customers that you're that you would try to lean into? Well, you know, it's funny. There have been times in recent memory, when the economy was so hot, that our guys were booked solid. So when you would go to them and talk to them about putting in additional marketing instrumentation or better ways to run their social media or just different things that would be marketing oriented and help them grow.

Paul routes: As previously disclosed we.

Paul routes: We are exiting the marketing services business by 2028 with cash flows from the business extending into 2030.

Paul routes: This will provide the company with ample liquidity to meet its obligations during the transition to a fully SaaS focused model.

Paul routes: First quarter consolidated adjusted gross margin was 68% first quarter consolidated adjusted EBITDA was $20 9 million, representing an adjusted EBITDA margin of 12%.

Paul routes: Finally, our net debt position was $298 million at the end of the first quarter.

Paul routes: Our leverage ratio was two two times net debt to EBITDA in line with our expectations net debt increased primarily due to planned upfront vendor payments the timing of corporate bonus payouts and the extension of our print directory assets 24 months.

Grant Freeman: They weren't necessarily at the very top of their list. And if There's a threat that things are going to slow down, or let's say things even do slow down a little bit. They're much more anxious to prioritize meeting with you about that stuff. And and focusing on that stuff so that they can get work. So I mentioned, I, I almost feel like. The current environment is sort of holy lock because it's not bad at all. It's more than it's supposed to get that in the future. And and I think it's that supposed to get that in the future things that's causing them to really pay attention.

Paul routes: This lengthening of a directory cycle as a component of our previously communicated strategic plan to exit the marketing services business by 2028 as we've previously discussed the aforementioned factors are expected to result in peak leverage during the second quarter on a trailing 12.

Grant Freeman: So. Yeah, I guess the answer to your question is answered directly. Is, you know, all of the grow your business type stuff that we offer is particularly in demand if things slow down. Um, you know, and and then when things are hot as a firecracker, you know, we maybe are leaning a little bit more into the run your business stuff, you know, getting into the. You know, I sometimes use the expression, the broccoli stuff you. Should be doing, uh, you know, CRM type stuff. Working on your schedule or your estimates invoices, billing, working on your ratings and reviews.

Paul routes: The month basis.

Paul routes: Withstanding our anticipated strong EBITDA generation in that period, we expect a substantial deleveraging in the back half of the year as fees impacts normalize.

Paul routes: Turning to our outlook for 2025 for the second quarter, we expect SaaS revenue in the range of $113 million to $115 million for the full year, we expect SaaS revenue to be in the range of 465 million to 471 billion.

Jason Kreyer: All that stuff and at the moment, the marketing and sales kind of stuff is really involved. Appreciate that. Um, just wanted to see if you can unpack it. You gave a lot of good commentary on what you're seeing right now. You haven't seen incremental pressure, things like that.

Paul routes: The second quarter, we expect.

Paul routes: Adjusted EBITDA in the range of $18 5 million to $19 five nine for the full year, we expect SaaS adjusted EBITDA in the range of 67 million to $71 million, which implies SaaS adjusted EBITA margin of 15%.

Paul routes: The adjustment is related to projected traffic cost.

Joe Walsh: But can you maybe pair that with how you're thinking about the guide your decision to maybe pull back on expectations for SAS revenue this year? Is it just cautionary for what may come or is any more thoughts there? Yes, you just answered your own question. That's exactly what it is. We just, we feel like, you know, a more cautious stance is appropriate given, you know, the really just the tremendous uncertainty that's in the market. You know, our, I mentioned before, our guys fix the broken things in the world, but they have to get, you know, Sub-Zero refrigerators from somewhere.

Paul routes: For the full year, we are confirming our marketing services adjusted EBITDA guidance range to be 77, 5 million to $78 5 million.

Joe: Now back to Joe.

Joe Welch: Thank you Paul.

Speaker Change: We've got a good start to the year as you've heard.

Joe Welch: <unk> core metrics healthy customer spending we're doing well.

Joe Welch: But we do read the same headlines that you do that.

Joe Welch: Often times are ahead, and it's going to be tough and so on.

Joe Welch: I wanted to spend a minute speaking to that.

Joe Welch: Our customers do break fix stuff. They are the guys that show up when you have a broken window or your roofs leaking or your.

Joe Walsh: They have to get, you know, fancy window packages. They have to get stuff that, you know, potentially gets affected by tariff. So there's lots of concerns about that. And then there's, you know, just overall. economic noise and sort of scary media headlines. So I think it was just prudent in all honesty. It's not linked to anything specific that we're seeing. We delivered, I think, nicely on our first quarter and we have great line of sight into the next quarter. But, you know, the whole rest of the year is a long time and with all the prognostications, you've read some of them about, you know, recessions and other things.

Joe Welch: Car the check engine light comes on are you break at <unk> and you've got to go to the dentist.

Joe Welch: They solve all those non discretionary problems and they are therefore very resilient. We don't have any luxury stuff. We don't have any discretionary stuff in our customer base no little blue boxes, no fine dining.

Joe Welch: Our customers are very resilient.

Joe Welch: And so I've been working with small businesses for a long time I would expect they will be very resilient going going through a recession. If one is in the offering for us.

Joe Welch: <unk>.

Joe Welch: What I'm finding is that we're in kind of a goldilocks moment, meaning sometimes when things are too good and expectations are too high.

Joe Walsh: It just seemed prudent to back off a smidge. We didn't move it very much all in all honesty, but we just thought it seemed to make sense to take a little bit more of a cautious stance.

Joe Welch: Small businesses can be.

Joe Welch: A little slow to invest in marketing tools and doing stuff right now they are concerned about making sure. Their order book is full making sure. They know where the next jobs are coming from and accordingly.

Jason Kreyer: That makes sense to me. Thank you. Appreciate it. Thank you.

