Thryv Holdings, Inc. (THRY) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong SaaS revenue growth, subscriber increase, and ARPU improvement, indicating a healthy business trajectory. Although there is a conservative guidance approach due to potential economic challenges, the company shows optimism in business momentum. The reduction in net debt and leverage ratio, alongside exceeding cost synergies from acquisitions, further support financial health. Despite some strategic shifts causing short-term subscriber declines, the focus on cross-selling and upselling is expected to balance growth. The positive sentiment from analysts and the strategic plans for future investments contribute to a positive outlook.
Key Financial Performance
SaaS reported revenue $115 million in the second quarter, representing an increase of 48% year-over-year. Keep contributed $17.7 million in the second quarter. Excluding Keep, Thryv's SaaS business grew 25% year-over-year. The increase is attributed to scaling a profitable and durable software business.
SaaS adjusted gross margin Increased 430 basis points year-over-year, reaching 74%. This improvement reflects progress in scaling the software business.
SaaS adjusted EBITDA Increased to $23.4 million in the second quarter, resulting in a record adjusted EBITDA margin of 20%. This exceeded guidance and underscores the progress in scaling a profitable software business.
SaaS subscribers Ended the second quarter with 106,000 subscribers, including 14,000 from Keep, representing a 25% increase year-over-year. The growth is driven by a focus on increasing spend per customer and driving adoption of more products and solutions.
Overall SaaS ARPU Reached $352 in the second quarter, with Thryv at $340 (up sequentially) and Keep ARPU at $431. The increase is supported by a broad platform and redesigned compensation plans incentivizing increased monthly recurring revenue.
Net revenue retention (NRR) Achieved 103% in the second quarter, indicating strong client retention and growth in spending among existing clients.
Clients with 2 or more Thryv SaaS products Increased to 17,000 at the end of the second quarter compared to 13,000 in the prior year. This highlights traction with existing clients and adoption of more products.
Marketing Services revenue $95.5 million in the second quarter, above guidance. This performance is attributed to the dynamics of the print schedule, which performed better than expected.
Marketing Services adjusted EBITDA $27.8 million in the second quarter, resulting in an adjusted EBITDA margin of 29%. This exceeded guidance and reflects normalization of shared expenses.
Marketing Services billings Totaled $78.4 million in the second quarter, down 38% year-over-year. The decline reflects an intentional shift in strategy to upgrade legacy digital marketing services products to the SaaS platform.
Net debt Reduced by $24 million to $274 million, bringing the leverage ratio to 2.2x. This improvement is due to making two additional quarters of required amortization payments, effectively eliminating two years of required amortization under the new term loan facility in just 13 months.
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Operating Highlights
Thryv for HVAC: A new product designed specifically for the HVAC industry, leveraging Keep's automation tools. It focuses on marketing and managing the funnel for acquiring and retaining work, rather than back-office operations. Early sales have been promising.
Workforce Center: A new product aimed at helping small businesses manage payroll and tax compliance. It integrates seamlessly into the Thryv platform and is designed for scalability, catering to businesses with varying numbers of employees. Initial sales have been positive.
Vertical Market Expansion: Thryv is deepening its engagement in specific verticals, starting with HVAC, and plans to expand into other successful verticals in the future.
Channel Diversification: The company is investing in new partner channels, franchise channels, and agency channels to broaden its market reach and reduce reliance on direct sales.
SaaS Revenue Growth: SaaS revenue reached $115 million in Q2 2025, a 48% year-over-year increase. Excluding Keep, Thryv's SaaS business grew 25% year-over-year.
ARPU Expansion: Annual ARPU increased to $4,200, with seasoned clients spending $5,400 and U.S. direct channel clients spending $6,000 annually. The company aims to increase ARPU to $8,000 over the next few years.
Client Product Adoption: Clients using two or more Thryv SaaS products increased to 17,000, up from 13,000 in the prior year. Net revenue retention was 103%.
Transition to Pure-Play Software Business: The company is phasing out its Marketing Services segment, aiming to exit by 2028 and fully transition to a SaaS-focused business model.
Capital Structure Flexibility: Net debt was reduced by $24 million to $274 million, with leverage ratio improving to 2.2x. Lower required amortization payments will enhance financial flexibility.
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Risk or Challenges
Leverage Ratio and Amortization Payments: The company faced challenges with a rising leverage ratio and high amortization payments, which created financial pressure. Although they have made progress, these factors previously constrained cash flow and operational flexibility.
Decommissioning Legacy Systems: The transition away from legacy systems tied to marketing services added short-term costs, complicating operations and increasing financial strain during the transition period.
Keep Business Performance: The Keep business experienced softness, particularly in the demand generation side, leading to reduced profitability and cost-cutting measures. This underperformance could impact overall SaaS revenue growth.
Marketing Services Decline: The intentional shift away from legacy digital marketing services has led to a managed decline in revenue from this segment, which will persist until its planned exit by 2028. This creates a transitional risk as the company moves to a pure-play software model.
Customer Churn: Small business customers inherently have higher churn rates, which poses a risk to sustained revenue growth and customer retention.
GICS Misclassification: The company is currently misclassified under advertising instead of software in the GICS system, potentially limiting visibility among investors and affecting its valuation.
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Guidance & Outlook
Free Cash Flow: The company expects to generate free cash flow starting in Q3 and Q4 of 2025, allowing for decisions on allocation.
ARPU Growth: Annual ARPU is expected to increase from $4,200 to $8,000 over the next few years, with seasoned clients already spending $5,400 annually.
