Prepared remarks
Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Thryv Fourth Quarter and Full Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The operator provided instructions. Thank you. I would now like to turn the call over to Cameron Lessard, Head of Investor Relations. Please go ahead.
Good morning, and thank you for joining us for Thryv's fourth quarter earnings conference call. With me today are Joe Walsh, Chairman and Chief Executive Officer; 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. A discussion of these risks and uncertainties are 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. This quarter marks our first time reporting SaaS results inclusive of Keap software following our acquisition on October 31, 2024. With only two months of Keap's revenue reflected, we are focused on executing our integration plan and realizing the synergies we outlined at Analyst Day.
To note, for 2025, total SaaS revenue will reflect the combined performance of Thryv and Keap. We will only specify Thryv SaaS when isolating Thryv's performance. This reporting approach aligns with our long-term vision of a unified SaaS platform and ensures investors have full visibility into our growth trajectory. For deeper insight into our future strategy, we encourage investors to review our December 3 Analyst Day materials. The presentation details our road map, including the planned exit for marketing services in 2028, Keap's role in accelerating SaaS adoption, expected synergies with the acquisition, product innovation and our updated medium-term outlook. With that, I'll turn the call over to Joe Walsh, Chairman and CEO.
Thank you, Cameron, and good morning, everyone. On today's call, I will highlight our fourth quarter results, key trends as well as progress in our SaaS transformation. I will provide an update on our recent Keap acquisition, and then our CFO, Paul Rouse, will take you through some of the financial numbers. Thryv finished the year with strong momentum, beating the top and bottom line guidance for our SaaS business. For the quarter, total SaaS reported year-over-year revenue growth was 41% and normalizing for the effect of the Keap acquisition, Thryv SaaS revenue growth was 23%. For the full year 2024, Thryv SaaS year-over-year revenue growth was 25%. Total SaaS revenue is now officially well over 50%, a milestone for our transformative business. Subscribers in our Thryv SaaS business grew 50% year-over-year to 99,000. Including Keap in the subscriber base takes us to 114,000. SaaS adjusted gross margin increased to 76% for the fourth quarter.
Our quarterly SaaS EBITDA of $17 million beat guidance by over $5 million, continuing to demonstrate our focus on building a profitable, growing SaaS software company. SaaS achieved the Rule of 40 milestone for the second quarter in a row. Net revenue retention was 98%. As we've said, our target is 100%, and we'll be a couple of points plus or minus that. Sometimes it will be 101% or 102% and sometimes it will be 98% or 99%, but we'll be right around 100% is what we expect going forward. The number of clients using two or more paid SaaS products increased by over 4,000 year-over-year, now representing 16% of our client base. This is a key metric as it demonstrates growing engagement and the increasing value clients are deriving from our platform. We have broadened the definition beyond just paid centers, which is 12%, to include all paid SaaS products. This underscores the expanding adoption of our full suite of solutions and shows we've been innovating and adding some interesting additional SaaS add-ons that fill in and around.
So the overall base increased tremendously. The percentage of centers looks like 12%, but when we look at the number of SaaS products overall, it's 16% or 4,000 gains. I'm pretty excited about what that shows in terms of the progress that we're making. One of our core strengths as a management team is integrating acquisitions with speed and efficiency. This Keap acquisition is our first SaaS platform and something we've been working on and planning for a while. It won't come as a surprise that we've already crystallized $10 million of EBITDA synergies. We've done this primarily by eliminating redundancies between the two businesses, vendor consolidations and some planned cost reductions. From a cross-sell perspective, the big long-term opportunity is the revenue cross-sell back and forth. We are working hard getting that set up now, and we expect very strong revenue potential to be unlocked over the next couple of years as we cross-sell between the two customer bases.
We have some exciting product updates in Q4 that I think strategically position us well as we go into 2025. I'd like to highlight a couple of those for you now. Reporting Center launched with a product-led growth motion. This positions us to unlock revenue expansion opportunities and increases client satisfaction, particularly of our larger accounts. Some of our larger accounts have requested more powerful reporting, and we are including Reporting Center on a product-led basis and will extract revenue down the road. In the meantime, we've got an initiative to sell to slightly larger businesses through our VSP group, and Reporting Center will assist with that. We also added AI review response to Business Center and Marketing Center. This feature has been well received by clients and sales, paving the way for future innovations leveraging AI. The addition of social media to Marketing Center added enhanced communication tools for our clients and has been well received.
