Thryv Holdings Inc (THRY) 2025 Q1 法說會逐字稿

Thank you for standing by. My name is Celene, and I will be your conference operator today.

At this time I would like to welcome everyone to the Thryv first quarter 2025 earnings call.

(Conference Instructions)

Thank you. I would now like to turn the call over to Mr. Cameron Lessard. Please go ahead.

Good morning and thank you for joining us for Thryv's first quarter 2025 earnings conference call. With me today are Joe Walsh, Chairman and Chief Executive Officer Grant Freeman, President, and Paul Rouse, Chief Financial Officer.

During this call, we will make forward-looking statements that are subject to various risks and uncertainties. Actual results may differ materially from these statements. The discussion of these risks and uncertainties is included in our earnings release and SEC filings.

Today's presentation will also include non-GAAP financial measures which should be considered in addition to, but not as a substitute for our GAAP results. Reconciliation of these measures can be found in our earnings release. As a reminder on this call, fast revenue reflects the combined performance of thrive and Keap. We will only specify Keap's performance when discussing its revenue contribution for the quarter and fiscal year. With that, I'll turn the call over to Joe Walsh, Chairman and CEO.

Thank you, Cameron, and good morning everyone. I started 2025 on really good footing, just continuing the momentum that we had in 2024. And for the first quarter we delivered both the top and bottom-line guidance beat, so we're really proud of that. Our execution has been excellent. Our team are working really hard to develop additional products and additional services, and the marketplace is responding well to them.

So pretty happy with what's happening with Thryv as we continue to develop as a software platform. When we look at the actual results for the first quarter, we had 50% year over year revenue growth, and when you normalize for the Keap acquisition, we had 24% growth, so that even margin expanded to 10%. SaaS revenue is now 61% of revenue for this quarter. So you think about that, we are transforming this business from marketing services to SaaS, and I know there are a lot of people waiting for us to become completely SaaS. We're just about there. I mean, we're majority SaaS revenue now, and that's a big milestone for us as a business.

Another thing that happened is our pool increased. $335 a month with the A poo that we delivered up nicely from the last period. I think you're going to see that trend throughout this year as we continue to go back to existing customers and add more products on our season net revenue retention reflected that motion to 103%, so pretty solid outcome there for net revenue retention, we're pleased with that.

Subscriber growth is 37%, bringing the thrive total to 96,000, and if you include the Keap subscribers in there, it's 111,000 overall. One of the key drivers in acquiring Keap was the partner channel. They have an excellent partner channel. They've been at it for a long time. A few weeks ago, I was able to attend our partner con conference out in Arizona, which was a combined thrive and Keap partner conference with more than 100 of our partners in attendance, some from as far away as Europe and Australia.

It was great to have a chance to talk to them about what they're thinking and what they're thinking is they want to sell the full Thryv product catalog. The idea that they can add the top of the funnel or Thrive is really good at helping you build your list, helping you meet new customers, helping you be found to the very strong key products in the middle and bottom of the funnel.

Where you nurture your list and convert sales and then follow up post sale for more business in the future kind of gives them a more complete marketing funnel and they feel like it's going to help them grow their business and that they're excited about that. So, it gives me a lot of hope for what '26 and '27 are going to look like in terms of us beginning to really build up that partner channel that they have the full, catalog of thrive and Keap products to sell.

So to tell you more about the progress of our business, I'm going to bring Grant Freeman on, our President. Grant.

Thanks, Joe, and thank you all for joining us. In 2025 we're entering a new chapter of growth for our SaaS business. Many of you have tracked our progress cross selling and upgrading marketing services customers to SaaS products. As you probably know, most of the legacy customers we converted to SaaS were upgrading. To our marketing center product which, as you probably remember, helps clients boost their online presence, gives them lead attribution tools so they know what marketing and advertising is working, and also helps them manage their social media posting across multiple platforms in addition to other features that are tied to growth.

Our sales strategy will remain focused on growing our staff subscriber base through upgrades, cross sales, and new sales. Of course, our most efficient path forward is deepening relationships within our existing software base and expanding their spend. As of the end of the first quarter, 17.2% of our staff subscribers use multiple paid products, a nice increase from where we were. As we've analyzed retention trends across our customer base.

