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Let's kick this puppy off. All right, I'm Andrew Boone. I cover internet here at Citizens. I'm here with Paul Rouse and Grant Freeman of Thryv. Thank you so much for being here. We appreciate the support and you guys attending the conference and participating in this chat. Let's start off big picture, right? Introduce Thryv to the audience here. For those less familiar, talk about the evolution of the business and its product offerings today.
Okay. Want me to start?
Why don't you kick us off, Paul?
Yeah. You probably don't know this, but it's a 138-year-old company. It essentially was a Yellow Page company. It was the original Yellow Pages. Where we came from, probably at one time, it was probably a $15 billion company, Verizon Yellow Pages and a like. Our company, that Joe Walsh and I, the CEO, and myself, we basically started a company called Yellow Book. We grew that on Long Island, New York, from $20 million to $2 billion. We basically made all that money from the company we ran from now. That was the transition. What they did is they put all these telcos back together. They thought, originally, they split off from the telephone companies. They loaded them up with debt and pushed them off the sea because it was so profitable, the Yellow Page business.
This funny thing called Google came along and kind of changed the equation in search. These companies started to have trouble. They put them all together. Instead of dealing with the debt issues, they just made a larger, more efficient company. We were brought in essentially to turn it around. They ran out of ideas. They were heading towards bankruptcy. They came to us, "we're out of ideas. We don't know what to do. Can you help us and turn this company around?" We studied the, we were consultants at first. We studied the business, what can we do. We go, "it's a declining Yellow Page company. Why do we want to do that?" Then we realized, "wow, there's some gold in those hills." It was 400,000 clients that were very loyal. The profit margins were very high.
What they were trying to do was digitize themselves out of business, taking 80% margin product and putting it to essentially zero EBITDA products. We came in immediately and changed the math around that equation. We cut right off the $500 million out of the cost structure. We financed the debt to get it to something that you could deal with. We decided, the idea we told the board is we have this idea how we could level the playing field for small business and its software. Mario's Pizza has the best pizza. Why are you using Domino's? Because of technology. What if we leveled that playing field and made it equal so they're competitive? That was the gem of the idea that led to the software company. We weren't software guys, but we did spend our whole life serving small business.
That germ of an idea turned right now, it's going to be close to $400 million just a software company at the end of the year with very high margins. That's the genesis of the story.
Okay. That's great. Help us understand that customer, though. Who is the typical Thryv customer today? Are you guys vertical agnostic? Is it 100-plus employee companies? Describe that to us.
Yeah. We're not heavily verticalized, although that's a realm that we're moving into. We're a very horizontal software platform. Our typical customer is probably 3 to 10 employees. Over half of our customers are service-based businesses. Think your roofers, your plumbers, sort of your dirty businesses that are a little bit sort of recession-proof and economy-proof as they're just the things that you need to get done around your house or around your business. The rest of it is really made up of professional services, lawyers, dentists, physicians, chiropractors, et cetera. That has changed a little bit with the acquisition of Keep, which I know that you'll ask some questions about later, where now we've opened up an entirely new sort of realm of things like travel agents and online businesses and coaches and consultants, et cetera.
I think that our ideal client moving forward, as we aim to move a little bit more upmarket from where we are, is probably around 10 employees. So not like a super big business, but 10 employee businesses have a few trucks on the road, more than $1 million in revenue, et cetera.
Okay. Talk to me about the centers that you guys have. You guys have various different kind of product suite offerings. Why don't you list them and briefly kind of describe what they are in terms of the overview of the product kind of going forward?
Sure. We have a freemium offering that debuted in August of 2023 known as Command Center. Think about it as centralizing all of a small business's communications. One of the things that they have is a complexity of communication using disparate apps. Customers or prospects reach out to them via Facebook Messenger or Instagram messages or multiple different emails. We aggregate all of that into one easy string that they can read and respond to, choosing any channel they want. It also offers them a Slack-like experience. That has been a freemium offering of ours and also does have tiers of paid as you add more and more staff to it. The biggest one forever that we built this business on, starting 11 years ago now, is now known as Business Center.
Think CRM, scheduling, estimates, invoicing, the ability to have a website, social media management, review generation and response, et cetera, et cetera, et cetera. Think about helping small businesses run their business more efficiently. In August of 2023, we came out with Marketing Center. This has been the thing that's really caught fire. What we learned is it's a lot easier to go into a small business and get into a conversation about growth versus getting organized. Getting organized is like freaking broccoli. They know that they have to, but it's not exciting at all. They kind of think it's not important. When you go in and talk about growth as the catalyst for a conversation, we got a lot of conversations going. That product has literally been flying off the shelves.
When we talk about Marketing Center's feature sets, it too has social media management. It has AI-generated review response. There is AI for the social as well. Probably the biggest thing that is the sizzle of it is the ability to not only help you market and brand your small business, but also lead attribution, which is something that has never really been available for the category that we serve, the market segment that we serve. You know which marketing is working and which marketing isn't working.