Zach Cummins: Your next question comes from the line of Zach Cummins with BP Rail Securities. Please go ahead. Thanks. Good morning, and appreciate you taking my questions. Joe, I wanted to ask about just retention of many of these marketing services customers that are moving over to the SAS customer base. I mean, can you talk about I know you had a huge influx of those customers coming over in 2024. So you just talk about the initial conversations and kind of the success you have of maintaining those customers for kind of a year plus after bringing them over last year.

Our buying marketing center and buying a lot of its growth package add ons.

Joe Welch: So much so that we're seeing additional traffic expense because of that and so I consider that a really good thing.

Joe Welch: Little bit of additional cost to that but it's a real good thing to see that small businesses want to meet with us they want to buy marketing center and they want to buy island. So.

Joe Welch: I think thats a real positive since.

Joe Welch: Since my final comment here on the guidance that we've taken for the year, we've taken a very conservative view in light of all the headlines and all the things that we're hearing and seeing out there.

Joe Welch: We want to make sure that we can continue to fully deliver on our promises.

Joe Walsh: Yes, I think that's a wonderful question. Same, we haven't been able to tease out any different. and the churn rate. I mean, it's the same, you know, The same as as the other customers that we're selling that we've sold before, you know, it's the same, you know, we, we are dealing with very small businesses. So. You know, when you're dealing with VSCs, you're going to have a little higher turn. And yeah, I think we've talked about that, we've established that. But we're not seeing any difference in terms with the folks that, you know, we've selected and brought over from marketing services.

Joe Welch: We don't actually see any big problems at the moment, maybe it's out of an abundance of caution, but we feel very confident.

Joe Welch: And the results we've had to date and very confident in the products that we have that they are appropriate for this time so.

Speaker Change: With that operator, we can we can tariff for questions.

Speaker Change: Thank you. Please begin the question and answer session.

Speaker Change: Have dialed in and you'll like to ask a question. Please press star one on your telephone keypad. Please go ahead and join the queue.

Speaker Change: Like can we try a question simply press star one.

Speaker Change: If I call it a fantastic question and.

Speaker Change: Speaker, please pickup your handset.

Speaker Change: Q4 is not.

Joe Walsh: Furthermore, what we are seeing is good, strong add-on and spending habits when you look out six months, a year, you look at that second year, we're having success adding additional things. And as Grant said in the prepared remarks, when customers buy you know, more product more than one product, they end up having a few different things. Their term profile meaningfully comes down in the most recent data that we were looking at. It's like it's cut in half kind of So we're really optimistic that, you know, we've moved them from a legacy old platform that we want to shut down, that we're trying to, you know, Turnoff that we've been maintaining for years that probably came through an acquisition.

Speaker Change: Asking your question first.

Speaker Change: First question comes from the line of.

Speaker Change: Please go ahead.

Okay.

Speaker Change: Perfect.

Speaker Change: Thank you guys and congrats on a nice strong start to the year here.

Joe: Joe what I'm, saying.

Joe: Stuck out to me this quarter was the retention rate that you called out at 110% it sounds like that was right.

Speaker Change: Goodbye seems like the priority on cross sell and expansion.

Joe: It is working already.

Joe: Can you maybe just elaborate a little bit on that what are customers buying in addition to their core broad.

Speaker Change: <unk> SaaS implementations, which new products are you seeing traction for <unk> and then further your great I'd be curious to hear Tom Powell.

Joe Walsh: and had limited capabilities and were giving them a real improvement where they're getting a lot more functionality, a lot more capability, a lot more value for money in the change. And they are responding by beginning to use some of it and access some of that and being receptive to have conversations about adding more products.

Tom Powell: Salesforce readiness is playing out to be able to kind of sell these these newer products.

Speaker Change: But you've launched relatively recently.

Speaker Change: Thanks for the question.

Speaker Change: We have been investing in the lab.

Joe Walsh: So I think that's the big success story that, you know, of the last, you know, recent period is the success we've had with those. Now, you know, obviously on the map, if you're adding big numbers like that, you know, you are, you know, you are going to have a little bit more churn. You're poking the bear, right? You're taking plenty and you're moving them over and you're moving big numbers over. So we have to outrun that a little bit. And, you know, you saw a little of that in the last quarter where between seasonality and just that, you know, the big quantity, you know, we were sequentially down a little bit.

Speaker Change: Couple of years, not just in developing new software tenants to build out the platform.

Speaker Change: But also in our actual go to market motion.

Speaker Change: We've been doing a lot of work on go to market.

Speaker Change: We're able to.

Speaker Change: Given the sales reps and in their sales force automation tools each morning.

Speaker Change: Go call on this customer.

Speaker Change: This conversation here is why.

Speaker Change: I think youre seeing a lot of that come through and you might say well haven't always had that we havent lately worked really hard on that for the last couple of years.

Joe Walsh: And I've said very clearly that we don't expect this year to be anywhere near like last year in terms of a big surge and sub. It's going to come more from expansion of spend this year. Our long-term guide on this is that our roughly $4,000 per customer will expand to $8,000 over the next couple of years now that the platform is more close to being built out. And a lot of our energies and attentions are going to go into expanding that spend. And quite frankly, as investors, you should love that because that's a more efficient motion than out-prospecting.

Speaker Change: We're seeing the fruits of that.

Speaker Change: In terms of what those plays are we are running very specific plays again.

Speaker Change: The base.

Speaker Change: With a good effect so the simplest one is adding additional centers.

They'll have business center will add market et cetera, or they will have marketing central lab business.

Speaker Change: Well.

Speaker Change: Sure.

Speaker Change: Adding additional follow on sensors, but even shy of that.

Speaker Change: We have been offered developing.

Joe Walsh: You know, you get your return on your time is better. Your return on the investment of energy is better when you're selling to existing customers rather than having a prospect. So I hope that answers the question.

Speaker Change: Simple add on.

Speaker Change: To help you.

Speaker Change: Both the amount of new businesses that basically boost our presence in the market.

Speaker Change: And help drive additional these additional new customers I mentioned all of that.