One thing has become glaringly clear. Expansion within our existing clients is one of our most compelling opportunities. When a customer adopts a second paid product, their churn rate drops significantly. Recently, we see it dropping as much as in half compared to just those with one product. Not only does this increase revenue per account, but it dramatically extends customer lifetime, making expansion a far more efficient growth lever than relying solely on net new customer acquisition.

At the start of the year, we reoriented our sales organization around growing monthly recurring revenue rather than prioritizing new account acquisition. Each business adviser now manages a large book of business with improved cadences, better automations, and enablement tools to help the rep efficiently increase average spend for each account. The result is a more consultative, value led approach that has meaningfully improved per rep productivity in recent quarters. This shift was deliberate, and the results are really encouraging.

We did things like overhauling the compensation to reward MRR and expansion. We've encouraged reps to focus less narrowly on selling individual centers and more broadly on selling the full scope of fast solutions that may benefit a given customer, and we encourage reps to focus on existing customers where wallet share expansion is more efficient. The strategy is working. Our productivity is improving, and importantly, we spend less to acquire higher quality growth from within our existing client base. Customers are responding positively to our growth oriented tools like marketing center growth packages and other customer acquisition add-ons that we offer.

These products serve as a natural springboard for introducing CRM and workflow automation later on in the journey. We're also seeing encouraging results moving upmarket with modestly growing average customer size and higher ACVs through more consultative sales approaches and multi-center deals. This is particularly important as we go deeper into specific verticals and higher performing SMB segments.

Maybe what's most gratifying is that our clients are happy and they are bringing their friends to learn about our platform, so we have a large referral flow. As such, a large portion of our new clients come via these referrals, which continues to be a strong motion for our business advisors. On the product side, we built five robust centers and added more product to bring to market with the introduction of Keap automations. This phase focuses on deepening adoption rather than just expanding subscribers.

Finally, Keep provides strategic advantages through its automation engine, its partner network, and R&D capabilities. We're just beginning to explore cross-selling opportunities between our customer bases and at the end of the day when we help clients do more, they stay longer, creating compounding growth. With that, I'd like to introduce Mr. Paul Rouse.

Thanks, Grant. Let's dive into the numbers. SaaS reported revenue was $111.1 million in the first quarter and above guidance, representing an increase of 50% year over year and up 7% sequentially. Keap contributed $18.9 million in the first quarter. Excluding Keap, Thryv SaaS business grew 24% year over year. SaaS adjusted gross margin, increased 490 basis points year-over-year, reaching 73%. The first quarter total SaaS adjusted EBITDA increased to $10.8 million, exceeding our guidance range and resulting in an adjusted EBITDA margin of 10%. This performance underscores the progress we're making in scaling our profitable and durable software business.

As we noted last quarter, first quarter included a temporary headwind of approximately $2 million to $3 million tied to shared cost allocations, with fewer print publications scheduled in the beginning of the year, a greater portion of operating expenses were attributed to the SaaS segment under our current allocation methodology. Which follows revenue activity. This dynamic will begin to reverse in the second quarter as print revenue recognition ramps, shifting these costs back to the marketing services segment. Importantly, this will also begin to smooth out for the remainder of the year and beyond as we extend the majority of our print publications onto a 24-month cycle.

That change improves visibility and leads to a more consistent cost attribution across the business. We remain focused on driving profitable growth in, balancing top line expansion with disciplined cost management. And we expect continued adjusted EBITDA margin improvements as we move through the year. We concluded the first quarter with 111,000, SaaS subscribers, including 15,000 Keap subscribers. This reflects a substantial 59% increase in our subscriber base year-over-year.

As Grant mentioned in his remarks, a key element of our go forward strategy involves focused effort on our existing customer base to drive increased value and revenue. With a significant portion of our current subscribers utilizing only one paid product. We are strategically positioned to expand their engagement and adoption of our broader offerings. This initiative to drive greater spend within our existing customer base is not only a pathway to ARPU expansion throughout 2025, but also represents a more efficient and significant contributor to our bottom-line profitability.

