All right, why don't we go ahead and get started? Thanks, everyone, for joining. My name is Arjun Bhatia. For those of you that don't know me, I am the analyst here at William Blair that covers Thryv. For a full list of disclosures, you can go to williamblair.com. We have Joe Walsh, the CEO of Thryv, here. Thanks, Joe, for coming.
Glad to be here.
Really interesting business. Joe will give a little bit of a presentation to go through some of the basics of the business, explain the growth drivers. Very interesting company, but we'll have some time at the end for Q&A. Without further ado, Joe, I will hand it off to you.
Thank you, Arjun. Appreciate it. Thank you very much. Thryv is a really interesting business. It is a business that is in transition. It is the old Yellow Pages business from 1886, you know, a 140-year-old company. We have taken those assets and used that customer base and those relationships when no one really valued. We have pivoted those to a small business SaaS offering.
We have had a tremendous amount of success. We have 100,000 customers already on the software platform using it. There is good engagement, good growth, and we are now building that platform out. It is a terrible stock. I will just tell you now, it is a terrible stock. It should not have been public yet. It was put public in a direct listing. It is kind of two different stories that the algos and the markets do not understand. It requires a bright person to dig in and do some work.
I'm going to quickly explain to you what we do. We market, sell, grow is what our software is all about. We help a small business build their list, get found, find new people that would want to buy what they do. Now with our Keap acquisition, we've got tools to nurture those customers, bring them down the funnel. When they convert and they buy, follow up and get repeat business from them.
It's a complete and powerful software tool that manages that full pipeline. With Keap, we acquired a business that had been in business for more than two decades. Other folks had invested $175 million of investment capital. It was once a unicorn. It was an amazing business, but it had faltered and it wasn't growing at the top line. They made some strategy changes inside that just didn't work out.
We were able to pick up with Keap and a very powerful partner channel that will help us take our products to market both here in the U.S. and internationally. We were able to pick up a 100-person engineering and product team. We were able to pick up more than 6 million lines of proven code that these very powerful automations that were built are elegant and very, very good. They had a terrible marketing plan. They were all over the place. There was lots of stuff they were doing wrong.
We did not keep any of the management that was doing that. We basically just plugged those three big things into what we are doing. We have picked up a bunch of good people too that have come in. It has been an incredible acquisition. It is still early days, but it will end up being transformative for us and really, really helpful.
Our product roadmap has been building out over the last, I've been running the company for 11 years. We came out initially with Business Center. We later added Marketing Center. We now are getting the platform really built out with Command Center, the Keap automations, Reporting Center, and soon to be Workforce Center. We've also rolled out some add-ons that sit around those.
The Thryv Salesforce today in early 2025 has a lot more product to sell than they would have this time last year. Our AVO is up. Our average order value is up. Our sales volume is up. Our sales per business advisor are up. We put in some powerful sales automations that are driving more pinpoint targeting and better messaging to larger businesses. Things are really moving along nicely for the company. We are coming up quickly on some key inflection points.
One we've already passed. When, Joe, will more of your revenue be from software than is from the old business? We passed that at the end of last year. When, Joe, will more than half your EBITDA come from SaaS? The answer is in 2026. When will you return to growth as an overall business? In 2027. It has been a long journey. It was a gigantic business, kind of melting iceberg business.
It is not shrinking from a mistake. You know, Yellow Pages had been disrupted. That process was going to happen with or without us. We have taken these assets and repurposed that customer relationship for something super valuable. It is working out really, really well. Great company, great execution, crappy stock. Where are we now? We will see. We will see what you do. We are coming out of the room today.
What's left in the printed Yellow Pages business? We're ending that business at the end of 2028. The way we publish the directories now, they publish and then we build them out over the next 24 months. The cash flow from that business will run out through the end of the decade. We project between $250 million and $300 million of cash will come out of that print Yellow Pages business.
Coincidentally, the business has $290 million or so of net debt on it. So roughly a cancellation of debt. What we'll have by the end of the decade is a billion-dollar SaaS business. It's growing fast. The market that we have been trying to build is now happening. Small businesses are actually adopting cloud tools. They're actually moving to these things now. Timing is good for us all to be having this conversation. You're not early. You're right on time. I think that's it.
All right.