At a glance on a dashboard, you can tell which investment, if it's your Google PPC that's working or if it's your Yelp ads or if it's even the phone numbers on your truck or even, yes, the number in a phone book, what is actually bringing in the dollars so that you can now redirect your marketing and get a better yield. We also have Reporting Center, which gives more advanced reporting for customers that have Business Center or Marketing Center. That's a smaller sort of sub-$100 a month product as well. Now, obviously, we have the Keep automation. Think marketing automations. When a lead comes in, one of the biggest problems that small businesses have is they spill these leads all over the floor because Johnny's up on the roof roofing at that moment.
A call comes in or a form fill comes in, and they don't respond quickly. This has really been one of the beauties of adding that sort of center or feature set to our portfolio. Now we can put it on autopilot for them and help them convert a higher percentage of leads. When we do help them convert more leads into customers, we help put them in a perpetual nurture stream that just happens and brings people back to serve them two times, three times, or four times, which really gets our customers excited because that's a far more efficient way for them to grow and turn a profit. Last but not least, debuting in just a few months, we're going to have Workforce Center, which will get us into the wonderful world of payroll as well.
When you think about all the things a small business needs to operate effectively and efficiently and grow their business, that's the world that we play in. You'll find I give long-winded answers, but they're very thorough, v ery thorough.
Talked about your Marketing Center flying off the shelf, right? I think that's how you described it. Talk about this from the concept of growth, though, right? Keep is certainly a growth asset. Is that the strategy going forward? Talk about just that vision more broadly.
Yeah, sure. We're going to lean into the growth messaging. You'll see there, what a beauty. We have a best IR guy. His name's Cameron. He's back there. He says he made that. I'm sure it was AI. It totally looks like an AI image, but we're going to give him credit. Yeah, we're leaning into the growth messaging. You will see up there industry-leading marketing and sales platform. We believe that that can be our niche. There's nobody else that can help you get more exposure, get more leads, capture those leads, nurture those leads, turn more of those opportunities into customers, and keep them coming back for more while also offering scheduling, communication tools, et cetera. We're really leading into that growth concept. To answer your question, Marketing Center is at the core.
That is the foundational platform that a small business needs to enable efficient growth. All of these other things get added onto it, if that makes sense.
Perfect. Perfect. All right. Let's bring this back to financials. The team talks about a goal of kind of a 100% NRR, right? Dollars in, stay. How do you think about achieving that goal just given natural churn, right? This is really a cross-selling question or upselling.
Sure
Right? Talk to us about the various natural deterioration of an SMB user base versus the upside of kind of more selling.
They're more volatile than enterprise, obviously. I wish we could have a churn profile that mirrored that of a Salesforce, but that's just not viable when you have a 5 employee to 10 employee business. We have a massive opportunity, though, to continue to drive the NRR number and keep it in sort of that 98% to 102% range because we have, as I just mentioned, five different software centers now with another one on the way. 84% of our 114,000 client base right now, 84% only have one product because the other four, soon to be five products, are less than a year and a half old. We have a remarkable opportunity to accelerate growth and do so efficiently.
I'm not saying that net new land isn't important, but retention and expansion are going to be a big part of our story this year because it's literally right there sitting in front of us. Why wouldn't you monetize it, right? Plus, we get a lot of referrals that way anyway that lead to net new land. Does that answer the question?
Yeah, totally, t otally. All right. Let's talk a little bit about go-to-market, right? Talk to me about more of the growth of those new customers. How does that take place?
Sure. Traditionally, we built this business over the last 11 years with a direct sales force, all right? The direct sales force right now is in Australia, New Zealand, Canada, and the U.S. It is the chief driver of growth for the organization. About 700-ish local salespeople that are interwoven into the fabric of the communities that they serve, really well trusted and have fantastic relationships with the small businesses. From a growth standpoint, though, even though that team is making it grow, man, making it rain, what's awesome is through the Keep acquisition, we brought on a whole partner network, a well-established partner network of 800 partners, certified partners who pay Keep and now us for the right to sell the products. That is really exciting.
When you think about it, w e've gone from a complete direct sales motion to this year getting the Keep products in our direct sales force at Thryv's bag and then getting the Thryv product set into the bags of these 800 partners who are chomping at the bit to sell what we have because the Keep product and Marketing Center, especially, give you this sort of one unique offering that nobody else in the marketplace has, which is sort of a 360-degree sales and marketing machine that nobody else can even compete with. You go again from one vector of growth and just direct sales to leaning into that motion and adding a partner motion. Also from Keep, we did get a free trial motion, which they've used for a long time.
Not the best, but we can make it better and enhance it as we combine our two products, which will bring us into the realm of PLG. By the time we get to the end of 2025 and enter 2026, now you've got three vectors of growth, which is why we're super optimistic and excited about the opportunity in front of us. That shift from one to three, we think, is going to be massive towards our goals between now and the end of this decade.