Zach Cummins: Absolutely, really, really helpful on that front. And my one follow up question, I know your core Thryve SaaS customer base and just all of those customers tend to be pretty resilient, despite whatever the macro environment is. I'm just curious if there's any meaningful contrast with the Keap customer base. And really, as we think about the updated guidance, are there any changes and assumptions for the core SaaS business versus maybe what Keap is going to be doing? contributing this year? The Keap acquisition is going really well. I mentioned before, we had some promises around synergies in the combining of the businesses and we've crystallized those and feel really good about delivering on the profitability and EBITDA there coming out of the Keap business.

Speaker Change: On the call.

Speaker Change: <unk>.

Speaker Change: Really strong lately and I think.

Speaker Change: I know.

Speaker Change: We're supposed to be crying in our near about the economy, let's be terrible, but our guys are chugging along doing spot, we arent really experiencing a whole bunch of macro issues. We are chugging along.

Speaker Change: <unk>.

Speaker Change: I can't really.

Speaker Change: Point to anything that's happening there.

Speaker Change: Pricing for all of them are reading about but we're just not seeing it.

Speaker Change: I mentioned on the prepared remarks, I mean, our our customers break everything that theyre fixed everything that breaks in your life.

Speaker Change: Greg So you still got effective even if the economy is a little softer so.

Speaker Change: Theyre definitely.

Interested in trying to make sure their order books are full.

Joe Walsh: And operationally, all the things that matter when you're running a business, like, you know, people, you know, computers or email sign on and their phone systems and their benefits. And, you know, we've gotten all that stuff, you know, sorted out in a great big hurry. So we're really proud of that. And I think we're also proud of the cultural merger and integration that we've had. We spent time talking with those folks about the mission. They were on the mission that we were on previously and how that those missions together are stronger and better. And we've had very little turnover, you know, people leaving or something like that.

Speaker Change: Hope that helps.

Speaker Change: Yes, yes very helpful.

Speaker Change: Men.

Speaker Change: The second question.

Speaker Change: You mentioned increased traffic.

Speaker Change: Thanks.

Speaker Change: Pardon me I think customer seeing.

Speaker Change: You guys seeing elevated demand for marketing side or is that largely just.

Speaker Change: One of your.

Speaker Change: Inbound marketing costs your lead Gen costs.

Speaker Change: What's exactly going into the incremental traffic expense youre seeing here.

Joe Walsh: Not not excited about the future. And so it's really set us up very, very well.

Speaker Change: One of the tools.

Speaker Change: As an add on marketing.

Joe Walsh: So we're excited about the Keap acquisition. I spoke at length before about the family partner, you know, approach and all that stuff looking deeper than into your question into the customer base. Keeps customers tend to be more online businesses. They tend to be more coaches, consultants, guides, people that do do things on the on the web. Or as I mentioned, some agencies that then help terrestrial businesses with their business. And, you know, it's a, it's a, it's definitely not a lot of overlap, there are only 50 customer overlap between the entire two customer base. Precious little overlap.

Speaker Change: Barclays Center.

Speaker Change: Our platform and instruments all your marketing allows me to make data driven decisions.

Speaker Change: You can manage their social and then there's a whole bunch of good things you can do we've added on top of it now.

Speaker Change: Add on tools, where it will help you.

Speaker Change: Optimizer position.

Speaker Change: Of your of your website to help you show a better and more organic result, and we've also added some things that have traffic and bad so we're actually draw.

Speaker Change: Driving search in the NDS business as well and.

Speaker Change: That product has continued to sell well, it's actually sort of in.

Speaker Change: And the mix of things outstripped actually what we thought it would do so we had planned or a little bit of attack in there. It was just a little bit more so it's not a giant thing I just wanted to bring it up.

Joe Walsh: But so far their customer basis has proven to be very strong and resilient too. And they also are not involved in too much discretionary stuff, you know, fine dining or whatever. I did meet at the partner conference a few travel related partners, you know, that conduct specialty trips for certain demographic groups or certain niches. You know, so, you know, maybe there's a little bit of that, but I think it's a handful of people. And none of them indicated any problems. They seem to be, they were actually, one of them was a speaker up on stage talking about the growth that she's experienced year over year and is planning for this year based on all the automation at the tower of them and what she's learned from the partner network about how to market her travel offerings and so on.

Speaker Change: One of the moving parts.

Speaker Change: It's sort of contracts or at least what I read some type of immediate.

Speaker Change: All businesses are going to roll.

Speaker Change: We're all over it stopped.

Speaker Change: Their marketing they are out there doing their thing.

Speaker Change: Looking ahead.

Speaker Change: Try to make sure that order books are full.

Speaker Change: Okay. That's perfect. Thank you guys.

Speaker Change: Thanks Arjun.

Speaker Change: Your next question comes from the line of Scott Berg.

Speaker Change: Madam. Please go ahead.

Scott Berg: Hi, everyone pardon me makes a nice quarter here everyone. Thanks for taking my questions.

Joe Welch: I guess a couple of questions Joe let's start with the key partner conference. It was your first one.

Speaker Change: My guess is that you've been too.

Zach Cummins: So, no, I'm at least not yet looking for anything. And again, they have 15,000 customers, so it is a smaller part of our base. I don't have as much experience with this group yet. I'll certainly keep you posted. coming quarters, but So far, I don't see any.

Scott Berg: With the acquisition just.

Speaker Change: Less than six months ago now but.

I almost exactly six months ago now, but what were your takeaways from the conference what are you hearing from partners.

Speaker Change: That platform with regards to how they think.

Speaker Change: Yes combination should work going forward.

Zach Cummins: You know, there's not a whole bunch of high-end restaurants in it or something like that.

Speaker Change: Well first of all thank you for attending I appreciate that.

Speaker Change: The.

Daniel Moore: Got it. Well, Your next question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

Speaker Change: The partner.

Speaker Change: I have been.

