Earnings Call: Q1 2021

May 13, 2021

This is conference ID number 7,00068,595. At this time, I'd like to introduce the conference to KJ Christopher, Thrive's AVP of Investor Relations, Treasury and Tax. Good morning, everyone, and welcome to this recorded management discussion of Thrive's Q1 2021 results. By now, you should have received a copy of the company's Q1 2021 earnings release and investor supplement, which is also posted on our website at investor. Thrive.com. With me today are Joe Walsh, Chief Executive Officer and President Paul Rouss, Chief Financial Officer and Ryan Cantor, earnings release and other filings with the SEC. Thrive has no obligations to update this information presented on the call. Also on today's call, our speakers will reference certain non GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on the Investor Relations website at investor. Thrive.com. With that introduction, I would like to turn the call over to Joe Walsh. Thank you, JJ. Good morning and thanks to everyone for joining us on our first Quarter 2021 Earnings Call. Over the past few quarters as a public company, we've demonstrated DRYVE's category leadership in end to end cloud software for SMB. This quarter validates another point, showcasing the massive opportunity for cloud adoption within the SMB space and the strength of our strategy and execution. We're off to a strong start to the year in our SaaS business With growth in revenue and client, our revenue accelerated 17% year over year in the Q1. This acceleration is fueled by a demand for small businesses to modernize and transition to the cloud. We feel that we're in pole position to seize this massive opportunity. We continue to penetrate Our captive legacy client base as well as activating new clients through our new channel. Even in our existing client base, There are more and more of those customers that see now is the time to move to the cloud, customers we may have proposed this to So that's working really well now. And then we are methodically scaling our new channel, our inbound channel. Each month, we add more leads to the top of the funnel. We build out more FCRs. We do more demos. We close more each month. It's becoming a very large part of our sales volume. And then we're adding partners to our reseller channel. Each month, there's more and more partners. We bought some new And then of course, we sort of stumbled on to the multi location franchise opportunity by having one chase us down and buy And that's now become a really big part of our plan. We're doing very well with franchises and multi locations. So these new channels are growing very nicely. We feel very good about where we are. As a result, we're updating our guidance accordingly. Paul will walk you through that a little bit later in the call. Some metrics I'd like to share with you. Our ARPU has continued to grow and it's a result of that move up market. You'll see that in the data. Our churn is stable in the mid-two percent range. This is really good for SMB churn. We're revealing today net dollar retention. We hadn't Revealed that in the past, it's a new metric for us. It's up 16% year over year to 89%. And I know you will sometimes see enterprise churn that's 15% growth momentum year over year as we solidified our strategy. And we expect that that's going to continue to grow moving out in time. We're pretty excited about the opportunity that that presents for us. The point I would just make to you as you compare us with enterprise type software is that We're in a much earlier inning with small businesses moving to the cloud, maybe top of the second inning. Enterprises are probably in the 5th or 6th They're much deeper into that transition. So I'd like to just talk to you about what this means in terms of clients. 1 of our customers, Andy Roble single day in the mobile app. They've been a customer with us for a little over 2 years and their usage is steadily growing. Looking at last month, they were up around 11 hours in the app. And appreciate that 7 employees are in and out of that app in a few seconds And they need to consult something, but collectively over the course of the month, 11 hours. They signed up for 5 ks. They were one of the early people who signed up. They switched from Stripe and we've seen steady volume coming out of them and steadily growing volume. They've had over 400 transactions so far With an average ticket of $6.12 So we're seeing that sort of engagement where our whole Teams are completely running their company within the app. And it's that sort of usage that's driving the ARPU, it's driving the NDR growth, Driving the improvement that we're seeing. So engagement was the big priority for us the last couple of years. We watch it like a hawk. It's on our crawler every day that goes across the screen in the morning and we watch that. And we've seen really nice gains in daily, weekly active usage. Our goal was to be at least 20%. We've just blown that away. Log ins are up. Time in the app has more than doubled in the last year. The number of clients using our core features, CRM, payments, communication, campaign management, That's our scheduling tool. We see more and more of them using more and more features. So that's part of what gives us confidence