Within the Keap products, we've had some improvements as well: we updated the automation builder, which decreased the time to publish an automation by two-thirds, meaning it now takes about one-third of the time to set one up. That was an opportunity, and the Keap team has leveraged that. Also, the visual sales pipelines have been streamlined for clients, and there is a real product improvement there that I think customers within Keap will appreciate. With that, I'd like to turn it over to Paul Rouse, our CFO, to discuss our financial performance.
Thanks, Joe. Let's begin with SaaS. Total SaaS reported revenue was $104.3 million in the fourth quarter and above guidance, representing an increase of 41% year-over-year and up 20% sequentially. Full year SaaS reported revenue grew 30% year-over-year to $343.5 million. Excluding Keap, Thryv SaaS business grew 23% year-over-year in the fourth quarter and 25% year-over-year for the full year. Breaking this down, our Thryv SaaS revenue was $90.9 million in the quarter, landing within our guidance range and growing 23% year-over-year. The Keap acquisition contributed $13.4 million in revenue in November and December 2024, surpassing our guidance range of $11 million to $12 million. For the full year, our total SaaS revenue grew 30% to reach $343.5 million. Excluding Keap, our Thryv SaaS business achieved 25% year-over-year growth. Our total SaaS adjusted gross margin has shown significant growth, increasing by 620 basis points year-over-year and 370 basis points sequentially, reaching 76%.
Full year, total SaaS adjusted gross margin expanded to 72%, up from 67% last year, a 540 basis point improvement. Importantly, our total SaaS adjusted gross profits grew 53% year-over-year, outpacing our strong revenue growth. In the fourth quarter, total SaaS adjusted EBITDA increased to $17.3 million, significantly exceeding our guidance range and resulting in an adjusted EBITDA margin of 16.6%. As Joe mentioned earlier, this marks the second consecutive quarter in which our SaaS business has achieved Rule of 40. In the fourth quarter, we delivered strong SaaS subscriber growth, reaching 114,000 subscribers; excluding Keap subscribers of 15,000, this represents a 73% year-over-year increase. Total SaaS ARPU for the fourth quarter was $324, including Keap. Thryv SaaS ARPU was $313, an increase from the previous quarter, while Keap's ARPU was $424 for November and December. Net revenue retention was 98%, which demonstrates strong performance and is a significant improvement compared to prior years, underscoring the effectiveness of our land-and-expand strategy.
This result is very close to our long-term goal of maintaining retention near 100%, which remains a key priority for the business. Additionally, centers per client grew to 12% at the end of the quarter compared to 6% in the prior year, further highlighting the traction we are seeing with existing clients. Moving over to Marketing Services. Fourth quarter revenue was $82.3 million and within guidance. Full year Marketing Services revenue was $480.7 million. Fourth quarter Marketing Services adjusted EBITDA was $12.1 million, resulting in an adjusted EBITDA margin of 15%. Full year Marketing Services adjusted EBITDA was $121.2 million, resulting in an adjusted EBITDA margin of 25%. The variance in reporting Marketing Services adjusted EBITDA to guidance in the quarter was primarily due to legacy and operational costs, which the company plans to streamline in 2025, including system-related expenses and support staff.
As indicated at our 2024 Analyst Day, we are committed to decommissioning legacy systems through 2025 and converting many legacy digital marketing services customers onto our SaaS platform. Despite this, our overall EBITDA for the quarter was at the high end of our range of guidance. Fourth quarter marketing services billings were $92 million, reflecting a 40% 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 offering. 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 SaaS-focused model.
Fourth quarter consolidated adjusted gross margin was 69% and full year consolidated adjusted gross margin was 68%. Fourth quarter consolidated adjusted EBITDA was $29.4 million, representing an adjusted EBITDA margin of 16%. Full year consolidated adjusted EBITDA was $162.4 million, representing an adjusted EBITDA margin of 20%. Finally, our net debt position was $279 million at the end of the fourth quarter, a decrease of $61 million year-over-year. Our leverage ratio was 1.63 times net debt to EBITDA. As previously discussed, we made an additional prepayment of $26 million on the new term loan during the fourth quarter, bringing our total amortization paid for 2024 under the new credit facility to $78.8 million. This eliminates the need for an additional payment until December 2025. This proactive debt repayment underscores our commitment to financial discipline and maintaining our healthy balance sheet.