Actually, I owe some numbers. You guys can get the numbers anywhere. These are the numbers, you know, most recent quarterly numbers. 50% growth is obviously flattered by the acquisition of Keap, but the organic growth is still very strong. 59% subgrowth.
Our ARPU is currently at about $4,000 a year. We believe we can move that to $8,000 a year by the end of the decade just by building out or completing the platform with our customers, that process. Gross margin 73%. Our net revenue retention of 103% is up from low 90s a year or so ago. That is very strong. I think, Arjun, I am at the end.
All right, perfect. Yeah, so we can jump into Q&A. Maybe the first place to start would be the market that you play in. I'd love to hear a little bit more about it. What sorts of SMB customers are you serving? Maybe talk about how that interplays with the legacy business that you've been operating in for a very long time for Thryv as a company.
Yeah, I mean, if you think about the Yellow Pages, these are the old-line, old-established businesses in your town. The old-line, you know, HVAC, moving and storage company, the funeral home down the street, these businesses that have been around for years and years and years, these tend to be the Yellow Pages customers. Newly started businesses, businesses run by 30-year-olds typically aren't buying Yellow Pages.
These are our average customers, have been with us for 15 years on average across the 250,000 customers or so. They tend to be service-based businesses. They fix things that are broken. You know, you walk into your house and it's ice cold and the boiler crapped out. You're not just going to live in a cold house. You're going to call somebody and get it fixed. You crack your tooth, you're going to go get it fixed.
You know, these are our customers. We do not really have manufacturing. We do not really have any fine dining or high-end entertainment. We do not sell any little blue boxes. There is no high-end retail. It is not very economically sensitive. It tends to be the people that fix broken stuff and keep our lives moving along. This is our main customer base.
When we bought Keap, Keap brought us 15,000 new customers. They tend to be more internet businesses, more online businesses, more international businesses, more no geography, where we have got people with trucks and offices and like kind of traditional businesses.
You know, there's always this kind of interesting debate about how do small businesses use software? What were they using before Thryv? You know, like when you're thinking of attacking this market and getting more customers on board, what gives you confidence that they're ready now to adopt a solution like Thryv?
Some are not.
Yeah.
Small businesses, I'm talking very small businesses. These are five-employee, ten-employee, very small businesses are just now beginning to move to the cloud. You know, a large percentage of those businesses are owned by baby boomers. These baby boomers are reaching retirement age, some 10,000 a day turn 65. That process is playing out right now.
They are beginning to think about options. Can they get one of their kids in the business? No, their kids hate them. They're not going to do that. Can they get the manager to buy them out? Is there a nephew or somebody who can come in? This process of figuring out how to hand the business to the next generation is really waking up, accelerating this SaaS adoption.
There are sales calls, I've been on some of them myself, where we go in and the parents are there and the 38-year-old son is there. They're arguing about whether or not they should modernize the business. The dad's going, "Oh, it's been fine for me for years." The kid's saying, "Yeah, well, grandpa left you this business. You've done nothing to expand it. I want to build it up and it's got to be digitized." You know, that argument's playing out in front of me. It's really interesting to see, but I think you're going to see an acceleration of adoption as these people who just aren't willing to do it step aside and hand it over to that next-gen person who expects more of a digital life.
Yeah. It was interesting, one of the slides you had up there, right? I think over the last maybe two years or so, three years, the platform has expanded quite a bit. You had, you started Marketing Center. You have Business Center now. You're launching a few more products. When you're going to these customers and we're at this kind of generational tipping point, what are you telling them? Like, here's the product that you need from Thryv to help you do, to help you grow, to help you run your business. Which product is it?
Our first entree into the market was CRM kind of run your business tool, right? It allowed you to have a scheduler and appointment reminders and we do estimates, invoices, billing. It kind of changed their business process. It turns out that that's hard to get somebody to change their business process. It requires a lot. It's, you know, it's a lot of work to do for them and for us.
Then our second product that we rolled out was Marketing Center, which is software designed to help you find more customers and then prove to you where they're coming from. That turns out is a hell of a lot easier to sell. It does not require anywhere near as hard an onboarding. It does not require as much follow-up. It is an easier lift for us, easier lift from them.
We have found with our Marketing Center software, it's now outselling Business Center by a lot. To the point where we've now come back and come up with some add-on products that sit around Marketing Center that sit on that platform. Those are selling like hotcakes as well. That's really become the center place of our business and selling people growth, more leads, more customers, more form fills, filling their order book for the second half of this year seems to be more attractive than getting them to change their business process.