as we look forward, part of why we feel good enough to actually upgrade our guidance. So we think it's a payoff of us improving our onboarding process, improving the software itself and just looking at the results that our customers are getting. Next, I want to bring in our Head of Product, Ryan Cantor. He's going to share with you some product improvements and talk to you about what we're doing on the verticalization front. Before I do that, I want to touch on an announcement that we put out this morning in regards to Thrive Pay. Thrive Pay has, up until now, we sort of soft launched it, It's only been available within the Thrive customer base. But as you now know, if we saw the announcement, we've now rolled it out as a standalone app. It's available at no monthly charge. We do make a little bit when customers use it. But we think this will be a terrific feeder pool helping us identify Thousands of new small businesses that are interested in modernizing and interested in more efficient payment methods And we'll be really able to help drive client acquisition going forward. We're finding that our existing customers that are using ThriveK Absolutely love it. And we're seeing volumes grow week over week, month over month. And there's no question that it's driving more engagement. And this and other add ons are driving the ARPU up. So look, it's still early days, but we're really excited about 5 pay. And I think with the 5 pay Thank you, Joe. The COVID-nineteen pandemic drove Thrive to adjust our product roadmap prioritization around the most basic needs of the everyday small business owner. We focused on both improving existing functionality and adding new functionality handled taxation and other back end services. We added new features to manage and sell products. Packages where the ability to sell bulk services was created and near the end of 2020, we launched ThrivePay. 5 Pay was developed to fill the void in supporting growing service based small businesses. These businesses often need to process large payments with more affordable with an overall average transaction size greater than $400 Just yesterday, we announced the launch of a dedicated ThrivePay mobile available in the iOS and Android app stores now. Not only does this app add convenience to our existing Thrive and Thrive Pay subscribers, but it is available at no monthly charge to all service based small businesses. Our flat rate credit card fees, cost effective ACH payment option, Scheduled payment, tips, dispute assistance services and optional pass through convenience fees are all included in our free app. We know that not every growing business is ready for the full Thrive solution yet, and so we are excited to offer the Thrive Pay app to these businesses providing a safe and convenient way to get paid while also providing frictionless upgrades to the full Thrive platform when the time is right. To further support the financial needs of our users, Thrive has also recently announced our completed integrations with QuickBooks Desktop and MyOB Accounting Software. These two additions to the Thrive app market make it easier for small business owners to run their day to day businesses while simplifying their accounting and tax process. Earlier this year after a full year of development, 5 launched our enhanced CRM functionality. This product improvement provides an industry specific CRM across becoming daily active users within the platform. While some in the SMB SaaS space show verticalized marketing tactics, Thryv's unwavering commitment to delivering an exceptional customer experience propelled us to ensure the product was properly verticalized first to not disappoint post sale. Next, we have verticalized our demo experiences and we will continue to move up the client experience journey into our website and online marketing activities In the coming periods. Lastly, over the past 18 months, Drive has been strengthening our integrations with all things Google and quickly respond in app to Google reviews. And with that, I will turn it back over to Joe. Thank you, Ryan. Next, I'd like to turn to our recent Census acquisition. We're off to a great start. It's just been a month and a half. And We're finding that the Sensus team loves Thrive. They love the software. They've had demonstrations. They've been doing they've been In our company store buying Thrive gear and they're all wearing Thrive outfits. They're pretty excited about the whole idea of this big pivot for them To become a category leader in Australia in the software business. And all the plumbing is being hooked up, the people are being trained, the process is rolling on. We've actually even On boarded a couple of customers as we're getting some guinea pig customers to test everything out, make sure our localization is right. We will begin selling in the second half of this year. And as I've explained to folks, we in We're really looking forward to that in 2022 and 2023. Our expectations are pretty limited through this year just because even as we get Customer sold and onboarded, we're really only going to have a couple of months of revenue before the calendar year runs out. But we're off to a great start. We've been really impressed With that next layer of management that we've