Thryv(THRY)2023-11-05 12:30Financial Data and Key Metrics Changes - The company generated approximately $7 million in adjusted EBITDA and $37 million in cash flow for Q3 2023, indicating strong cash management despite a light revenue recognition period [3] - Third quarter consolidated adjusted gross margin was 60%, with adjusted EBITDA of $7.3 million, representing an adjusted EBITDA margin of 4% [9] - The net debt position was $377 million at the end of Q3, with a leverage ratio of 1.8x net debt to EBITDA, well below the covenant of 3x [9] Business Line Data and Key Metrics Changes - SaaS revenue grew 19% year-over-year to $67.4 million, with an adjusted gross margin of approximately 67% [21][23] - SaaS subscribers increased to approximately 66,000, a 29% year-over-year growth, while ARPU decreased by 3% to $365 [8] - Marketing Services billings were $159.5 million, reflecting a 19% decline year-over-year [9] Market Data and Key Metrics Changes - The international business is developing positively, with all centers now available in all markets, contributing to optimism for future growth [11] - The company is facing FX pressure, particularly in Australia and New Zealand, impacting the Marketing Services outlook [10][80] Company Strategy and Development Direction - The company is focusing on its SaaS business, aiming for it to become the predominant revenue stream, with expectations of approaching 40% of total revenue next year [59] - A new commission structure for the Marketing Services sales force is being implemented to drive higher productivity and growth in the SaaS business [10][80] - The introduction of the Marketing Center is expected to enhance customer engagement and facilitate upselling opportunities [28][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects of the SaaS business, anticipating revenue growth acceleration and margin expansion [12][24] - The macroeconomic environment remains challenging, but management believes there will be an acceleration in SaaS growth due to the full platform being sold in all markets [16][77] Other Important Information - The company has made $105 million in year-to-date term loan debt repayments in 2023, indicating a commitment to strengthening the balance sheet [9] - Approximately 8.3 million warrants expired unexercised, with minimal dilution and $15.8 million generated for debt paydown [26] Q&A Session Summary Question: What contributed to the strong net new customer additions in the SaaS business this quarter? - Management noted that the Marketing Center's closer alignment with customer needs has driven traction, and many new customers signed up at lower introductory prices, which is expected to improve ARPU over time [14] Question: Can you elaborate on the FX pressure affecting Marketing Services? - The FX pressure primarily relates to operations in Australia and New Zealand, and the company is restructuring its sales force to enhance productivity [15][80] Question: What is the outlook for Marketing Services EBITDA in 2024? - Management indicated that while there may be a slight recovery in Marketing Services due to more books being published, the focus will remain on growing the SaaS business [53][80] Question: How does the Command Center fit into the overall strategy? - The Command Center is still in beta, and while it has generated user interest, significant revenue is not expected until later periods as the company focuses on delivering value first [36][69] Question: What is the potential for further adoption of the Marketing Center within existing customers? - Management is optimistic about the potential for deeper penetration within the existing customer base, with nearly 400,000 customers and significant room for growth [39][81]