Speaker Change: Thrilled with Keith automation and the way, they're flexible the way that we're able to put them in and it's a key.

Will: Hi, this is Will on for Dan. Um, I think you said that your long term net revenue retention goal is staying at 100%. As you shift your sales focus, you know, recurring revenue, increasing average spend per account, would you evaluate, you know, raising that goal? That's a really good question. You know, I think there's going to be ebbs and flows to where our focus is. We had a massive ad last year of new subs as we selected marketing services people to come over, you know, to have these upgraded experiences I spoke about earlier. And, you know, the job now is to sort of bed them down, go see them, talk to them about how to use it, what they can do, and all that's going on.

Speaker Change: Part of the service they provide.

Speaker Change: Various customer Danielle illustrate there's a lot of our partners or people that.

Speaker Change: Specialized baby in a particular vertical that maybe they help wellness people or maybe they help desk. So maybe that helps.

Speaker Change: Jim State tax staple and they help them with all of their marketing thought and what they do is they use the key tools to build automation.

Speaker Change: So they're marketing in some cases, not even for their marketing or other things like hiring automation for fulfillment.

Speaker Change: Fulfillment.

Speaker Change: One of the things that keep never did and doesn't do is it doesn't help you build your lift if you have a list that nurtures the lift and that helps you work your way through so there are super excited about.

Joe Walsh: We invest a lot in taking care of these customers and making sure they have a great experience after they've migrated over. That's just a real point of focus. But there could come a fiscal period in the future where the focus is more on bringing new people on or whatever. That's just the focus, you know, during kind of 2025. So, I think what in our investor day guidance and in our investor materials, we've sort of talked about, think of us as around 100% net revenue retention business, because we wanted to underscore that we're selling to BFC.

Speaker Change: Thrives ability to help them build that list meet.

Speaker Change: New people and new people to the top of the funnel. So if you picture a marketing funnel, where you meet people and they start the process drive is really good up at the top of funnel and keep us really good in the middle and bottom of the nurture and convert and then follow up follow up follow up stuff so for them.

Speaker Change: Completion of that funnel.

Speaker Change: And they're super excited because they feel like.

Speaker Change: A very high percentage of their customers are going to be able to add.

Speaker Change: Some of the thrive offerings. So they are very anxious.

Joe Walsh: You know, these aren't enterprises. Some of them do actually go out of business. Some of them do actually fail. And there's some uncontrollable loss that's always going to be in our numbers. That's offset by the fact that there's such a gigantic supply of them. You know, there are, and in the markets that we're trying to serve, like 8 million businesses. So we've got, you know, we can very easily or fairly short sales cycles in place. One that leads, and the BFC segment is just now migrating to the cloud. It's still pretty new for BFC. So I think it's a wonderful market.

Speaker Change: To get.

Speaker Change: Yes, the full product catalog at their disposal and like any acquisition, we didn't instantly have all the <unk>.

Speaker Change: Back office plumbing done they can do that so there are sort of going up.

Speaker Change: <unk> and how quick can we have everybody here right now and.

Speaker Change: Happily the team.

Speaker Change: Worked really hard and that's beginning to come together, so I think theyre going to be pretty happy about that the other thing that they wanted is it.

Speaker Change: Towards the towards the tail end of the prior administration and Keith.

Speaker Change: They were in.

Joe Walsh: I think in a lot of ways, a better market than enterprise. And I know you're probably, you know, putting your eyebrows up on that, but it's just so big. And it's just so early. There's just so much growth there. It's so exciting. But it comes with, you know, a little bit higher churn and a little lower net revenue retention. So, yeah. It's not a crazy question at all. And, you know, we probably will have some pretty high stepping on net revenue retention, you know, over the next, you know, couple fiscal periods, just because we're putting such focus in the base.

Speaker Change: Kind of a little bit of a harvest mode. They weren't really growing they weren't really investing a lot in.

Speaker Change: Nursing their partner channel are or even innovating our product as much as they had in previous years.

Speaker Change: So a lot of the partners have got listed.

Speaker Change: The things that they would like from Keith.

Speaker Change: They are waiting for.

Speaker Change: And.

Speaker Change: Immediately when we got the key we leaned in to trying to feed some of that up and we were able at the partner conference.

Speaker Change: Unveil some things that are now done.

Paul Rouse: But that focus could also swing, you know, much more to expansion in the future at some point. So I think I'll stick with the guide that we're going to be there thereabouts around 100. And, you know, if we keep blowing it away every period, you can ask that question again, in a couple of quarters, and we'll have the champagne conversation about Yeah, maybe we should raise it, you know, but right right now, I think I'll hold where we are just out of conservative.

Speaker Change: And then to make some near term promises for additional improvements API hooks other things that some.

Speaker Change: Some technical things Theyre looking for.

Speaker Change: That will make their experience with keep better and.

Speaker Change: No I think Thats pretty high morale I mentioned they traveled in from all over the world. So.

Speaker Change: We needed to give them something that they would have they would have flown back to Italy or wherever they came from pretty disappointed so.

Speaker Change: <unk>.

Speaker Change: We feel like it was a real success.

Speaker Change: The sense of community that they have built.

Paul Rouse: Thanks for that.

Paul Rouse: And then just one more, you know, now that you've accelerated the migration to a fully SaaS based business, what is your target leverage range over the next two to three years? Paul, why don't you take that one? Yeah, right. Right now, we're in a leverage, we are, we plan to continue to pay down debt. So I think you would expect leverage to improve consistently as we go out in time. That's our plan at the moment. Thank you.

Speaker Change: People have been coming.

Speaker Change: Working with keep in coming to these conferences.

Speaker Change: More than a decade, so there's a real there's lots of people that are personal friends. There are a lot of it and the other thing we did when they did that was really coal was a networking session, where they where they had people say that a big table and kind of move every three minutes and meet all of these different people that they had before as you kind of exclude it looked like.

Speaker Change: David.