gotten to know beneath John Allen and even beneath the C level people as we've been interacting functionally Back and forth and having a lot of fun. We've created a company dictionary where we're Sharing back and forth American and Australian terms, it's been a lot of fun and interesting to people and there's a really high morale around this combination and International expansion. So feeling good about that. Can't wait to update you more on that in the future. Next, I'd like to bring Paul Ralphs back to take us through the Financial results. Paul? Thank you, Joe. As Joe alluded to, it's been a strong start to the year and we're excited to share the results with you. Okay. Now let's turn to the U. S. Business segment starting with SaaS. 1st quarter SaaS revenue was $37,300,000 an increase of 17% year over year. 1st quarter SaaS billings were $40,300,000 an increase of 22% year over year. 1st quarter SaaS ARPU was $304 another significant increase when compared to $2.40 in the Q1 of 2020. 1st quarter SaaS churn was 2.5%, a significant improvement in retention and compared to 3.4% in the Q1 of 2020, a significant improvement in churn despite a tough business backdrop was $227,900,000 a decrease of 21% year over year. 1st quarter marketing services billings were $216,200,000 a decrease of 22% year over year. As is consistent with previous calls, we are providing billings an additional operational metric to give our investors better insight to our operational performance, the billing data will show a very consistent and steady decline in our marketing services segment, Which is shown to be lumpier on an accounting basis given the 15 month lifecycle of our print directories. This is provided in our Q1 investor supplement available on our website. Turning now to profitability for the consolidated business. 1st quarter adjusted gross margin was 69%, A 50 basis point increase when compared to the Q1 of 2020. 1st quarter adjusted EBITDA was $104,900,000 resulting in an adjusted EBITDA margin of 30 Marketing services EBITDA margin increased to 43%, a nearly 5 point increase year over year. The acquisition of Sensus Holdings on March 1st is now included in our consolidated results. Going forward, census will be reported under the new segment titled Thrive International. Now moving to guidance. Let's first start with the U. S. Given our strong first quarter results and momentum of our U. S. SaaS business, We are raising our 2021 revenue guidance to $151,000,000 to $153,000,000 implying year over year growth of 16% to 18%. Our previous guidance was $140,000,000 to $145,000,000 For U. S. Marketing services, we are maintaining 2021 revenue guidance of $740,000,000 to $760,000,000 for 2021. As previously mentioned, U. S. Marketing Services EBITDA margins will primarily as a result of the investments we are making in product and sales and onboarding. Now for our new segment, 5 International. We expect revenues to be in a range of $180,000,000 to $200,000,000 measured in Australian dollars. This guidance reflects 10 months of ownership since we acquired the business on March 1 this year. Since this is an well run asset with 40% plus EBITDA margins historically, we expect to maintain strong margins. I'll now turn the call back over to Jeff. Thanks, Paul. So it's been a really good quarter for us and just sort of where we are in our SaaS business. We finished up last year at with 8% growth in that quarter And 17% in this quarter. We're now comfortable diving into the high teens for the year. Growth is accelerating. To grow this business faster and really allowing us, giving us the green light for some additional investment It's coming along faster now. We're delivering some things ahead of what we've had planned in our longer term roadmap now And our bandwidth to do more and improve the size more quickly is there based on this investment and the support. And so I'd like to thank our new Board for that and I'd like to point investors to just realize that that was a big catalyst. September 1, those guys came in And within a few months, we had that green light and direction. So there's more good things to come as we get some of the fruit Coming out of these investments that we've been making. So really excited about where we are there and prepared to now take questions. Operator? And your first question comes from the line of Arun Bhatia with William Blair. Yes. Thank you very much and congrats to you guys on the great results. Great to see the SaaS acceleration. Joe, one of the things that stuck out to me was that the SaaS client base, I think it increased sequentially for I would love to hear if you've noticed any change in how customers are landing with the SaaS product, whether The problem they're trying to solve has changed at all as you've built out the product a little bit and you've been able to communicate the value proposition A little bit better and then going off of that, is there anything that you would point to in terms of organic marketing Versus cross sell from the legacy base in terms of how that customer acquisition has shifted over the last couple of quarters. Absolutely, Arjun. Let's start with the first question, the problem. We were arguably early with our all in one approach. Small businesses were just