In the first quarter, our overall Saas ARPU reached $335. Thryv contributed ARPU of $320 showcasing positive quarter over quarter growth. Keap specific ARPU was a robust $428 similar to last quarter. Looking ahead, we have a good line of sight for continued ARPU expansion throughout the year, driven by the inherent strength of our software platform with its multiple adaptable products, as well as our recently updated compensation plan designed to incentivize and drive increased MRR.

We reached our highest reported season net revenue retention this quarter of 103%, emphasizing the differentiated value we create and the sustained return our clients experience. We've discussed previously that our long-term goal is to maintain retention near 100%. Which we expect to continue to achieve. Additionally, clients with two or more Thryv fast products grew to 16,000 at the end of the quarter compared to 12,000 in the prior year. Further highlighting the expansion we are seeing with existing clients.

Thryv centers per client also grew to 14% at the end of the quarter compared to 8% in the prior year, further highlighting the traction we are seeing with existing clients. Moving over to marketing services, first quarter revenue was $70.2 million and above guidance. First quarter, marketing services adjusted EBITDA was $10.1 million, resulting in an adjusted EBITDA margin of 14% and just above guidance. As anticipated, this quarterly performance is subject to the dynamics of the print schedule. And we project a return to normalized levels starting in the second quarter. First quarter marketing services billings were $81.4 million, reflecting a 42% year over year decline.

This trend more closely aligns with our strategic direction for marketing services as we continue to convert many of our legacy marketing services clients to our SaaS offerings. The pace of this transition impacts the rate of decline in marketing services billings. As previously disclosed. We are exiting the marketing services business by 2028 with cash flows from the business extending into 2030. This will provide the company with ample liquidity to meet its obligations during the transition to a fully fast-focused model.

First quarter consolidated adjusted gross margin was 68%. First quarter consolidated adjusted EBITDA was $20.9 million, representing an adjusted EBITDA margin of 12%. Finally, our net debt position was $298 million at the end of the first quarter. Our leverage ratio was 2.2 times net debt to EBITDA in line with our expectations. Net debt increased primarily due to planned upfront vendor payments, the timing of corporate bonus payouts, and the extension of our print directory assets to 24 months.

Its lengthening of the directory cycle is a component of our previously communicated strategic plan to exit the marketing services business by 2028. As we've previously discussed, the afore mentioned factors are expected to result in peak leverage during the second quarter on a trailing 12-month basis, not withstanding our anticipated strong EBITDA generation in that period. We expect a substantial deleveraging in the back half of the year as these impacts normalize.

Turning to our outlook for 2025, for the second quarter, we expect SaaS revenue in the range of $113 million to $115 million. For the full year, we expect SaaS revenue to be in the range of $460.5 million to $471 million. The second quarter we expect SaaS adjusted EBITDA in the range of $18.5 million to $19.5 million. For the full year, we expect SaaS adjusted EBITDA in the range of $67 million to $71 million, which implies SaaS adjusted EBITDA margin of 15%. The adjustment is related to projected traffic costs. For the full year, we are confirming our marketing services adjusted EBITDA guidance range to be $77.5 million to $78.5 million.

Now back to Joe.

Thank you, Paul.

We got a good start to the year, as you've heard, strong core metrics, healthy customer spending, we're doing well. But we do read the same headlines that you do that, awful times are ahead and it's going to be tough and so on and I wanted to spend a minute speaking to that. Our customers do break fix stuff. They're the guys that show up when you have a broken window or your roof's leaking or your car, the check engine light comes on or you break a tooth and you got to go to the dentist. They solve all those non-discretionary problems, and they are therefore very resilient.

We don't have any luxury stuff. We don't have any discretionary stuff in our customer base, no little blue boxes, no fine dining. Our customers are very resilient and so I've been working with small businesses for a long time. I would expect they will be very resilient going through a recession if one is in the offering for us. What I'm finding is that we're in kind of a Goldilocks moment, meaning sometimes when things are too good and expectations are too high. Small businesses can be, a little slow to invest in marketing tools and doing stuff.

Right now, they are concerned about making sure their order book is full, making sure they know where their next jobs are coming from, and accordingly they are buying marketing center and buying a lot of its growth package add-ons. So, much so that we're seeing additional traffic expense because of that. And so I consider that a really good thing. It's a little bit of additional cost to that, but it's a real good thing to see that small businesses want to meet with us, they want to buy a marketing center and they want to buy add-ons.