Speaker Change: I think they really appreciate the power networking that happened there as well so anyway. The conference was a big success.

Speaker Change: We're planning a customer event in the fall that will be many many times what partner Con was which was just for partners.

Matt Watson: And your last question comes from the line of Matt Watson with RBC. Please go ahead. Yeah, great. Thanks for taking my questions. And congrats on the strong start to the year.

Speaker Change: Understood helpful and thank you for that Joe I guess last question for me is your.

Matt Watson: You know, Joe, as you see more success for offselling, can you talk a little bit about how you're working to kind of ensure that continued success post implementation and make sure customers are seeing kind of the compound, compounding value of the combined platform? Yes, thanks for the question. That's a good question. That's probably one of our number one areas of investment, because if you look at the profile of our base, you'll see that it's been getting bigger and there's a lot to take care of. So we really prioritize their experience. And we go at it with a CX, a customer experience team that uses a variety of tactics.

Speaker Change: Your SaaS customer additions were down 3000 in the quarter. It looks like it's kind of related to the core.

Speaker Change: <unk> customer base there.

Speaker Change: I guess, maybe can you add a little color in terms of why that's down quarter over quarter.

Speaker Change: I know, you're focusing a little bit more on expansion activities.

Speaker Change: Top of funnel and bringing customers in but I would have thought maybe even with with that focus we would see something that was closer to flat quarter over quarter.

Speaker Change: Yes, good question.

Speaker Change: The.

Speaker Change: The holiday season is always thought for us.

Speaker Change: In Q4.

Doing fine.

Speaker Change: At the beginning of Q4, but as we get to that.

Speaker Change: That Thanksgiving to new year low.

Joe Walsh: I mean, they literally are calling them, they're on Zooms with them. They have What we call TechTouch, meaning they're sending them in-app messages, they're sending them emails, so that we're, we're reaching out to them and it's in the hundreds of thousands of, you know, reach out kind of things just to make sure and then we'll schedule time with them. We'll jump on Zoom with them, share a screen with them, go through it. So that's happening. and then our business advisor. are, you know, visiting them in person and spending time with them trying to do the same thing.

Speaker Change: A little past new year's run here in the U S. It's harder.

Speaker Change: Get small businesses to sit down and have a conversation with us they're doing their own lives.

Patients are doing their own thing.

Speaker Change: Try and finished up on the <unk>.

Speaker Change: Services jobs for a customer under a lot of stress is ready for the holiday.

Speaker Change: And then our own employees.

Speaker Change: A lot of times have personal plans that you have.

Speaker Change: Take extended trips because it is a soft period. So it tends to feed on itself. That's here when you get over to Australia, and New Zealand next level, because it's the middle of the summer for them and it's their big mid year break and.

Joe Walsh: So small businesses are busy. And honestly, their lives are hectic.

Speaker Change: They pretty much pull the rip cord.

Joe Walsh: And they, you know, Unknown Attendee, Zachary Cummins, Cameron Lessard, Grant Freeman, Thryv Holdings, Unknown Upgraded to other stuff have to have has been similar and they're spending more when you look back six months a year later so that's really important and then once they you do engage with us they do dig in and and hopefully they add something to it then we see the churn profile really improve so that's that's a point of focus for the company has been in the recent past and will be this year and a place that I think we're good at getting better at it, we're becoming more and more innovative in how we do it.

Speaker Change: A week or so before the Christmas holiday break and they show back up in late January.

Speaker Change: A while.

Speaker Change: They do a lot of international travel.

Speaker Change: They live life to it which is great we love them, but.

Speaker Change: It just makes that period, a little softer already.

Speaker Change: If you go back and you look at prior year simply didn't stop there.

Speaker Change: Relative to our business is seasonal other than just the ability to sit down and talk to people and get it done. So I think that's always always a part of it and then the second thing is we really put an enormous amount of emphasis on running these plays into our base icon purpose and so we've kind of eaten up some of the available sales team.

Speaker Change: It might've been.

Speaker Change: Our prospecting.

Speaker Change: What's going into the base now the thing that's an energizer Bunny that always keeps filling for our business advisors is referral.

Joe Walsh: I think we're doing a really good job. That's a really helpful color.

Speaker Change: So we are always getting more and more referrals.

Joe Walsh: And then we've mentioned a couple of times on the call the Goldilocks moment for the customers. But I guess just maybe acknowledging like how your customers see the same news articles we do, like does this change your go-to-motion, go-to-market motion at all? Maybe like emphasizing the ROI of the platform more or is there any way you can kind of incorporate that into actually like a positive or a tailwind for the company? Yes, it's a wonderful question, because there's different flavors for different days. And I sometimes liken the growth aspect of our software to piping hot French fries and the kind of run-your-business aspects of our software to steamed broccoli.

Speaker Change: They serve those referrals whenever they come in but even that motion slows a little bit during the holidays, just dot top VI.

Speaker Change: At New software Hey, It's Christmas time at Abbvie software. So anyway that was that was started before I wouldn't get overly alarmed about keep in mind how to use the gains were coming into that and we were anxious to get to the.

Speaker Change: New customers.

Speaker Change: And talk to them about more stock.

Speaker Change: Yeah.

Speaker Change: Understood. Thanks for taking my questions.

Speaker Change: Thanks Scott.

Speaker Change: Question comes from the line of Keith <unk> with Sig.

Speaker Change: Caller. Please go ahead.

Speaker Change: Great. Thank you guys, maybe I'll start with Brent you had highlighted some changes in the sales motion just curious if we go into a more challenging macro environment is there a different product suite that you think resonates better with your customers.

Joe Walsh: We all know that steamed broccoli is really good for you, and you should eat it, and you'll feel healthier and better and so on. But it's sometimes not as fun and exciting. There have been periods where we were out there slinging the broccoli, really doing a lot of work on how your scheduler runs, in your operating your business, you know, and CRM in the back. At the moment, the flavor that is really hunting is talking to people about growth. And we're seeing a lot of uptake growth, and that's where the Goldilocks comment came from. I remember The government kind of took a helicopter and threw money at people right after COVID.