Beginning to warm up to the idea that they could use cloud tools to solve their problems. And They were buying some fairly narrow point solutions to experiment with it and here we came along with this great big thing that did it all. And so what's happening is with the pandemic, I guess, the realization that you need To be able to work remotely, you need to be able to accept contactless payments that you need to be able to update the entire Internet on your service offerings, your safety protocols, your store hours when they change. All that stuff came really into sharp focus. And not everybody reacted instantly. It's taken a little time, but they're definitely out to be able to do those things now. Think about The big move to remote work over the last year, a lot of small businesses had a lot of adapting to do to try to figure out how to do And that drove a lot of the demand. I would say that if I'm really honest and I go back 2 or 3 years ago, we had a lot of customers buying our software and we were telling them it was software, we were telling them it was to run Their business operation and improve their client experience. But I think honestly, they were thinking about it as advertising and marketing. And increasingly now, we have customers that really grasping that they're buying software to run their company. And so I think The fit is better that way. And I think the market is really ready now for what we have We were too early, but I think that the wave is really coming now and we're feeling it every day. As far as the source of the sales, Your question is very astute. We if I go back several years ago, we really got all of our sales from the traditional Marketing services sales force as it was making its rounds working with marketing services customers and they were Offering drives those customers and there was a steady uptake. What's happened now more recently and is definitely seen in these numbers We are building the traditional channels that a lot of start up software companies would have, an inbound channel With a funnel of leads coming down through to SDRs, coming down through to demos that gets that coming down through to closes. And we scale that Inbound channel every month. We add more leads to the top. We add more SDRs. We add more we do more demos every month. So It's math, right? We're just we're scaling it and the numbers are holding up really well and we're getting better at what we do there, Each piece of it. And so that scaling will continue and that's been probably the primary driver begun to build and we've been steadily adding resellers and really professionalizing how we do that. We've installed the technology now To really facilitate the reseller channel and that's beginning to Ron on 4 out of 8 cylinders and we're tuning. We're probably if you ask me again in 6 months, I'll tell you we're on out of 8 cylinders. So we're getting there. We're starting to get that figured out and it's building and some of this volume is coming out of the reseller channel. Large multi location emerging franchises. And we're signing long term, they're typically 3 year contracts with these We designed what we call the Thrive hub for that master franchisor and one of the Franchise experts said that this was the Holy Grail for franchise business. So those new channels are A big part of where this volume is driven from at the moment. Perfect. That's Very helpful color there. Thank you. The one of the things you mentioned, I think in your prepared remarks, if I remember the name of the customer correctly, I believe it Tree Masters, I might be getting it wrong. But they had switched from Stripe over to ThrivePay. Can you just help us understand what are the benefits of using Thrive Pay versus Strife or Square or one of the other partners that you integrate with. In that example specifically or even just more broadly, Especially for our service based businesses. That's been our stock and trade. They've been our customers for the life of our company. And So we have a pretty close dialogue and relationship with them. We basically asked them, we're getting into payments. Initially, we put on Square and Stryfe and the usual suspects onto our platform. And we had designs on trying to put something together and we asked them, what would be the perfect Payment solution and they were pretty focused on the fees and pretty focused on instant instantly knowing where they stood on the money. So anyway, as I've been calling these customers, I'm finding a lot of them are switching from Stripe or Square, one of the other tools to ours. And We have Ryan Cancer with us today, and Ryan has been working really closely on the payments. I'd like to let him make a few comments About the advantages of using Thrive Pay versus some of the others. Ryan, can you pick that up? Sure can, Joe. Thank you. So obviously, these types of businesses are low transaction volume, but high dollar amounts and that requires a specific set of features and benefits in any specific product. So for example, we launched ACH with the ability to accept electronic bank payments. And if provider, they could be paying 3% or even more than 3% of a fee on that particular payment. But with our ACH service inside ThrivePay, we charge 1% up to a maximum