Yeah.
Now, sometimes when we get them going with Marketing Center, we're able to then get into the other stuff. We, it turns out, we're going for the harder thing initially.
Yeah. And it's like instant ROI, right? When you're seeing, "Oh, I adopted Thryv and my growth rate went from X to X and my business grew for the first time maybe in a while because it's maybe a little bit more delayed and requires a little bit more upfront investment with Business Center with the process change we were talking about.
We had a customer come on to my executive committee meeting just last week. And she came in and she basically took us through what her experience with our Marketing Center product has been. And she said, "I can show you it's paid for itself with multiple returns every month since I've been on it. My business is taking off. I'm telling my friends, this is fabulous." You know, we didn't get that kind of instant reaction from Business Center unless they really got involved and really got going with it. And so, yeah, Marketing Center has really been strong.
Going back to kind of the core of the business and your customers that you serve on the software side, you know, you've built this for a specific type of customer, right? It's a small business, largely in home services. Do you consider yourself a vertical platform or what are the investments that you're making in verticals? Because it seems like you have that sort of at least product capabilities that it's built specifically for this set of customers.
We just, we inherited from the old business relationships with all of these service businesses. What we are doing now is using Keap's automations. Keap has these automations that help map out a process for a business. We are working closely with particular verticals and building out custom automation so that we can then go into those verticals and say, "Look, one of the premier, you know, guys in your industry who's somewhere across the country is using these," and you can basically plug it in and you do not have to design it, you do not have to build it. This is kind of best practice. It is more of a turnkey. We are going to be moving very quickly to build those out in our most successful verticals and offer those.
Keap, sticking on Keap then, it gives you this sort of vertical angle where you're pre-building some of the automations for them and you can give this turnkey solution. It adds, I think it augments your go-to-market motion because most of what you've been doing traditionally had been direct and Keap has a pretty big partner ecosystem. Talk about how that complements what Thryv had built other customers.
Yeah. Keap just approached the market differently than we did. They had a small direct effort, but they were mostly partner. We were virtually all direct with a tiny partner channel that really wasn't getting much traction. So with Keap, we got, you know, a leadership team and partner, a bunch of relationships, 800 certified partners who pay them annually to be a certified partner and represent them, a whole partner ecosystem of people who do development and work with them.
So they are super excited about getting the full Thryv catalog now to add. You know, I had that funnel up there earlier. Keap was always the bottom of the funnel, but if you wanted to build your list or create a list or find people who wanted your product, Keap wasn't for you. It was taking your list and nurturing it and helping you close those sales.
Now it sort of completes that whole process. Very interesting. They have all these influencers who have their own brand and their own thing who use Keap, and Keap basically sells from the stage with them in their big conferences that they run. They've got MSPs that sell for them. They've got local marketing agencies. They have people who specialize in different verticals, like maybe helping med spas get patients or helping dentists or, you know, helping particular verticals do their thing.
It has really opened up a new vista for us. Furthermore, it is international. They've got well-established partners in Australia and Vietnam and Italy, all over Europe, that are touch points for Keap in those markets that are now going to be able to bring Thryv to those markets as well. We got a lot when we got that partner channel.
Is Keap as a product, is it monetized separately from Marketing Center and Business Center, or how do you think about the actual, what it can add to your revenue growth?
I mean, it's, we view the whole thing as a product platform and we build the solution out of the stuff that you're ready for, the stuff that you're prioritizing and what you really want or what you really need. You know, it's not a big secret. You know, we paid $80 million for Keap. And this was a unicorn. This is a company that had raised a lot of equity capital and sort of flamed out.
And so it did have some problems. Its top line revenue was declining. They were actually losing customers. And that did not stop just because we bought it. It was still trying to happen. There is a very short-term, you know, down the first couple of quarters. Our sales organization is super excited about having these automations to sell. You know, I think the cross-sell will be very, very strong.
You know, late this year, 2026, I think it'll be a growing and maybe even really fast-growing part of our business. There was nothing at all wrong with the products they had built. It was all dysfunction in the way the company was operated. You know, the investors changed strategies a couple of times and then when their time started running out, they just started harvesting.
Yeah.