We intend to continue prepaying debt this year, reinforcing our focus on strengthening our financial position. Finally, on leverage, we remain committed to further deleveraging of the business by the end of 2025. However, as we have outlined at our December Analyst Day, net leverage will temporarily increase in the first two quarters of 2025 due to the prepayment of key vendor contracts, decommissioning of legacy systems, corporate bonus payments and the timing of direct republications, which follow a 24-month cycle as we position the marketing services for exit in late 2028. Since leverage is calculated on a trailing 12-month basis, it will be impacted by this publishing schedule. As a result, we expect significant deleveraging in the third and fourth quarters of 2025 and on a full-year basis. Turning to our outlook for 2025. For the first quarter, we expect total SaaS revenue to be in the range of $107.5 million to $110 million.
For the full year, we expect total SaaS revenue in the range of $464.5 million to $474 million, which implies Thryv SaaS revenue growth of 35% to 38%. We expect Keap to contribute between $75 million to $78 million for the full year, consistent with what we announced at our recent Analyst Day. For the first quarter, we expect SaaS adjusted EBITDA in the range of $9 million to $9.5 million. For the full year, we expect SaaS adjusted EBITDA to be in the range of $69.5 million to $71 million, which implies SaaS adjusted EBITDA margin of 15%. For the full year, we expect Marketing Services revenue to be in the range of $310 million to $314 million. Quarterly guidance ranges for Marketing Services are available in our investor presentation, which can be found on our investor site. For the full year, we expect Marketing Services adjusted EBITDA to be in the range of $77.5 million to $78.5 million.
Thank you, Paul. As we look ahead to 2025, I'm happy to share that including Keap, our SaaS business will be 60% of total revenues. That's a big milestone for us. At our recent Analyst Day, we outlined some of the key inflection points coming up. One of them is that in 2026, the majority of our EBITDA will come from SaaS. That helps focus us on the fact that we're building a profitable SaaS business. And then in 2027, we anticipate a return to overall top-line revenue growth as we continue to build out our platform, gain traction and deliver more value for clients. We are proud of the fact that we were recently given an important award as best software by G2. This is third-party validation of the progress that we're making, and it echoes what we hear from our customers: our software is easy to use, it helps them run their business more efficiently, it helps them streamline operations and importantly, it helps them grow.
We intend to continue to innovate and improve and expect to win more awards in the future. Looking back on 2024, we're maturing as a software business. Our platform is getting built — not quite done yet, but getting stronger. Our ability to sell to slightly larger businesses is improving. That's been one of our goals: higher ACV and lower churn. We already have low churn, but we think we can do even better as we sell to slightly larger businesses. As our platform becomes more fully built out, we're focusing on leaning into the growth side of the business—helping small businesses grow, being an industry-leading marketing and sales platform, and helping them deepen their relationships with their customers. Our dedicated team is delivering innovative technology, and I'm confident we can continue to drive sustainable, profitable growth and maximize shareholder value. We appreciate your ongoing support and look forward to the opportunities ahead in 2025. With that, operator, we can open the line for questions.
Questions and answers
Your first question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead.
Wonderful. Thank you guys. So look, I know it's early days on the Keap side of things, but just wondering if you could give some early commentary on what the cross-sell process looks like in getting those customers into some of the Thryv centers.
Sure. The acquisition, as you know, closed on October 31. We only had a couple of months to work on it, so everything is not fully complete, but we do have some cross-sells beginning. The process is underway, and it really goes two ways. Some Keap customers coming into Keap are trying to figure out how to grow their business. Keap's offering is really the next step for growth: you need to have a list and customers that you can then nurture and put through Keap's automation processes. Keap doesn't typically generate that list or generate leads for you, and Thryv's Marketing Center is designed to do that and is helpful in doing so. That's been really positive: they've been able to capture some leads that otherwise would have been lost. As they get success with winning new business and building up their list, they will naturally add automation to nurture and manage their sales pipeline. On the Thryv side, we generate a large number of leads for our small business customers, and some of them get lost or aren't followed up on as well as we'd like.
Implementing a sales pipeline, a funnel, an automated process that continues to follow up with those customers will add tremendous value to our Thryv customers. Our sales organization is excited about that. The plumbing and wiring for all that is being put together, the groups are being trained, and that will kick off and begin to happen as the year plays out. We've had a couple of early sales already as demand was strong and we figured out how to do it. The broad process will pick up very soon, and we expect about $5 million of cross-sell back and forth between the customer bases this year. That will be slightly back-weighted because it takes time to set up. But there's strong depth of demand; our business advisers are excited to bring Keap automation into the broad customer base.