of $9 per transaction. So the savings is pretty clear. And in some cases, people are saving $70 to $80 per transaction by using ThrivePay. We also added features like scheduled payments, but not just the reoccurring payment that you might have come to the average use case would show someone charging on the 1st of the month every month for $40 We allow installment plans, scheduled payments, repeating payments, all types of configurations that really help service businesses kind of manage their cash flow in a predictable manner. And so when you kind of couple all of that together into a bundle of features and set and products, we really find High adoption and we are keenly focused on supporting the kind of high dollar transaction amount for these types of businesses. So that's our biggest focus is to help them process these larger ticket items with more affordable processing fees and features. Understood. Thank you. And then one last one for me, this might be for Paul, a little bit more on the guidance. Obviously, good to see the SaaS guidance raised. Are you factoring in any benefit from the Sensus cross sell into the SaaS product yet or is that something that we should wait for 2022 and 2023 to really come up on the numbers. Yes, you're exactly right there, Arjun. There's very little, If there's any drive sales related to census at this time. All right, perfect. Thank you very much and congrats again on the quarter. And your next question comes from the line of Daniel Moore with CJS Securities. Thank you, Joe. Thank you, Paul. And thanks for taking the questions. I want to follow-up on Cenkus a little bit more. You gave good color, but anything more that you've kind of learned since you closed the deal and I think you referenced the 40% plus EBITDA margins given Likelihood of increased investment to drive Thrive, are those is kind of 40% a reasonable thought process the remainder of this year or you see a little pressure given the incremental investment? Thanks. Yes. I mean, they have incredible margins. Their White Page business And the advertiser base in the White Pages is largely made up of the government institutions, giant companies And they pay for the White Pages on their Telstra, which is the telephone company there, their Telstra telephone bill. So So it's almost like a utility that just rolls on. Think of like the AOL 1495 thing that just ran on and on and on, that type of thing where Their marketing services revenue decline is slower Than ours is or slower even than their Yellow Pages is because of that big White Page business. And it really flatters the margin. I mean, they've been delivering margins actually into the mid-40s. So to your question about setting up Thrive and getting the SaaS business started In Australia, how much that will eat into margins? I don't think you'll see a material move. It might be a point or 2, but it won't knock us In Australia down in 30s or something like that. Maybe it's a point or 2, but they'll still deliver much margins than we have in the U. S. And as we blend them together, the Sensus acquisition nicely flatters our marketing services Margins and revenue decline because of the better curves there. And really, when you think about While the enthusiasm is sky high over there and they're really anxious to get into the market and start selling it, This is really a 2022, 2023 story for revenue there. We will definitely have sales this year and we will have some revenue this year. But If you think about a SaaS sale, if you make the SaaS sale late in the year, you maybe have 1 month of revenue or 2 months of revenue. It's not going to be huge in this year. People should pretty much focus on 2022, 2023 for that integration and the revenue there. That's super helpful. And then switching gears, exciting news relating to the launch of the ThrivePay app. I know it's early days, but can you think about what type of attachment rates You would expect to generate over time, I'm sure it's the goal is to obviously drive Penetration of the SaaS solution as you expand the small business relationship base by using the Thrive pay Is there a way to sort of think about conversion over a long period of time or still early days at this point? Yes. I mean, look, there's no question that Having a free app out there that's delivering exactly what small businesses and particularly service based small businesses are looking for It's definitely going to drive brand awareness and bring people to Thryv and to Thryv brand and to Thryv whether or not once they're doing payments, they'll jump over and say, Oh, I actually want a full CRM and I want to improve my client experience and I want to manage my presence all over the web and all that. Whether they're going to want to do those other things, we do not know yet. Since most small businesses are on a journey to automate and modernize, Our hunch is that there will be. Our hunch is that this will be a great feeder pool of leads And conversions into the full software, but we haven't gone as far as to model or project exactly It's just around the known things that we have, the expansion of our new channels, our existing sales force doing its thing. In this year's guidance, You don't really have any ThrivePay revenue to speak of or any census