When we showed up at the partner channel, we're like, "Bet you're glad to see us." They said, "We are, but you know, we've been starved. We need investment. We need stuff." You know, and they had a long list of demands, which we're quickly meeting and getting them going.
By the way, you said you paid $80 million for it. That was roughly about one time's revenue?
Yeah, they did $82 million last year.
Yeah. Okay.
One time's revenue. And on a post-synergy basis, it was less than five times EBITDA.
Yeah.
It was a pretty good one. And when we look at the replacement cost for those customers, you know, it was kind of below replacement cost.
Just from going back to the growth question, because you're going to be able to cross-sell Thryv into Keap's customer base of about 15,000 and vice versa, right?
Correct.
Just maybe you said it'll take a little bit of time, but I'd be curious where you are just in terms of go-to-market adjustment to be able to do that cross-sell and if there's processes or change required.
Yeah, I mean, there's a bunch of things going on. You know, you guys know enough about software. It's not instant when you buy a company. It all doesn't work together. It takes a little bit of time. We have a bundle now where you can get the Keap automations and our Marketing Center together.
There's a sort of a disclosure in there that says, "Look, we just bought the company." You're going to get two bills. When you click around the different colors on the screen, we'll get all that unified over the next year. If you want the benefits, you can do it now. People are signing up for it. We just rolled that out. The sales are, you know, just getting started. As far as, you know, Keap has inbound coming into their company all the time that say, "Look, it's not really the automations I need. I need leads.
Yeah.
They are then buying Marketing Center. Those sales have begun to happen as well. The partners have some limited access to sell the Thryv catalog, but that will improve over the next couple of months as we make a couple more development releases for them.
Yeah. But it fits in very nicely in terms of your full, like, I'll say revenue generation software for small businesses to help some grow where your Marketing Center does one thing and Keap does something complementary.
It's the funnel we show. It's Marketing Center is the top of the funnel, Keap's the bottom.
Perfect. Okay. Just maybe zooming out beyond Keap, when you think about Thryv's software growth, you've clearly had some pretty healthy growth rates. As you think ahead, how much of this, your future growth is going to come from new customer acquisition? Because we know there's a lot of new customers that you can go get in the SMB software market versus upsell and cross-sell amongst your existing base now that your platform has actually broadened quite a bit over the last few years.
Yeah. The most gratifying source of customers for us is referrals. And we get a ton. We have installed a base of over 100,000, and they're bringing their friends. So we, every Monday morning, you know, in the inbox is, "You got to come talk to my friend. I talked to him over the weekend. You got to talk to him." So we get a lot of referrals. That's pretty low cost of acquisition because they're pretty pre-sold by the time we go out there.
That's really good. We obviously are calling on the Marketing Services base, converting them, moving them over. That's an ongoing motion as well. The thing that we're not doing in 2025 is investing in marketing. This, if you've followed any of our investor day materials, we talked about this being kind of the pinch point year for us.
It was specifically the first half of this year. We have, we're not really doing any marketing. Even basic marketing that you should be doing, we're not doing. We're really in a, you know, we need really efficient customer acquisitions this year. In 2026, we'll kind of get back on the front foot and be out there doing more. It is a fast-growing market for what we do. We just aren't doing any marketing to go out there and get them.
This will be a year without big, we made huge strides last year. This will not be a big year of new customer ads. This will be a year of expanding their spend. I mentioned $4,000 - $8,000. We'll make a nice chunk toward that this year now that we have the platform we've built out.
I think to maybe facilitate that, you've made some incentive changes in your Sales force and how sales reps are comped. Can you talk a little bit about the changes you were making there and how you think it might fuel this ACV expansion that we're talking about?
It is going to. I mean, we're seeing it. I have, we're halfway through the year now. I have a lot of information. We're selling larger businesses and we're selling bigger. We're doing that with a combination of more products to sell. We tweaked the incentive system so reps are really incented to sell bigger businesses and sell bigger. We have altered the technology that they work on.
The sales platform that they work on is guiding them when they open up in the morning. They've got to close out certain calls. They're being sent to the bigger businesses with a bigger recommendation, and they have to close those out as a part of their day. We really have control over what they're doing that a year ago we didn't have, honestly.
We were putting this tool in, but we did not really have it working very well. Now we do. The result of those three things is our average order value is moving up with these new sales that we are making. You are always going to have some churn in SMB. Some of these might churn out at $228 a month, and then you go sell a guy $450 that is new coming in. There is a stepping up going on. We like that. We think that is a really healthy thing. Over time, we will continue to have a favorable effect on our margins and on our churn.