Speaker Change: That you would try to lean into.

Speaker Change: Okay.

Speaker Change: Well.

Speaker Change: <unk>.

Speaker Change: It's funny.

Speaker Change: And there have been times.

Speaker Change: In recent memory when the economy was so hot that our guys were booked solid so when you would go to them and talk to them about.

Putting in additional marketing instrumentation or better ways to run their social media or different things, but the marketing oriented and help them grow they werent necessarily at the very top of their list.

Joe Walsh: Every one of our guys that built decks was booked out for a year for decks. And if they built swimming pools, they were booked out in swimming pools for a whole year and so on and so forth. Everything was just, they were so full, it was hard to talk about anything marketing. And so the thing that you did is you talked about operating. But right now, there's more trepidation about that order book into the future, and so they're really anxious to take a meeting, keep the meeting, and really focus on you on, on, you know, how can I make sure I've got the work going forward?

Speaker Change: And.

Speaker Change: If it.

There is a threat to the things theyre going to slow down or let's say things, even this slow down a little bit they're much more exit to prioritize leading with you about that stuff.

Speaker Change: And focusing on that stuff so that they can get work. So I mentioned I almost feel like the current environment.

Speaker Change: <unk> all day long because its not bad at all it's more than it's supposed to get better future.

Speaker Change: And I think that both to get that in the future. Thanks.

Speaker Change: It's causing them to really pay attention so.

Joe Walsh: And so that's, that's my comment around Goldilocks. They're not broke where they can't, they can't write a check and buy it. They're still doing all right, but, but they're, they read these headlines, and it causes them to be more. focused on their marketing. Does that resonate with you?

Speaker Change: Yes, I guess the answer to your question you just answered directly.

Speaker Change: All of the.

Speaker Change: Grow your business type stuff that we offer.

Speaker Change: It's particularly in demand if things slow down.

Speaker Change: And then when things are hot as a firecracker.

Speaker Change: Navy are leaning a little bit more into the run your business getting into the.

Operator: That concludes our question and answer session. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Sometimes use the expression the broccoli.

It should be doing.

Speaker Change: No.

Speaker Change: RM type stuff working on your schedule or your estimates invoicing billing working on your ratings and reviews all of that stuff.

Speaker Change: At the moment, the marketing of sales kind of stuff.

Speaker Change: Both.

Speaker Change: Appreciate that.

Speaker Change: Just wanted to see if you can unpack that you gave a lot of good commentary on what Youre seeing right now you haven't seen incremental pressure if things like that but can you maybe pair that with how youre thinking about the guide your decision to maybe pull back on expectations for SaaS revenue this year.

Speaker Change: Is it just cautionary for what may come or just any more thoughts there.

Speaker Change: Yes.

Speaker Change: <unk> question, that's exactly what it is we just we feel like.

Speaker Change: A more cautious stance.

Speaker Change: Is appropriate given the.

Speaker Change: That really just the tremendous uncertainty that's in the market.

Speaker Change: Our.

Speaker Change: I mentioned before our guys Vik the broken things in the world, but they have to get.

Speaker Change: Sub zero refrigerators from from somewhere or they have to get.

Speaker Change: Fancy window packages, they have to get up that.

Speaker Change: It gets affected by tariffs so there's lots of concerns about that.

Speaker Change: And then there.

Speaker Change: Just overall.

Speaker Change: Economic noise.

Speaker Change: So scary media headlines. So I think it was just prudent in all honesty.

Speaker Change: Not linked to anything specific that we're seeing we delivered I think nicely our first quarter and we have great line of sight into the next quarter, but the whole rest of the year is a long time and with all the prognostications, both you've read some of them about.

Speaker Change: Sessions and other things.

Speaker Change: Imprudent to backup match, we didn't move it very much.

Speaker Change: In all honesty.

Speaker Change: Got it makes sense.

Speaker Change: Take a little bit more of a cautious stance.

Speaker Change: That makes sense to me. Thank you I appreciate it.

Thank you.

Speaker Change: Your next question comes from the line of Zach Cummins.

Speaker Change: Secondly, please go ahead.

Speaker Change: Okay.

Speaker Change: Thanks, Good morning, and I appreciate you taking my questions.

Speaker Change: Yes.

Scott Berg: Joe I wanted to ask about just retention.

Speaker Change: Many of these marketing services customers that are moving over to the SaaS customer base. I mean can you talk about I know you had a huge influx of those customers coming over in 2024. So can you just talk about the initial conversations and kind of the success you have of maintaining those customers for kind of a year plus after bringing them over to <unk>.

Scott Berg: Sure.

Scott Berg: Yes, Thanks, that's a wonderful question.

Scott Berg: The same.

Scott Berg: We haven't been able to tease out any different.

Scott Berg: And the churn rate the same.

Scott Berg: Yes.

Scott Berg: The same as the other customers that we're selling we sold before.

Scott Berg: It's the same.

Scott Berg: No.

Scott Berg: We are dealing with very small businesses.

Scott Berg: So when.

Scott Berg: And when you're dealing with DSP as youre going to have a higher churn and yes, I think we've talked about that would establish that.

Scott Berg: But we're not seeing any difference in churn with the folks that we've selected and brought over from marketing services and.

Scott Berg: Furthermore, while we are seeing good strong.

Scott Berg: Add on and spending habits. When you look out six months a year and you look at that second year.

Scott Berg: We're having success, adding additional thing and.

Scott Berg: As grant said in the prepared remarks when customers buy.

Scott Berg: More product more than one product they end up having a few different things they're term profile meaningfully come down in the most recent data that we were looking at.

Scott Berg: It's cut in half.

Scott Berg: So we're really optimistic that.

Scott Berg: We've moved that from a legacy old platform that we want to shut down.

Scott Berg: That we're trying to.