revenue to speak of. Those would be icing on the cake. Understood. Makes perfect sense. And last for me, just in terms of the SaaS segment margins, Q1 EBITDA margin is Yes. Look, I think your read of that is right. We were our margins were rising throughout last year Just based on the operational leverage of having a fully scaled national SaaS software product. And now We've got this new Board who sees the merit of growing this a little faster and they've green lighted some additional investment In engineering, in product, in marketing, really we're nourishing the entire business and investing to scale it up And that's not free. So there is some expense to that. So I think the way to think about our SaaS Businesses' margins is rather than the margins growing higher and higher and higher, I think they actually are It's going to come down a little bit as we step up that investment and really accelerate growth, but it will remain profitable. Growth and then say, oh, we lost money. It's been profitable since 2019 on an EBITDA and a cash flow basis. It's fully repaid our investment to start it And it's cash flowing and it's going to continue to cash flow. But in terms of margins, it's not our goal to grow them. So I think Mid single digit kind of margins will be there where we'll be. And I wouldn't take a lot directionally from it if it pops up and down a point or 2 One way or the other, we intend to run it at a profit, not lose money, but not grow the margin. So if that's Low to mid single digits or whatever, that's probably the zip code that we'll be in. And I'd say I'll bounce around because it's hard to be super precise quarter to quarter with that. But The green light that we have is to reinvest those significant profits that SaaS is generating into growing it faster, both domestically and internationally. All right. Makes perfect sense. Entirely consistent. Thanks for the color and look forward to product demo next week. Thanks, Dan. And your next question comes from the line of Ryan McWilliams with Stephens. Thanks for taking the question. Nice quarter. With Thrive for Home Services set to roll out in the second half of this year, can If you think about our company, it's been around a long time. We have a large customer base and it's very heavy in the service based businesses. Everything to do with working on your home, working on your car, working on your body, working on your dogs and cats, all the services out there. We don't tend to have as much in high end retail and travel and entertainment. That's part of why While the pandemic was a bummer, they didn't hit us directly because the kinds of businesses that were waxed by the pandemic weren't really our customers. And the service based businesses have actually done quite well. So when we look at our current Thrive subscriber scrolls, It's very heavily concentrated around the service based businesses, just naturally because that's who our customers are, that's Who we have relationships with, that's who our business advisors in the field had relationships with. So that's who came on. And we had a pretty general product. It wasn't Really verticalized very much for them. And we've had some feedback. I call customers every week and talk to them about We've had some feedback that we could do more to customize it for them or verticalize it for them. And so we actually made a decision to do this last year. And with the pandemic, we paused that investment just In the interest of hunkering down. But we're very much on the game now. We've hired someone to Ron, the first verticals, the home services vertical, actually last fall, he's been hard at work pulling all the bits together. We've Created the technology and put it in and now are prepared to roll it out. And we really think The client satisfaction inside our very large service base is already in the client base will improve and we think that the Referral pass along kind of thing will accelerate some. And I'd like to have Ryan Cantor With a comment a little bit on the verticalization and our thoughts and plans there. Ryan, can you pitch in here? Sure can, Joe. Thank you. So I think it's Thrive Home Services is an exciting opportunity for us. As I stated in my statement, we Did start with the product. So we feel the product is we're honest on the first leg of verticalization. We've used a lot of feedback from our existing client base. A lot of them are in the home services segment to improve functionality within the product to specifically cater to them. And with that CRM enhancement that we announced a couple of months ago, we took kind of a very big but important step towards that journey. And so our product is verticalized today. We've then started working upstream with our sales partners and our demos are now verticalized with Specific verticalized demo tools so that every client when they come in sees a version of Thrive that fits their business needs. And as we've perfected that and Every stage of that obviously comes with its learnings and things that we can do better and feedback. We then take that and bring that to the market. You'll see changes to thrive. In our digital marketing, content marketing and social media strategy in the coming period where we then take that out into the marketplace