So, I think that's, a real positive. Just my final comment here on the guidance that we've taken for the year, we've taken a very conservative view in light of all the headlines and all the things that we're hearing and seeing out there. We want to make sure that we can continue to fully deliver on our promises. We don't actually see any big problems at the moment. Maybe it's out of an abundance of caution, but we feel very confident in the results we've had to date and very confident in the products that we have that they're appropriate for this time, so.

With that operator we can turn for questions.

Thank you. We will now begin the question-and-answer session. (Conference Instructions)

Your first question comes from the line of Arjun Bhatia with William Blair & Company LLC. Please go ahead.

Perfect. Thank you guys and congrats on a nice strong start to the year here.

Joe, one of the things that, stuck out to me this quarter was the net retention rate that you called out at 103%, and it sounds like that was a record high. It seems like the priority on cross expansion is working already, but can you maybe just elaborate a little bit on that?

What are customers buying, in addition to their core thrive fast implementations? Which new products are you seeing traction for? And then for your great I'd be curious to hear just in terms of how Salesforce readiness is playing out to be able to kind of sell these newer products, that you've launched relatively recently?

Thank thanks for the question, Arjun. We have been investing the last couple of years, not just in developing new software centers to build up the platform. But also, in our actual go to market motion. We've been doing a lot of work on go to market and we're able to give the in their salesforce Automation tools and, each. Morning, go call on this customer and have this conversation and here's why and I think you're seeing a lot of that come through and you might say. Well haven't you always had that we haven't we've worked really hard on that the last couple of years and we're seeing the fruits of that in terms of what those plays are, we are running very specific plays against the date and with a good effect.

So the simplest one is adding additional centers, so you know they'll have a business center lab marketing center, or they'll have marketing center lab business center or we'll reporting center and adding additional full-on centers, but even shy of that, we have been also developing some simple add-ons to help boost the amount of new businesses that they need, basically boost their presence in the market, and help Thryv additional lead to additional new customers.

I mentioned on the call that's been really strong lately and I think and I know. It we're supposed to be crying in our beer about the economy. It's supposed to be terrible, but our guys are chugging along doing fine. We aren't really experiencing. a whole bunch of macro issues, we're chugging along and I can't really, point to anything that's happening there, we sort of I guess, bracing for all that we're reading about, but we're just not seeing it. I mentioned on the prepared remarks, I mean our customers break everything that or fix everything that breaks in your life. When that stuff breaks you're still going to fix it even if, the economy is a little softer so they're definitely interested in trying to make sure their order books are full. So, I hope that helps.

Yes, very helpful. And then, the second question, you mentioned an increased traffic, expense, from, I think customers seeing or you guys seeing elevated demand for marketing center is that largely just kind of your inbound marketing costs, your lead gen costs, what, what's exactly going into the incremental traffic expense you're seeing here?

One of the tools that is an add-on to marketing center. So, marketing center is a platform that instruments all your marketing allows you to make, data-driven decisions you can manage your social in there. You there's a whole bunch of good things you can do. We've added on top of it now, some add-on tools. Where we'll help you optimize your position of your website to help you show up better and more organic results. And we've also added some things that have traffic in them so we're actually, driving search in the into your business as well.

And that product has continued to sell well it's actually sort of you know, in the mix of things out. Script actually what we thought it would do. So, we had planned for a little bit of tech in there and it's just a little bit more, so it's not a giant thing. I just wanted to bring it up as, one of the moving parts and it's sort of contrast to at least. What I read sometimes in the media that, small businesses are going to roll over and stop we're finding that they're marketing, they're out there doing their thing looking ahead, trying to make sure their order books are full.

Okay, yes, that's super helpful, perfect, thank you guys.

Your next question comes from the line of Scott Berg from Needham & Company.

Please go ahead.

Hi everyone. Pardon me, nice quarter here, everyone, thanks for taking my questions. I guess a couple questions, Joe. Let's start with the Keap partner conference. It was your first one. My guess is that you've been to, obviously with the acquisition just, less than 6 months ago now, but, almost exactly six months ago now. But what were your takeaways from that conference? What were you hearing from partners of that platform with regards to how they think this combination can work going forward.

