A Look at Thryv in 5 and 10 Years

Last week Thryv released its Q1 results. We took a look at the presentation provided to the investment community and picked out the highlights to share in here. At the front end of the presentation, the company provides the context for why the company believes it can achieve ARR of $1billion by 2027 – five years from now. 

First, the company claims it is the decade of SMB SaaS. It points to the prior decade from 2010 to 2020 as the decade of enterprise SaaS. And the following decade, 2020 to 2030, as the decade of SMB SaaS.

Thryv makes the case that today consumers are ready to engage with modern SMBs. And that SMBs are ready for SaaS. And finally, the tools are out there that are designed for SMBs versus SMBs trying to use tools that were built for enterprise and pushed down market. 

The presentation goes on to suggest that SMBs will adopt SaaS for three primary reasons. These are to drive growth, to save time and scale, and for the freedom and mobility SaaS tools and solutions offer. 

Adjusted TAM

One of the most interesting data points the company offers up is its estimate of Total Addressable Market. At Localogy 2022, we heard a variety of marketing sizing estimates. Thryv has put a stake in the ground that they can potentially serve 4 million businesses in the U.S. and another 4 million outside of the U.S. for a total TAM of 8 million worldwide. That is a far cry from the 31 million TAM in the U.S. and 400 million that EverCommerce put in their investor presentation materials.

Thryv narrowed its TAM by defining its potential market as service businesses with 2-5 employees and at least $500,000 in annual revenue. 

The company points to its 5-year plan and the $1 billion in annual revenue. Of that $1 billion, they anticipate that 75% or $750 million will be SaaS revenue. They expect to have 150,000 businesses on their SaaS platform to achieve the $750 million threshold. That is about 3 times the number of businesses the company currently has on their SaaS platform.

On a global basis though, it is less than 2 percent of the global addressable market (150K/8M). Taking the calculation a little further, it requires an ARPU of about $5,000 per year. That’s just over $400 per month. When considered in the context of businesses with at least $500,000 in annual revenue, $5,000 does not seem to be a huge stretch. This would represent just under 1% of a local, small business’ annual revenue. 

The company is clearly bullish on its opportunity. They describe a 10-year view of the company where SaaS revenues scale to $3.8 billion across a customer base of 500,000. In the 10-year time frame, the company expects the ARPU to increase to just over $600 per month. And its customer acquisition and retention to secure about 6% of the 8 million TAM. 

Achievable Goals

At a high level, the simple math makes the company’s 5 and 10-year aspirations seem quite doable. The company points to customer engagement as its north star. In other words, its core driver for retention and ARPU growth over time. And if done really well the company can expect that by delivering a superior customer engagement and experience, it will lead it to the promised land of customers who become advocates. Those advocates then become the company’s best, and importantly most inexpensive source, of new customers.

For the company to achieve its aspirational goals, that really is a must. We say that because the company reported 47,000 SaaS customers at the end of Q1 2022. That is 2,500 more than they reported at the end of Q1 2021. At that pace of customer acquisition, it will take the company 41 quarters — or just over 10 years — to reach its goal of 150,000 customers.

That won’t do it and the company knows it. They point to their three new channels of “inbound” as the solution. The three are hand-raisers who learned of Thryv from their peers or friends – e.g. advocates), partners, and franchises

The company has made considerable progress in transitioning from a mainline Yellow Pages and marketing services company into a SaaS business. In that old world, customer engagement and experience was hardly the driver of financial success. In SaaS it is critical.

That transition alone is quite remarkable. The next major frontier for Thryv to conquer is customer acquisition. Those three new channels will really have to perform at extremely high levels to propel the company forward. We’ll be keeping a close eye on their progress.

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