to attract With the right message targeting the right customer specifically for Thrive Home Services. So hopefully that answers your question, but we really did start from A client experience, user experience and worked our way up the funnel so that as people buy this product, we don't disappoint. No, I appreciate that color and I don't think it's just the blueprint for some of the other verticals you can go after. And look, I like hearing about the focus around engagement. It seems like the improvement in ARPU and net dollar retention Has tracked that improvement in daily and weekly active users. So in the fullness of time, how do you think about a long term target for your net dollar retention As your customers continue to get more seasoned and in fact they add more integration solutions like DrivePay to their existing Drive usage? Well, look, like a lot of software companies, we've got quite a roadmap of products, modules, services that we intend to offer. And like a lot of software companies, we bundled a lot of things together when we started that There are opportunities for us to unbundle as we move out into the future. So we do have a Pretty robust plan to grow ARPU and to grow NDR and we made 16 points of progress year over year. I'm not going to say we're going to make 16 points of progress next year, but we have a road map that's going to deliver big progress next year and the year after And the year after that. And so I think you'll see NDR steadily climbing. And I know we certainly You see the literature and some of the other information that you've got some of these land and expand, boil up things that are way past 100%. We're making big sales to real businesses. So we're not our model isn't as land and expand as some of those, but we do think Band is some of those, but we do think 100 plus is in sight in the intermediate It's not something that we think we'll do in the next year, but it's that we definitely think that this will be a 100 plus NDR Your business as we continue to build out our product roadmap. Excellent. Appreciate the color. Congrats on the quarter. And your last question comes from the line of Vince Bittanzas with Cowen. Hi, guys. Thanks for taking the questions. Actually, I want to see if I can squeeze 2 in if you have time. But the first is On the SaaS ARPU to 304 versus 240 a year ago, I mean, it's quite a jump. Could you talk a little bit more about the factors behind the higher ARPU? Joe, you mentioned the move up market, but is that new customers coming on with higher Price plans or is the pricing tiered based on size of company, number of employees, usage, etcetera? Just trying to get a little bit more context there. Okay. So what you see happening, Lance, is we had an experiment a few years ago Moving down market, we put up a kind of buy it yourself online product at a little bit lower price point And we sold them like chiclets. I mean, they were selling like hotcakes. The problem is that those customers They weren't as serious. They weren't as engaged. They didn't use the product as much or in its intended way, and we experienced a lot higher churn. And we made a decision as a business that that just wasn't our ideal client profile. We did a lot of work with some outside vendors and our own team On really designing a crystal clear ideal client profile and that just didn't include these little tiny Hobby businesses, solopreneurs, little tiny, tiny businesses. There's a market out there for that, I guess, but that's not our market. And so we moved back up market and we timed it with a really dramatic upgrade in the software where it was really enhanced and improved and we eliminated all those lower price point tiers And we actually solidified our price at a higher point. We actually raised the price a little bit at the higher end And we locked down and started pursuing that higher price point. And so what you've seen happening over the last really 7, 8, 9 quarters As you're watching the mouse move through the snake, you're seeing that little churn bomb that we lit in our customer base roll off and go through and you're seeing those lower priced customers factored out of the picture. And you're absolutely right when you say A customer that bought yesterday is buying at a full price higher price point than they were buying at in the past. And so that's why you see the blend of that ARPU going up, up, up, up. When you layer onto that, The fact that we've made leaps and bounds in client engagement and usage and the software has gotten so much better that you have people Buying more seat licenses. You have people buying add ons and extra things. And so you've got spend climbing out of happiness and more usage. So those are the two things that are driving ARPU up. That's super helpful. Thanks. And then my last question, just again from the outside looking in, I mean, I see a business where you've got A revenue guide north of $1,000,000,000 and includes $150,000,000 plus of SaaS, yet your equity market cap is less than 800,000,000 I know you got some debt, but even adding the debt in, the enterprise value is about 1.3x sales. So clearly, you're not getting credit for the SaaS business. Is there ultimately a way to separate the SaaS business perhaps in a few years when