Can you explain just how a sales force works with somebody who is paying for a license to be able to sell your product, right? Is there any, just explain those two things.
It's a great question. You mean like channel conflict?
I didn't want to say it.
Yeah, it's okay. It's healthy to talk openly, man. We're obviously very cognizant about channel conflict, right? Here's the deal, though. We had 100,000 clients. We went and we acquired Keep, and they're 15,000 customers. That's 115,000 customers. 100,000 from our side, 15,000. There were 52 that had overlap. Remember when I mentioned at the beginning of this conversation, they had a different market segment that they went after, a little bit more upmarket and not really plumbers, not home services. They went after a different market. Now we're actually gaining access to a market that we never had, as are they. We don't see much channel conflict. Instead, we're doing some beta tests to see how they can work together. Our local BAs with partners from a fulfillment standpoint, and could that aid us in retention and expansion as well?
More to come on that, but we look at it as a fabulous asset to go from one vector of growth to three pretty much overnight.
You talked briefly about just going upmarket. Talk about that. I think in the last call, you said slightly upmarket.
Yes.
Right? Clarify that comment and then just explain the expectation of does the customer base evolve over time or what does that look like in the future?
That's a great question. We do have a desire to move upmarket, right? Obviously, there's less volatility and they can spend more, right? When we say upmarket, we mean moving from a majority of our base that has like three or four employees now to 10. That's like the big business that we're going after right now. We think we can do that with the products that we have now. We tweaked our go-to-market motion and we're just directing the sales force. We're directing the partners now. We're helping people get in front of the right opportunities that have a propensity not only to buy, but to pay and to stay and to expand as well. We've done a lot of propensity modeling and lookalike modeling, and we know who we're going after. It's just guiding the resources that we have in the right direction.
The products are already more than powerful to help that. We have also aligned compensation, which is a key driver for salespeople in case anybody did not know that key driver, and we are seeing that already bear fruit this year.
All right. Let's go back in terms of more strategic and go back to the product focus, right? Talk about Thryv as a platform that can unify kind of the products to be able to really drive that cross-sell and upsell across the various centers that are coming, especially with something new like payroll.
Yeah. We have our best opportunities that we get are small businesses that have three, four, or five completely disparate single-point solutions. When we started this journey 11 years ago, you had to convince small businesses, the corner businesses in all the towns that you live in, that they even needed software. They had Post-its and they had Excel and that was software. It's cool, right? Now you do not have to convince them anymore. Now they're saying, "crap, I can't have eight logins and five and nothing talks to each other." These are amazing opportunities all around us, especially for that 10-employee-ish business size. Our platform affords the opportunity and the ability to just have one login and all the information that goes in is used to its greatest capacity because you do not have to move it from one place to the other. It's just simplicity.
There's less friction. It's a more seamless experience and customers really enjoy that.
Forgive me here, right? Just stick with me. Something like cross-platform adoption, though, it's like low- teens today, right?
Yeah, absolutely. Yeah.
What's been the barrier to that, why that hasn't been more successful? Because the vision is so compelling.
Because we only had more than one product to sell starting in August of 2023. It is just timing. You have resources of 700 global salespeople for that year. It is just getting to everybody. It is penetration. Over the course of the year, though, we did move from 2% with multiple products to 12.9%. It' s substantial. It is exponential, actually. I mean, we believe that that trend will continue. The absolute number of customers that have two or more software products will continue on an upward trajectory without a doubt as we penetrate more and more and more. Now you add the partner network to go sell a second SaaS product to their entire ecosystem as well.
We talked earlier about centers. You guys talked about payroll, right? What's the evolution of that as you guys address more SMB needs, right? Is there a next obvious center beyond kind of?
You know, I think once that comes out, we're more in the mind space, the head space now of saying, "how do we make what we have excellent? How do we ensure that the Keep integration goes flawlessly? How do we have a single design system with a fantastic UI/UX that people just adore using the software?" I think that's where we're going to spend our time. Maybe upgrade and enhance features, obviously inject even more AI into the platform so that more is automated and it's just sort of on autopilot. Our clients say all the time, "I'd love it if I didn't have to touch it. Just have it help me grow and I'll stay with you forever." We are not trying to win the game of DAU anymore and be the software that you have to touch all the time for it to work.
We're trying to go the opposite way now and automate and put on autopilot everything that we possibly can inside the software.
All right, Grant. We're in overtime. Last question. Talk to me about growth versus profitability, the balance.
That's a Paul question. He's the money guy.
All right, Paul. Money guy.
The way we look at it, we're basically cash flow guys at our heart. We like a balance. We like to make money as we grow. That is sort of we came out with guidance would be more rule of 40. The rule would be, no, it's going to change from year to year, but essentially 20% growth and 20% margins in the SaaS business. We think that's the right mix for us. That is our overall objective as you look at us.
Makes sense. Thank you both so much for being here. We appreciate you guys participating.
Absolutely. Thank you. Thank you.