Scott Berg: Turn off.

<unk> been maintaining for years that probably came through an acquisition somewhere.

Scott Berg: And had limited capability.

Scott Berg: We're giving them a real improvement where theyre getting a lot more functionality.

Scott Berg: Lot more value for money.

Scott Berg: In the change and.

Scott Berg: They are responding by beginning to use some of the access all of that and being receptive to have conversations about adding more products. So I think that the big success story.

Scott Berg: The lap.

Scott Berg: Recent period.

Scott Berg: Is the success, we've had with those now.

Scott Berg: Obviously on the math, if you're adding big numbers like that you are you are going to have a little bit more churn you've spoken to bear right you've taken.

Scott Berg: What about when Youre moving big numbers over so we have to out run that a little bit.

Scott Berg: You saw a little of that in the last quarter or between seasonality and just that.

Scott Berg: Yes.

Scott Berg: The big quantity.

Speaker Change: We were sequentially download it and I've said very clearly that we don't expect this year to be anywhere near like last year in terms of the big surge in subs, what's going to come more from expansion of spend this year or long term.

Scott Berg: Died on that or roughly.

Speaker Change: <unk> $4000 per customer.

Speaker Change: We will expand to 8000 over the next couple of years now that the platform is more close to being built out and a lot of our energies and attention they're going to go into expanding that spend and quite frankly as investors you should love that because that's a more efficient motion than our prospects.

Speaker Change: You get your return on your time is better and the return on the investment of energy better when youre selling to existing customers rather than having to prospects. So I hope that answers the question.

Speaker Change: Yeah, absolutely really really helpful on that front.

Speaker Change: Follow up question.

Speaker Change: I know your courts thrive SaaS customer base and just all of those customers tend to be pretty resilient.

Speaker Change: Despite whatever the macro environment. It is I was just curious if there is any meaningful contrast, with the key customer base and and really as we think about the updated guidance are there any changes in assumptions for our core SaaS business versus maybe what Keith is going to be contributing this year.

Speaker Change: Yes, the Cape acquisition is going really well.

Speaker Change: We I mentioned before we had some promises around synergies and the combining of the businesses.

Speaker Change: We crystallize those.

Speaker Change: Feel really good about that.

Speaker Change: Delivering on the profitability.

Speaker Change: Profitability and EBITDA, they're coming out of the key business and operationally.

Speaker Change: All of those things that matter when you're running the business like you know people.

Speaker Change: Peter E mail sign on an account systems and their benefits, we've gotten all of that stuff.

Speaker Change: Got it out in a great big hurt that we're really proud of that and I think.

Speaker Change: We're also proud of the cultural merger and integration that we've had we spent time talking with those folks about the mission. They were on the mission that we were on previously and how that those missions together are stronger and better and <unk>.

Speaker Change: <unk> had very little turnover people, leaving or something like that not that excited about the future.

Speaker Change: So its really set us up very very well. So we're excited about the <unk> acquisition.

Speaker Change: I spoke at length before about the channel partner.

Speaker Change: Approach and all that stuff looking deeper then enter your question into the customer base.

Speaker Change: Keep the customers tend to be more online businesses they tend to be more.

Speaker Change: Coaches consultant.

Speaker Change: Guide people that.

Speaker Change: Yes.

Speaker Change: Do do things on the on the web or as I mentioned.

Speaker Change: Agencies that that help terrestrial businesses with therapy.

Speaker Change: And it's a desk without a lot of overlap there are only 50 customer overlap between the entire customer base into this process.

Speaker Change: Precious little overlap.

Speaker Change: But so far their customer base has proven to be very strong and resilient to end.

Speaker Change: They also are not involved in.

Speaker Change: Discretionary stuff fine dining or whatever.

Speaker Change: Did meet at the partner conference a few travel related.

Speaker Change: Partners.

That conduct specialty trips for a certain demographic groups or certain niches.

Speaker Change: So maybe there's a little bit of that but I think it's a handful of people.

Speaker Change: And none of them indicated any problem they seem to be exited.

Speaker Change: One of them was a speaker up on stage talking about.

Speaker Change: The growth that <unk> experienced year over year and is planning for this year based on all of the automation and the power of them and what <unk> learned from the partner network.

Speaker Change: <unk>.

Speaker Change: Out of market for her travel offerings and so on so no at.

Speaker Change: At least not yet looking for anything and again it may have 15000 customers. So it is a smaller part of our base I don't have as much experience with this group yet further.

Speaker Change: Certainly keep you posted in the coming quarters, but.

Speaker Change: So far I don't see any any.

Speaker Change: Theres not a whole bunch of high end restaurants in it or something like that.

Speaker Change: Got it.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Danielle Mccoy.

Speaker Change: <unk> Securities. Please go ahead.

Will: Hi, This is will on for Dan.

Speaker Change: I think you said that your long term net revenue retention goes staying at 100%.

Will: As you shift your sales focus is recurring revenue.

Will: Increase in average spend per account, which you evaluate raising nickel.

Will: That's a really good question.

Will: I think theres going to be ebbs and flows to where our focus is.

Will: We had a massive AD last year.

Will: New new subs as we.

Will: Selected marketing services people to come over.

Will: Have these upgraded experience that I spoke about it earlier and.

Will: The job now sort of bad debt down because CMS also about how to use it what they can do and all of that going on.

Will: Best of luck in.

Will: Taking care of these customers, making sure they have a great experience.

Will: After they've migrated over and.

Will: That's just a real point of focus but there could come.

Will: Our fiscal period in the future, where the focus is more on bringing new people on or whatever.

Will: That's.

Will: The focus during kind of 25, so I think what in our Investor day guidance and in our Investor materials, we've sort of talked about think of us as around 100%.

Will: Net revenue retention.

Will: Because we wanted to underscore that we are selling the BSP. These are enterprise some of them do actually go out of business do actually fail.

Will: <unk>.