revenues there are $300,000,000 or more or How do you think about that? Well, we think about it with a very relaxed long time horizon to be honest with you. We're doing really well. You mentioned that our equity market cap is $800,000,000 Well, it was $300,000,000 6 months ago. I We are beginning to get credit. There are, I don't know, 3, 4, 5, 10 portfolio managers out there that have found us and We're willing to go out and do some investment conferences and tell the story and we're pretty patient about it coming. I mean, The benefits of having the company together are quite dramatic. There's a lot of software companies out And they're all battling customer acquisition costs. It's tough to break through, especially to small businesses. It's tough to break through and have your message heard. For us to have hundreds of thousands of relationships through these marketing services that we can go out and have a conversation and be a big market leading brand that people stop and listen to that have it has credibility. It just sets you apart. It's not even a fair fight. It puts you in such a stronger position. So the benefits of having these things these two things together are so incredible that we wouldn't even contemplate separating them in the short term. I acknowledge to you that in the long term, it may be necessary to separate them to really crystallize value. But My time horizon, the management team's time horizon, many of our new investors that are coming in, we're all thinking in terms of 5, 7, 8, 10 years. We're thinking out in time. We think that Thrive can be the platform that you operate a small business on, just in the United States, but really globally. We're in pole position. The market is just unfolding. We think we're in the top of the second inning of a very, very big wave. Think back, if you will, to 4, 5, 6, 7 years ago and the way cloud was just coming on like gangbusters in the enterprise. It's just beginning, just starting for small business and we already have a fully scaled international platform that's best of breed It won 14 awards in the most recent round of awards. Go on Capterra or G2 Crowd, look at our Best value for money, best service, easiest onboarding. We're in a really good spot. So if it takes the market a little while to figure us Maybe we're an artist, it's misunderstood. We have to die and go away before our art is really valued. But we're looking A little bit longer term. Lance, you will know I just made a substantial personal investment in shares of the company just recently. My time horizon for that is 5, 7, 8 years. I'm cool with that and I think I'll do real well with that. Yes. Could we unlock some value if we hurt the company by separating it today? Yes. But we don't need to. We're not up against it on anything. It would be pleasant to have a higher valuation, but maybe that would just come as people see growth accelerating. And at this time, there are no further audio questions. Are there any closing remarks? Yes. I'd just like to thank everybody for tuning in. Back to Lance's question, there are a lot of folks that looked at us and said, well, is this really a SaaS business? Have they failed? What's the story? Because we did have a number of quarters where our both subscriber and revenue growth It was flat to even slightly negative as we worked our way through. We're a young software company. But during that time, what you don't know is we were focused like a laser beam on improving the software, improving its interoperability with other software in the marketplace, making it easier for small businesses to adopt and use us, Building out an app marketplace where the kinds of tools that small businesses needed were right in there, they could just plug in and make the software go. And all of that like a flywheel has been just driving more and more usage and more and more engagement. And we've seen quantum leaps And time in app, days logged into the app, number of messages sent, inbox things received. As we make the software easier to use, more and more of our small business customers are using it and recommending it to their friends. So It really has been a journey of making the software better. Obviously, this is a numbers oriented call, so we talked about Raising our guidance. But the big story here is the software got tons better over the last year. I think we show that we're X percent higher this year over last year in revenue, but the software got 3x better and that's what has really driven it. So I can hardly contain my enthusiasm. I talk to customers personally every week. I call them and just talk about how it's going. And the feedback I'm getting is you guys are getting this figured out. This is really starting to work. And people are running their companies on this software now. And that was only partially the case a year or 2 ago. We had a couple outliers, but people were struggling with some of the glitchiness of the early days of the software and the fact that it didn't talk to some of the other applications that they wanted to use. But we're really moving now And I think verticalization will only enhance that. So thanks everybody for your time. Really appreciate it. We're excited about updating you in 3 months' time on how this is all going.