Well, first of all, thank you for attending. I appreciate that. The partners have been thrilled with Keap automation and the way they're flexible, the way they're able to put them in, and it's a key part of the service they provide to, various customers and you illustrate that a lot of our partners are people that we specialize maybe in a particular vertical, so maybe they help wellness people. Or maybe they help dentists or maybe they help, gyms, stay pack stay full, and they help them with all their marketing and so on. And what they do is they use the key tools to build automation not, for their marketing in some cases, not even for their marketing for other things like hiring automation or service fulfillment.

But one of the things that he never did and doesn't do is it doesn't help you build your list. If you have a list that nurtures the list and it helps you work your way through. So, they're super excited about Thryv the ability to help them build that list meet new people, add new people to the top of the funnel. So if you picture a marketing funnel where you meet people and they start the process. Thryv is really good up at the top of the funnel and Keap is really good in the middle and the bottom of the funnel, the nurture and convert and then follow up stuff.

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

The other thing that they wanted is that, to the tail end of the of the prior administration and Keith, they were kind of a little bit of a harvest mode. They weren't really growing. They weren't really investing a lot in nourishing their partner channel or even innovating the product as much as they had in previous years. And so, a lot of the partners have got lists of apps of things that they would like from Keap that they're waiting for and immediately when we got the Keap, we leaned in to try to speed some of that up and we were able at the partner conference to unveil some things that are now done and then to make some near term promises for additional improvements.

API hooks, other things that they're, some technical things they're looking for that will make their experience would Keap better and so I think there's pretty high morale. I mentioned they traveled in from all over the world, so we needed to give them something and they would have they would have flown back to Italy or wherever they came from pretty disappointed. So, we feel like it was a real success and the sense of community that they have built a lot of these people have been coming, working with people and coming to these conferences.

For you know more than a decade. So there's a real, there's a lot of people that are personal friends. a lot of that and the other thing we did that they did was really cool was a networking session where they had people sit at a big table and kind of move every three minutes. And meet all these different people that they hadn't known before as you kind of scooted along almost like speed dating and I think they really appreciate the power networking that happened there as well. So anyway, the conference was a big success and we're planning a customer event in the fall that that will be many times what partner was, which was just for partners.

Understood helpful and thank you for that, Joe. I guess that last question for me is your customer editions were down 3,000 in the quarter looks like it's kind of related to the core Thryv customer base there is, I guess maybe can you add a little color in terms of why that's down quarter over quarter, I know you're focusing a little bit more on expansion activities and top of the funnel and bringing you know customers in but I would have thought maybe even with that focus we'd see something that was closer to the flat quarter.

Over quarter yeah, good question. Look, the holiday season is always tough for us. In Q4, we're doing fine in the beginning of Q4, but as we get to, that Thanksgiving to New Year's, even a little past New year's run. Here in the US it's harder to get small businesses to sit down and have a conversation with us. They're doing their own lives, they're taking vacations, they're doing their own thing trying to finish up, home services jobs for customers under a lot of stress and ready for the holidays and then our own employees, a lot of times have personal plans to, take extended trips because it is a soft period, so it seems to feed on itself. That's here, when you get over to Australia and New Zealand.

It's next level because it's the Middle of the summer for them and it's their big mid-year break and they pretty much, pull the ripcord A week or so before the Christmas holiday break, and they show back up in late January. I mean they're gone for a while they do a lot of international travel and they live life to its fullest, which is great, we love them, but it just makes that period a little softer always and if you go back and you look at your prior years, we've been soft there.

Or relatives, so our business isn't seasonal other than just the ability to sit down and talk to people and get it done. So I think, that's always part of it and then the second thing is we really put an enormous amount of emphasis on running these plays into our face like on purpose, and so we've kind of eaten up some of the available sales time that they might have been, out prospecting. It's going into the base. Now, the thing that's an energizer bunny that always keeps going for our business advisors is referral.