Will: There are some uncontrollable loss, that's always going to be in our numbers, that's offset by the fact that there is such a gigantic supplier.

Will: Sure.

And the markets that we're trying to sort of like 8 million visits that we've got.

Will: We can very easily on a fairly short sales cycles at play.

Will: One that lead.

Will: The DSD segment are just now migrating to the cloud, it's still pretty new for them.

Will: So I think it is a wonderful market and a lot of way the better market that enterprise I know you probably.

Will: Putting your eyebrows up on that but it's just so big and it's just so early so much growth there so exciting but it comes with.

Will: A little bit higher churn and a little lower net revenue retention so.

Will: It is not a crazy question at all and we probably will have some pretty high stepping on net revenue retention over the next.

Will: Couple of fiscal periods, just because we're putting such focus in the base, but that took it could also swing.

Will: Much more to expansion in the future at some point, so I think I'll stick with the guide that we're going to be there or thereabouts around 100 and.

Will: If we keep blowing it away every period you could ask that question again in a couple of quarters and will have the.

Will: Sam pain conversation about yes, maybe we should raise it.

Will: Right now I think I'll hold where we are just out of conservatism.

Will: Conservatism.

Speaker Change: Thanks for that and then just one more now that you've accelerated the migration to a fully SaaS based business.

Will: What is your target leverage range over the next two to three years.

Paul Routes: Paul why don't you take that one.

Paul Routes: Yeah right right now.

Speaker Change: And our leverage.

Speaker Change: We plan to continue to pay down debt.

Speaker Change: So I think you would expect leverage to improve consistently you guys would go out in time, that's our plan at the moment.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: And your last question comes from the line of Matt Watson.

Speaker Change: With RBC. Please go ahead.

Matt Watson: Yeah, great. Thanks for taking my questions and congrats on the strong start to the year.

Speaker Change: Joe as you've seen more success cross selling can you just talk a little bit about how you're working to kind of ensure that continued success post implementation and make sure customers are seeing kind of the compound.

Matt Watson: Rounding value of the combined platform.

Speaker Change: Yes, thanks for the question Thats a good question.

Speaker Change: That that's probably our one of our <unk>.

Speaker Change: Number one areas of investment because if you look at the profile of our base you'll see that.

Ben: It's Ben.

Ben: Getting bigger and there is a lot to take care of it so.

Ben: We really prioritize their experience and.

Ben: We go at it with us.

Ben: CX customer experience.

Ben: <unk> that uses.

Ben: A variety of tactics.

Ben: Literally are calling them. They are on zoom is with them.

Ben: <unk>.

Ben: What we call it tech cuts, meaning they are sending them in.

Ben: Messages are sending them E mail.

Ben: We're reaching out to them and it's in the hundreds of thousands of reach out kind of things just to make sure and then we will have scheduled time with them will jump on zoom with them share the screen with them go through it so thats happening.

Ben: And then our business adviser.

Speaker Change: Visiting them in person and spending time with them trying to do the same thing. So small businesses are busy and honestly their lives are hectic and.

Speaker Change: The modest they sometimes break appointments with things like that because the truck broke down or they have an emergency on a job. So it sometimes can be a little scattered you got to really work at it but we are really working at.

Speaker Change: I think for evidence of that.

Speaker Change: I would look at the fact that the churn profile.

Speaker Change: People that have been.

Speaker Change: Upgraded other stuff.

Speaker Change: It has been similar and they're spending more when you look back six months a year later.

So that's really important and then once they.

Speaker Change: Do engage with us they do de.

Speaker Change: And hopefully they add something to it then we see the churn profile really so.

Speaker Change: That's a point of focus for the company has been in the recent past and we will be this year.

Speaker Change: Yes.

Speaker Change: I think we're good and getting better at we're becoming more and more innovative in how we do it and I think we're doing a really good job.

Speaker Change: That's really helpful color and then we've mentioned a couple of times on the call, but the goldilocks moment for the customers.

Speaker Change: But I guess, just maybe acknowledging like how your customers see it the same news articles we did like does this change your go to motion our go to market motion at all maybe like emphasizing the ROI on the platform.

Speaker Change: More or is there any any way you can kind of incorporate that in to actually like a positive or a tailwind for the company.

Speaker Change: Yes, it's a wonderful question because there is different flavors for a different day.

Speaker Change: Sometimes like in the growth.

Speaker Change: Aspect of our software to piping Hot French fries, and the kind of run your business aspects of our software theme Broccoli. We all know the theme broccoli is really good for you and if you need it.

Speaker Change: Be healthier better thought, but it sometimes not as part of the filing.

Speaker Change: There have been periods, where we were out there language broccoli are really doing a lot of work on how youre scheduler wrong.

Speaker Change: And you're operating your business.

Speaker Change: <unk> in the back.

Speaker Change: At the moment the flavor that is.

Speaker Change: Really hunting is talking to people about growth and we are seeing a bottom.

Speaker Change: A lot of uptake.

Speaker Change: That's where the goldilocks comment came from what I remember in the period.

Speaker Change: The.

Speaker Change: Yes, the government kind of took a helicopter and throw money at people right. After COVID-19.

Speaker Change: Every one of our guys that build the deck was booked out for a year for that they built they were booked out.

Speaker Change: For a whole year and so on and so forth everything was there were still all hard to talk about anything marketing and so the thing that you did as you talked about operating stuff.

Speaker Change: But right now theres more trepidation about that order book into the future.

Speaker Change: And so they are really anxious to take a meeting if the meeting and really focus on you on.

Speaker Change: How can I make sure I've got the work going forward.

Speaker Change: That's my comment around Goldilocks, theyre not growth where they can't.

Speaker Change: They can write a check and buy it.

Speaker Change: Theyre still doing alright, but there they read these headlines and it causes that.

Speaker Change: Be more.

Speaker Change: Focused on their market that resonate with you.

Speaker Change: Okay.

Speaker Change: That concludes our question and answer session, ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.