Net Revenue Retention: Net revenue retention is expected to remain slightly above 100%, with the current rate at 103%.
SaaS Revenue: For Q3 2025, SaaS revenue is projected to be between $116 million and $117 million. Full-year SaaS revenue guidance is updated to $460 million to $465 million.
SaaS Adjusted EBITDA: For Q3 2025, SaaS adjusted EBITDA is expected to range from $18.5 million to $19.5 million. Full-year guidance is raised to $70.5 million to $73.5 million.
Marketing Services Revenue: Full-year Marketing Services revenue guidance is raised to $323 million to $325 million.
Marketing Services Adjusted EBITDA: Full-year Marketing Services adjusted EBITDA guidance is raised to $78.5 million to $80.5 million.
Vertical Market Strategy: The company is focusing on vertical markets, starting with HVAC, and plans to expand into other verticals using tailored solutions.
New Product Launches: The company has launched 'Workforce Center' to help small businesses manage payroll and tax compliance, with early adoption already underway.
Future Growth Initiatives: Plans include a free trial motion for a product, investment in partner and franchise channels, and leveraging the agency channel for growth.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How will the HVAC product impact the business and what is the roadmap for future verticalization?
A:The HVAC product includes automations and is an upcharge. It helps HVAC companies by providing prebuilt automations and business processes, which can improve ARPU, engagement, and client satisfaction. It also helps retain existing HVAC accounts and attract new ones. The company plans to expand into other verticals by focusing on areas where they have the deepest penetration and success, with several vertical applications underway.
Q:How realistic is the back half deceleration on an organic basis in the guidance?
A:The guidance is conservative, assuming potential challenges like economic slowdowns. Management is excited about the business momentum and does not have specific concerns but prefers to provide numbers that stakeholders can rely on.
Q:What is the status of the Keep business and its impact on the company?
A:The Keep software is valuable, but its go-to-market motion had challenges. The company decided not to invest in unprofitable sales but is finding success selling Keep software through the Thryv sales force and partner channels. Cost synergies from the Keep acquisition have exceeded expectations, and revenue synergies are expected to grow over time.
Q:Why did the SaaS customer count contract by 4,000 quarter-over-quarter?
A:The company is focusing on cross-sell and upsell initiatives this year, leading to a flat client base but a significant increase in ARPU. They expect to balance adding subscribers and ARPU growth in 2026.
Q:What financial flexibility does the company have after passing the financial pinch point?
A:The company now has the ability to invest in salespeople, marketing, and share buybacks. They are also focused on repaying debt and deleveraging.
Q:What is the customer feedback and market fit for Workforce Center?
A:Workforce Center targets small businesses with fewer than 25 employees, providing a single platform for payroll and contractor payments. It is not expected to generate massive revenue but helps reduce churn and improve customer convenience. Early feedback has been positive.
Q:What are the opportunities for investment in 2026 after the financial pinch point?
A:The company plans to invest in sales channels, international expansion, marketing, and other initiatives that were previously scaled back. They aim to shift from a cost-cutting mode to a growth-focused strategy.
Q:How does the company plan to improve the percentage of customers with multiple SaaS products?
A:The company is modernizing its go-to-market efforts with data-driven sales strategies and account-based marketing. They expect the percentage of customers with multiple SaaS products to increase steadily, improving net revenue retention and reducing churn.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific timeline and revenue expectations for the Workforce Center and additional vertical applications, providing only general statements about their potential impact and early feedback.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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THRY Transcript
Thryv Holdings, Inc. (THRY) Q1 2026 Earnings Call Transcript
Positive4-30
The earnings call summary indicates positive developments: SaaS revenue and ARPU are growing, and the transition to a SaaS model is progressing well. The Q&A section reveals a positive sentiment towards AI integration and upmarket strategies, with no major concerns from analysts. Despite some margin compression due to strategic investments, the overall outlook is optimistic with a focus on high-value clients and innovative product offerings. The positive momentum in marketing services and AI product feedback further supports a positive stock price reaction over the next two weeks.
Thryv Holdings, Inc. (THRY) Q4 2025 Earnings Call Transcript
Positive2-26
The earnings call highlights strong SaaS growth, with increased ARPU and quality customer acquisition. Despite a decline in marketing services revenue due to strategic shifts, the company shows promising SaaS revenue and EBITDA projections. The Q&A reveals excitement about the new platform and AI integration, despite some churn and unclear long-term plans. Overall, the focus on high-value customers and AI-driven growth, along with improved financial health, suggests a positive outlook for stock price movement.
Thryv Holdings, Inc. (THRY) Q3 2025 Earnings Call Transcript
Unknown10-30
Despite strong financial metrics and optimistic guidance, concerns about execution issues in the SaaS segment and unclear management responses temper enthusiasm. The company's strategic shift and ARPU growth are positive, but missed guidance and a lack of specific details on future initiatives create uncertainty. Without market cap data, the prediction remains neutral.
Thryv Holdings, Inc. (THRY) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call highlights strong SaaS revenue growth, subscriber increase, and ARPU improvement, indicating a healthy business trajectory. Although there is a conservative guidance approach due to potential economic challenges, the company shows optimism in business momentum. The reduction in net debt and leverage ratio, alongside exceeding cost synergies from acquisitions, further support financial health. Despite some strategic shifts causing short-term subscriber declines, the focus on cross-selling and upselling is expected to balance growth. The positive sentiment from analysts and the strategic plans for future investments contribute to a positive outlook.
THRY Slides
THRY Report
Frequently Asked Questions
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