So, we're always getting more and more referrals and that they serve those referrals whenever they come in, but even that motion flows a little bit during the holidays just not top of mind always to add new software. Hey, it's Christmas. I'm going to add new software. So anyway, that was, that was sort of I wouldn't get overly alarmed about it. Keep in mind how huge the gains were coming into that and we were anxious to get to those, new customers and talk to them about more stuff.

Understood, thanks for taking my questions.

Your next question comes from the line of Jason Cryer with Craig Hallum. Please go ahead.

Great, thank you guys. Maybe I'll start with Grant you know you'd highlighted some changes in the sales motion just curious, if we go into a more challenging macro environment, is there a different product suite that you think resonates better with your customers that you're that you would try to lean into?

Well, it's funny, there have been times in recent memory when the economy was so hot that our guys were booked solid. So, when you would go to them and talk to them about, putting in additional marketing instrumentation or better ways to run their social media or just different things that would be marketing oriented and help them grow they weren't necessarily at the very top of their list.

And if there's a threat that things are going to slow down or let's say things even do slow down a little bit, they're much more anxious. To prioritize meeting with you about that stuff and focusing on that stuff so that they can get work. So, I mentioned I almost feel like the current environment is sort of Goldi locked because it's not bad at all. It's more than it's supposed to get that in the future. And I think it's that supposed to get that in the future thing that that's causing them to really pay attention. So, yeah.

I guess the answer to your question is answered directly is, all of the grow your business type stuff that we offer, it's particularly in demand if things slow down, and then when things are hot as a firecracker. We maybe are leaning a little bit more into the run your business stuff, getting into the I sometimes use the expression the broccoli stuff you should be doing, CRM type stuff working on your schedule or your estimates, invoices, billing, working on your ratings and reviews, all that stuff, and at the moment, the marketing and sales kind of stuff is really in both

Appreciate that. Just wanted to see if you can unpack like you gave a lot of good commentary on what you're seeing right now. You haven't seen incremental pressure things like that, but can you maybe pair that with how you're thinking about the guide, your decision to maybe pull back on expectations for fast revenue this year? Is it just cautionary for what may come or just any more thoughts there?

Yes, you just answered your own question. That's exactly what it is. We just, we feel like a more cautious stance is appropriate given, the really just the tremendous uncertainty that's in the market. Our, I mentioned. Before our guys fix the broken things in the world. But they have to get sub-zero refrigerators from somewhere they have to get, fancy window packages. They have to get stuff that, potentially gets affected by tariffs, so there's lots of concerns about that, and then there's just overall, economic noise and, there's scary media headlines.

So I think it was just prudent in all honesty, it's not lied to anything specific that we're seeing, we delivered, I think I say on our first quarter and we have great line of sight into the next quarter, but the whole rest of the year is a long time and with all the prognostications, so you've read some of them about, recessions and other things, it just seemed prudent to back off, we didn't move it very much, all in all honesty, but we just thought it seemed to make sense to take a little bit more of a cautious stance that makes sense to me.

Thank you. I appreciate. It.

Thank you.

Your next question comes from the line of Zach Cummins with B. riley Securities. Please go ahead.

Thanks, good morning, and appreciate you taking my questions.

Joe, I wanted to ask about just retention of many of these marketing services customers that are moving over to the customer base. I mean, can you talk about, I know you had a huge influx of those customers coming over in 2024, so you just talk about the initial conversations and kind of the success you have of maintaining those customers, for kind of a year plus after bringing them over last year.

Yes, I think that's a wonderful question. Same, we haven't been able to tease out any difference in the churn rate. I mean it's the same as the other customers that were selling that we sold before. It's the same, we are dealing with very small businesses. So when you're dealing with SBs you're going to have a little higher churn and Yes, I think we talked about that we've established that but we're not seeing any difference in churn with the folks that, we've selected and brought over from marketing services.

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

Somewhere and had limited capabilities and we're giving them a real improvement. Where they're getting a lot more functionality, a lot more cap, a lot more value for money. In in the change and They are responding by beginning to use some of it and access some of that and being receptive to have conversations about adding more products. So, I think that's the big success story that, over the last recent period, is the success we've had with those now, obviously on the map, if you're adding big numbers like that, you are going to have a little bit more turn. You're poking the bear, right?

