Thryv(THRY)2024-02-22 16:46Financial Data and Key Metrics Changes - SaaS revenue for Q4 2023 was $74 million, a 25% increase year-over-year and a 10% increase sequentially, with full-year SaaS revenue growing 22% to $263.7 million [39][31] - SaaS adjusted gross margins improved to 70% in Q4, trending towards the long-term guidance of 75% [25][40] - The company generated $148 million in cash from operations and $115 million in free cash flow, allowing for significant debt retirement in 2023 [26] - Net loss for Q4 was $257.5 million, or a loss of $7.39 per diluted share, compared to a net loss of $50.4 million, or a loss of $1.47 per diluted share, in Q4 2022 [46] Business Line Data and Key Metrics Changes - SaaS adjusted EBITDA for Q4 was $6.5 million, exceeding guidance and resulting in an adjusted EBITDA margin of 8.8% [41] - Marketing services revenue for Q4 was $162.2 million, with full-year revenue at $653.2 million, both above guidance [43] - Marketing services billings declined by 23% year-over-year in Q4, aligning with the long-term vision of transitioning clients to SaaS [44] Market Data and Key Metrics Changes - SaaS subscribers reached approximately 66,000 at the end of Q4, a 27% year-over-year increase, while SaaS RPU decreased by 4% year-over-year to $370 [67] - Net dollar retention for Q4 was 96%, an increase of 500 basis points year-over-year, driven by upselling and cross-selling initiatives [68][57] Company Strategy and Development Direction - The company is transitioning from a legacy marketing services entity to a rapidly expanding SaaS business, with expectations that SaaS will represent approximately 40% of revenue in 2024 [58][96] - The introduction of new products like Marketing Center and Command Center is expected to enhance client experiences and drive growth in the SaaS business [38][70] - The company is focused on upgrading legacy clients to the Thryv platform, which is seen as a significant growth lever for 2024 [27][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the SaaS business's trajectory, indicating that the nadir of declining EBITDA has been reached and profitability is expected to improve [2][50] - The international market is performing well, with plans for expansion into new markets [77] - Management anticipates some noise in ARPU due to the introduction of new customers at lower price points, but expects overall growth in the long term [76][49] Other Important Information - The company recorded a non-cash impairment charge to goodwill of $268.8 million, attributed to the structural decline in the marketing services business [72] - The leverage ratio was 1.8 times net debt to EBITDA, well below the covenant of three times, indicating a strong financial position [73] Q&A Session Summary Question: How should we think about the migration of marketing services customers to the new platforms? - Management believes the entire base can eventually transition to the SaaS platform, but it will take time as this is a gradual process [6] Question: What resources are allocated for onboarding customers during this transition? - Management is focused on ensuring adequate resources are in place to support the transition and may require incremental investments to grow the SaaS business [7] Question: Has there been any change in incentives for legacy customers to accelerate their transition? - Management confirmed that they are offering viable products to retain clients long-term and facilitate their transition to the SaaS platform [9] Question: Can you discuss the growth in SaaS subscribers and any moving parts affecting this metric? - Management noted that the growth in SaaS subscribers is linked to the introduction of new products and the transition of legacy customers, which is expected to positively impact net dollar retention [11] Question: How does the company view customer growth versus ARPU in 2024? - Management indicated that while there may be pressure on new customer pricing, seasoned ARPU is showing strong growth, and they expect overall ARPU to improve as more customers transition to higher-value offerings [13][14]