Thanks, Joe. Maybe a similar topic. As you are targeting these larger businesses, just curious if there's anything different with that process, if there are any changes in the selling cycles? And then do you have any tangible evidence yet of the ability to cross-sell into that group? Or is it too early to tell?
I want to be clear: we are not targeting very large companies like 200- or 500-employee firms. We are talking about going from a three-employee business to an eight-employee business. The biggest difference as we get slightly larger is reporting needs. We have many service-based businesses in our customer base, and the difference is between a business with one truck and a business with five trucks. In the 10–15 employee range that we target, customers look for more powerful reporting. Our Thryv software sits between powerful and simple; we are closer to simple and easy to use, and until now it has lacked very powerful reporting. Keap similarly lacked powerful reporting for some customers. Reporting Center, which we rolled out recently, addresses this and will meaningfully improve client satisfaction for larger, more complex businesses. As we talk to customers with 15–18 employees, they have managers who need reports to run their companies and the software; that will make us more attractive to those slightly larger businesses. That feedback informed our prioritization of Reporting Center, and our product teams are excited to make Reporting Center available for their offerings as well.
Your next question comes from the line of Scott Berg with Needham. Please go ahead.
Hi everyone. Nice quarter here. I guess a couple of questions for me. Joe, let's talk sales in the fourth quarter. You guys obviously had a lot going on with the acquisition and whatnot, but your net customer adds in the core SaaS business declined a little bit from what we saw in Q2 and Q3. I know there is some seasonality in the business there. But did you see anything different around buying appetites from your customers or how you guys are going to market versus what was really a strong middle part of the year?
Scott, the holidays are always a little soft for us. Our small businesses behave more like consumers at times; they take time off for holidays and it's harder to be as productive with our sales force from Thanksgiving through early January. Regarding the macro, immediately following the election there was a more positive sense among small businesses about a business-friendly administration, and that sentiment is still there, but there's now some added concern about tariffs and inflation — things feel a little softer. It's not negative, just a bit more cautious than the initial post-election optimism. Overall, our results depend on our execution more than small business sentiment, but there is a little extra concern in the environment that doesn't materially impact our results.
Understood. Certainly, I understand the seasonality in your fourth quarter. It is apparent in some of your historical metrics as well. From a follow-up, Paul, the Keap acquisition outperformed your expectations in Q4 by, I'll call it, roughly $2 million, yet you maintained the fiscal '25 contribution from that business. I guess what drove the upside in the two months that you had it? And then is there any follow-through on that and how we should think about upside opportunity for that Keap segment here in fiscal '25?
Yes. We were conservative in our estimate because we had just acquired the business and wanted to ensure deliverability. That conservatism led to the overperformance. Given integration complexity, we're going to stick with our Analyst Day estimate of $75 million to $78 million for Keap's contribution this year. We think that's the appropriate number right now. Thanks, Scott.
Your next question comes from the line of Arjun Bhatia with William Blair. Please go ahead.
Thanks for taking my question. This is Linda Lee here for Arjun. First question is: what is the feedback from customers who have experienced a cross-sell between Thryv and Keap? And what are you learning from those customer conversations so far?
It's very early days; we're just getting the process started. Some Keap leads are people trying to grow their business; Keap's offering is the next step in growth, where you need a list and customers to nurture through Keap's automation. Keap doesn't typically generate that list, and Thryv's Marketing Center is designed to generate leads and capture them. That's been helpful: Keap customers have captured leads that would otherwise have gone away, and that's been positive feedback. As they build up their list, they will add automation to nurture and manage the pipeline. On the Thryv side, we are already bringing leads and building lists and will begin selling automation to those customers. Another advantage is the ability to create vertical-specific automations: for example, a successful HVAC business or roofer can help us build automations for their industry that we can then offer to thousands of similar businesses as turnkey solutions. While we are a horizontal platform, we've seen success in verticals and customizing to those verticals is something our sales organization is excited about. Keith's team allows us to do that quickly, and our sales force is eager to take customized automations to clients where we expect strong appetite.
And moving more broadly, any changes to the go-to-market to achieve the goal of returning overall business growth by 2027?
Yes. The Keap acquisition added a significant partner channel—about 1,000 partners. Thryv had a smaller partner effort previously, but Keap's two-decade-old partner channel is a meaningful addition to enhance our sales channel to more sophisticated businesses that acquire software through partners. It also amplifies our international efforts into markets where we don't currently have a footprint. I do think this will be a major amplifier of our sales efforts and will contribute significantly by 2027 to the overall top-line growth we anticipate.