Yeah. You have seen, I think you disclosed net retention, and you have seen that sort of uptick happen already in the net retention rate. Talk about like how your gross churn just as you go after these higher customers will benefit and where ultimately you think the net retention rate can shake out longer term.
There's almost a straight line. If you go between giant enterprises like IBM down to the consumer, there's almost a straight line of churn, like how much churn you're going to have. You know, in the enterprise world, you might have churn of less than 1%. In the consumer world, you might have churn of 9 or 10%. And there's almost a straight line there.
We're down in currently very small business, like three, two, three, four, five employees. And we're continuing to move up to larger. Keap helped us move up a little bit, to be honest with you. And Keap's more sophisticated offering helps us make them more satisfied. Our Reporting Center helps bigger businesses be happier. Our Workforce Center that's coming will pay employees, and therefore you have to have employees to pay them. So we're moving up.
As we move up, the natural amount of just people going out of business and just not being there anymore will improve. I think this is a gross simplification, but we're going to go kind of from four or five employees to 10 or 12 over the next couple of years. That will just make it easier.
Yeah, 100%. Okay, we have a few minutes left, and I don't want to leave without touching on the legacy business. We've walked through the growth rates and the drivers in the software business and kind of the execution and go-to-market changes that you've been making there.
What's happening in the legacy business, which is Yellow Pages and Marketing Services, you mentioned in your presentation you're kind of sunsetting that. Give us a sense of how confident you are that you can generate those cash flows out of the legacy business and what sort of visibility you have into how much cash that business can generate.
The customers are on, for the most part, with a few exceptions, 24-month contracts. The way 606 accounting works is you publish the directory, you have to recognize all the revenue the day you publish it, and then you collect the cash over the next 24 months. There is quite a bit of predictability in that because you have 24-month runout on the collections.
Our bad debt is, you know, going back 139 years, has been really low. We just do not have much bad debt. We are selling to established businesses. It is a completely collectible type thing. We have a lot of visibility on the collection of that money. Our decline rates have barely budged. It may look to you sometimes if you are looking at the numbers like they are bouncing around because of the revenue recognition. We are recognizing different books in different periods.
The actual decline in the directories has been high 20s for years. It's just sitting there. Hasn't really moved. Even though we're cannibalizing the hell out of it, not really working it that hard, it's pretty much just hanging out right around there. Yeah, I have a lot of confidence in the cash performance of that business.
Your CFO is not here, so I'm going to ask you this question because you're here. When you think about what sort of cash flow is needed to service the debt, how much of that is reliant purely on the legacy business versus a software business, which has also become profitable? I'm trying to see if the number is up there. It's also become profitable.
Can I give you a high-level rough?
Yeah, that's fine, please.
Thinking about like now to the end of the decade, we're going to generate about $600 million of cash. About half of it's going to come from SaaS and about half of it's going to come from print phone books. Either half could pay off the debt.
You have optionality?
Yeah.
Yeah. Okay. Maybe just then talk about capital allocation because you have the debt and you've made some M&A in the past, both on the software side with Keap and on the Yellow Pages side. Like how do you think about M&A going forward and capital allocation, you know, in terms of paying off the debt?
For the first time, as we get to the second half of this year, we're going to begin to have some cash left in the business that doesn't all go to the debt.
Yeah.
We will be able to consider buying back our shares. We have a share price, a share authorization we could potentially buy back if we want. We will have that as an option to consider. Hard for me to find a business that is on sale for a lower price than ours is on sale. That is going to be, we are going to look hard at that. You know, and we can invest a little bit more in marketing.
There are a lot of basic things that we are not doing at the moment that are just good hygiene you should be doing. For example, somebody does a branded search for your particular product or brand name, you should at least defend that by having ads on that page. We are not doing that. We really have not enough money to do that. People are shanghaiing our customer off right there unless they go down and find the organic result. You know, we'll cure that, but we just do not have a lot of extra dough to throw around right now.
Okay. All right. We are up on time. Thank you, Joe. Great conversation. Thanks, everyone, for coming. We really appreciate it. We are going to be in here for the breakout afterwards. If you have any questions for Joe, please stick around. We'll open it up to the floor fairly shortly here.
All right.