You're taking, you're moving them over and you're moving big numbers over, so we have to outrun that a little bit, and you saw a little of that quarter or between seasonality and just that that that you know the big quantity. We were sequentially down a little bit, and I've said very clearly that we don't expect this year to be anywhere near like last year in terms of a big surge and stuff. It's going to come more from expansion of spend this year. Our long-term guide on this is that our roughly $4000 per customer will expand to $8,000 over.

The next couple of years now that the platform is more close to being built out and a lot of our energies and attentions are going to go into expanding that spend and quite frankly, as investors. You should love that because that's a more efficient motion than out prospecting, you get your return on your time is better your return on the investment of energy is better when you're selling to existing customers rather than having a prospect. So, I hope that answers the question.

That absolutely really helpful on that front and my one follow up question, I know your core Thryv fast customer base and just all of those customers tend to be pretty resilient despite whatever the macro. Is I was just curious if there's any meaningful contrast with the Keap customer base and really as we think about the updated guidance, are there any changes and assumptions for the core business versus maybe what Keap is going to be contributing this year?

Yes, the Keap back this is going really well. We, I mentioned before, we had some promises around synergies in the combining of the businesses and we crystallize those and feel really good about, delivering on the profitability and EBITDA they are coming out of the Keap business and operationally. All the things that matter when you're running a business like people computers and their email sign on their phone systems and their benefits, we've gotten all that stuff, sorted out in a great big hurry, so we're really proud of that and I think we're also proud of the cultural merger and integration that we've had.

We spent time talking with those folks about the mission they were on the mission that we were on previously and how that those missions together are stronger and better and we've had very little turnover, people leaving or something like that, not excited about the future. And so it's really set us up very well. So we're excited about the Keap acquisition. I spoke at length before about the channel partner, approach and all that stuff. Look deeper then into your question into the customer base Keap customers tend to be more online businesses.

They tend to be more, coaches, consultants, guides, people that you know. Do things on the web or as I mentioned. Some agencies that then help terrestrial businesses with their business. And it's there's a lot of overlap. There are only 50 customer overlap between the entire two customer bases for this precious little overlap, but so far their customer base has proven to be very strong and resilient too, and they also are not involved in too much discretionary stuff, fine dining or whatever I did meet at the partner conference a few travel related, partners that conduct specialty trips for certain demographic groups or certain niches, so, maybe there's a little bit of that, but I think it's a handful of people, and none of them indicated any problem.

They seem to be, they were actually one of them was a speaker up on stage talking about the growth that she's experienced year over year and is planning for this year based on all the automation and the power of them and what she's learned from the partner network about how to market her travel offerings and so on. So, no I'm at least not yet looking for anything and again they have 15,000 customers, so it is a smaller part of our base. I don't have as much experience with this group yet. I'll certainly keep you posted in the coming quarters, but so, far I don't see any, there there's not a whole bunch of high-end restaurants in it or something like that.

Got it. Well.

Your next question comes on the line of Daniel Moore with CJS Securities. Please go ahead.

Hi, this is Will on for Dan. I think you said that your long-term net revenue retention goal is staying at 100%. As you shift your sales focus, recurring revenue, increasing average spend per account, would you evaluate, raising that goal.

That's a really good. Question. I think there's going to be ebbs and flows to where our focus is. We had a massive ad last year of new subs as we, selected marketing services people to come over, to have these upgraded experiences. I spoke about it earlier and the job now is to sort of bed them down, go see them talk to them about how to use it, what they can do, and all that's going on.

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

The BSB, these aren't enterprises. Some of them do actually go out of business, some of them do actually fail. And there's an uncontrollable loss that's always going to be in our numbers. That's offset by the fact that there's such a gigantic supply of them, that are in the markets that we're trying to serve like $8 million businesses so we've got, we can very easily on fairly short sale cycles in place.

One that leads and the DSP segment is just now migrating to the cloud. It's still pretty new for them. So I think it's a wonderful market. I think in a lot of ways a better market than enterprise. I know. You're probably, putting your eyebrows. Up on that, but it's just so big and it's just so early. It's just so much growth there's so exciting. But it comes with, a little bit higher churn and a little lower revenue.