Your next question comes from the line of Daniel Moore with CJS Securities. Please go ahead.
Good morning, I appreciate the color. Thanks for taking the questions again. Two quick ones. One, you reiterated in the slide deck that the lines cross on revenue and SaaS makes up the majority of revenue now. Just update us on your confidence and any greater specificity in terms of when you expect the lines to cross on EBITDA. Just wondering whether you still feel like fiscal '25 will mark roughly the bottom for EBITDA and when we start to think about overall growth there?
In our investor deck there is a slide showing the inflection points. We're anticipating that in 2026 the majority of our EBITDA will be coming from SaaS. So SaaS will take the baton; marketing services will continue to generate earnings, but SaaS will eclipse it in EBITDA contribution. Then in 2027, we believe the larger SaaS business will be able to deliver overall top-line growth for the company even as marketing services continues to decline. Parsing it down to specific quarters would be too granular for now; we have internal models, but it's not appropriate to give a tighter quarter-by-quarter guide at this time.
Understood. And then maybe speak to the cadence of the launch of additional centers over the next one to two years? Or is the focus more on integrating and capturing revenue synergies from Keap?
We preannounced at Analyst Day that the next center is Workforce Center. There's demand for time tracking and paying employees and contractors, and we've been building that for a couple of years; it's now in alpha. We are confident it will come out this year, though it probably won't add material revenue until the following year. As for additional centers in 2026 and 2027, we have not promised more. That doesn't mean we won't add any; our focus is on making everything work well together, ensuring platform interoperability. With very small businesses, the product must be consumer-grade: simple and clear. We won't deliver a Frankenstein experience. Future innovations may come as add-ons or product offerings that don't rise to the level of a separate center. Workforce Center adds significant capability; now we need to fill in and ensure everything is integrated and easy to use.
Your last question comes from the line of Zach Cummins with B. Riley Securities. Please go ahead.
Hi, good morning. Thanks for taking my questions. Joe, I wanted to ask about ARPU and the core Thryv SaaS business. It was nice to see the sequential uptick from Q3 to Q4. Are we approaching the trough in terms of where you think ARPU will be for that business? I know it can fluctuate given adding legacy marketing services customers versus layering in additional products. So just curious how you're thinking about the progression of ARPU for the core business.
ARPU can be noisy and bounce around due to conversion activity from marketing services. But I feel that for 2025 we'll make very strong progress on ARPU growth. Over the last couple of years we built a very large client base — including Keap, about 114,000 clients — and now we want our sales and marketing teams to focus on the installed base to ensure clients are engaged, using the product and that we meet more of their needs so they don't go elsewhere. Upselling existing customers and getting more products in place is a major focus for 2025. One slide in the deck highlights significant progress adding additional SaaS products to existing customers, and I expect 2025 will be a year where that progress is a key priority. ARPU growth will likely be a central story for the year.
Got it. And I think you already partially addressed my follow-up. But can you speak to some of the other paid SaaS products you're selling within the base now aside from adding centers and driving that percentage upward?
We are filling out the offering with an eye toward helping small businesses grow. Our legacy since 1886 is linking buyers and sellers together; we still own and control large directory sites and have a large network of directory partners we monetize. We're bringing that to bear to make the phone ring and bring inbound inquiries to customers. Customers will engage if you can help them grow. We built products called growth packages, which are add-ons to Marketing Center and help bring inbound inquiries in. They are working very well for customers and for sales. That's part of why we broadened the definition beyond additional centers to include additional products: growth packages are add-ons rather than full new centers, but they have made a big difference. We are staking out ownership of the growth category. There are many point solutions in the market, but customers increasingly want a more complete platform: one login, permissions, mobile access, and the ability to run the business.
Marketing Center instruments and tracks marketing performance end to end: it can tell you how many calls a yard sign generates, whether truck decals are working, website heatmaps, everything. Pair that with a sales pipeline and automations to ensure leads are followed up on, and you have a very powerful package. Beyond that, we have CRM, estimates, invoices, billing, payments, social media, and now powerful reporting. Soon, you'll be able to pay employees and track contractor hours. We're building a near-complete platform to run a small business. Five years ago many small businesses were not in the cloud and used point solutions. Now they're looking for a more complete platform with one login for their 12 employees at a price point that's accessible. We may have been early, but the market is moving toward this platform solution, and we think we have the right product at the right time. We are working with urgency to finish the platform and ensure it's easy to use and interoperable. We expect to capture significant demand as it comes.
Appreciate all the color and congrats on the strong results.
Thank you.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.