So, It's not a crazy question at all, and we probably will have some pretty high stepping on that revenue retention, over the next couple of fiscal periods just because we're putting such focus in the base, but that focus could also swing much more to expansion in the future at some point. So, I think I'll stick with the guy that we're going to be there, thereabouts around 100 and if we Keep blowing it away every period. You can ask that question again in a couple of quarters and we'll have the champagne conversation about. Yeah, maybe we should raise it but right now I think I'll hold where we are just out how conservative.

Thanks for that. And then just one more, now that you've accelerated the migration to a fully SaaS based business, what is your target leverage range over the next 2 years to 3 years?

Paul, why don't you take that one.

Yeah, right now we're on a leverage our we plan to continue to pay down debt.

So, I think you would expect leverage to improve consistently as we go out in time. That's our plan at the moment.

Thank you.

And your last question comes from the line of Matt Swanson with RBC. Please go ahead.

Yeah, great, thanks for taking my questions and congrats on the strong start to the year. Joe, as you see more success cross selling, can you talk a little bit about how you're working to kind of ensure that continued success post implementation and make sure customers are seeing kind of the compound compounding value of the combined platform.

Yes, thanks for the question. That's a good question. We -- that's probably our one of our, number one areas of investment because if you look at the profile of our base, you'll see that it's been, getting bigger and there's a lot to take care of. So, we really prioritize their experience and we go at it with a CX a customer experience team that uses a variety of tactics. I mean they literally are calling them they're on Zoom with them. They have what we call tech touch, meaning they're sending them in app messages, they're sending them emails.

So, that we're reaching out to them and it's in the hundreds of thousands of reach out kind of thing just to make sure and then we will schedule time with them, we'll jump on Zoom with them, share the screen with them, go through it, so that's happening. And then our business advisors are visiting them in person and spending time with them trying to do the same thing. So small businesses are busy and honestly, their lives are hectic and they honestly sometimes break appointments with and things like that because the truck broke down or, they have an emergency on a job, so it sometimes can be a little scattered.

You got to really work at it. But we are really working at it, and I think for evidence of that I would look at the fact that the churn profile of these people that have been, upgraded to other stuff has been similar and they're spending more when you look back six months or a year later. So that's really important and then once they you do engage with us, they do dig in and hopefully they add something to it then we see the churn profile really so. That's a point of focus for the company has been in the recent past and will be this year and a place that I think we're good at getting better at it. We're becoming more and more innovative in how we do it, and I think we're doing a really good job.

That's really helpful color and then we've mentioned a couple times on the call the Goldilocks moment for the customers, but I guess just maybe acknowledging like how your customers see the same news articles we do like does this change your go to motion or go to market motion at all, maybe like emphasizing the ROI of the platform more or is there any way you can kind of incorporate that into actually like a positive or a tailwind for the company.

Yes, It's a wonderful question. Because there's different flavors for different days and I sometimes liken the growth aspects of our software to piping hot french fries and the kind of run your business aspects of our software to steamed broccoli. We all know that steamed broccoli is really good for you, and you should eat it and you feel be healthier, better, so, but it's sometimes not as fun and exciting. There have been periods where we were out there flinging the broccoli or really doing a lot of work on how your scheduler runs in your operating your business, CRM in the back.

At the moment, the flavor that is really hunting is talking to people about growth and we're seeing a lot of uptake growth. And that's where the Goldilocks comment came from. I remember in the period when the government kind of took a helicopter and threw money at people right after COVID, every one of our guys that build decks was booked out for a year for decks, and if they built swimming pools, they were booked out in swimming pool for a whole year and so on and so forth.

Everything was just, they were so full, it was hard to talk about anything marketing. And so the thing that you did is you talked about operating stuff. But right now there's more trepidation about that order book into the future. And so they're really anxious to take a meeting, keep the meeting, and really focus on you on. How can I make sure I've got the work going forward and so that's my comment around Goldilocks. They're not broke where they can't write a check and buy it. They're still doing all right, but they read these headlines and it causes them to be more focused on their marketing. That resonate with you?

That concludes our question-and-answer session, ladies and gentlemen, that concludes today's call.

Thank you all for joining. You may now disconnect.

Thank you.