Last week two companies we follow, Thryv and DoorDash, reported their latest quarterly results. We’ll take a look at each and pull out the numbers that we believe were the most revealing about where these companies are today. And about where we think they may be going in the near future.
Is Thryv Thriving?
In the case of Thryv, the evolution of the Yellow Pages company continues. For the quarter ending March 30, 2021, the company reported some promising results. Three numbers stood out to us. First, the APRU or average revenue per unit for its SaaS-based Thryv platform increased from $240 to just over $300. That’s about a 26% increase. This suggests to us that more and more of Thryv’s SaaS customer base is choosing to add paid features. In the SaaS world, that’s a very good signal that customers are engaged and using the product.
A second important and interesting number is the decline in year over year churn from 3.4% to 2.5%. Coincidentally, that decline improvement is also 26%. Anywhere you read about the SaaS world, churn is such an important metric. Declining churn is a very positive result. According to some SaaS blog posts, a 2.5% monthly churn rate equates to a 26% annual churn. While ideally, the rate should be even lower, the trend line is positive.
Is Customer Growth a Concern?
The third data point we find interesting is the overall SaaS customer base. According to the company, total SaaS customers declined by about a thousand from the prior year. While 44,000 customers are nothing to scoff at, the lack of solid customer growth leads us to wonder if the company’s current “go to market” approach is being reevaluated. We know that over the course of some prior quarters, the company took proactive measures to shed SaaS customers who were not a good fit for the product. We have to believe that process is complete. And we would expect that adding new customers is now a key company objective.
To that end, the company’s guidance on SaaS revenue going forward has been raised. This tells us that at least the ARPU trend will hold. With some good results on the customer acquisition front, future quarters could be very impressive.
A Good Fit Down Under?
Moving down under, we think the company’s acquisition of Sensis will be interesting to watch and evaluate over the coming months. In particular, we’re interested in how well the current Thryv software solution will fit the needs of Australian small businesses.
In the larger sense, small businesses are small businesses, regardless of where they are located. But it is never quite that simple. And we’d expect the company will need to consider adjustments and modifications to the American solution so that it does indeed fit the needs of Australian business owners. We’ll be curious to see if and when the company reports out SaaS customer acquisition for the Sensis unit.
DoorDash Looking Past the Pandemic
We’ve long followed DoorDash’s journey as it has been thrown into the spotlight with both its IPO and its role in the transformation of dining commerce during the pandemic. There are other big players in the space as well, like GrubHub and UberEats, whose fortunes we will follow closely as the pandemic recedes in our rearview mirror. Last week DoorDash — a company we criticized when they were using customer tips to subsidize the base pay of their dashers — also reported its latest quarterly results last week.
We found a number of its metrics intriguing. We also acknowledge the company put out a comprehensive write-up of the quarter’s progress with an eye toward the future. As we consider some of these numbers, we should note that these results reflect the winter months of January – March. We believe this had a positive impact on results, and they are compared with the same period in 2020. Keep in mind that the “pandemic” took hold in mid-March 2020. So there were only two weeks in last year’s Q1 that were impacted by the pandemic.
The Re-opening Effect
We found this statement from DoorDash’s latest earnings report interesting. “Throughout Q1, as markets continued reopening and in-store dining increased across the U.S., the impact to our order volume was smaller than we expected, which contributed to strong performance in the quarter.” We already noted this period covered the “winter” months. We suspect as the weather gets better, the impact will be greater. Therefore, believe Q2 results will tell us more about where dining commerce is headed following the trends that were accelerated by the pandemic.
DoorDash reported that its quarterly revenues grew 198% year-over-year to $1.1 billion. And total orders grew 219% year-over-year to 329 million. Its marketplace Gross Order Value (GOV) grew 222% year-over-year to $9.9 billion. While these are impressive numbers in absolute terms, the comparison to 10 weeks of pre-pandemic suggests these numbers may be less impressive than at first blush. Still, another key metric — average order rate among existing customers — improved both quarter-to-quarter and year-over-year. Customer acquisition trends in the first quarter were similar to those in the prior two quarters.
The company attributed some of the quarterly performance to the issuance of government stimulus checks. At the same time, the company does acknowledge that the re-opening of markets has had a negative effect on new consumer growth, order rates, and average order value. Interestingly, the company also noted that the reopening has a more negative impact on newer customers. In other words, the behavioral changes of newer customers may be more momentary than lasting.
The company pays particular attention to its strategy to broaden the choices consumers can make via the company’s Marketplace. Yet the company’s order from restaurants still represents more than 90% of the total.
The company said this regarding its expansion. “In our Marketplace, we increased our focus beyond restaurants a little over a year ago and are very pleased with the progress we’ve made so far… Despite solid early progress, less than 10% of our monthly active users placed an order in a new category in Q1. Our goal is for all our consumers to find value beyond restaurants, which suggests we have substantial room to raise awareness, improve our offerings, and earn order volume from a much larger portion of our consumers.”
The company, like many small local businesses, is facing a challenging period in terms of identifying and hiring workers. We have heard anecdotally from local businesses that there is an acute shortage of trained employees. Some would argue that the government stimulus is double-edged. On the one hand, it put money into people’s pockets so they could go spend some coin on dinner. So good for the food delivery ecosystem. On the other hand, the stimulus checks may keep some potential Dashers or restaurant workers on the sidelines.
White Label Strategy
In Q1 the company extended its solution set of services to merchants. Interestingly, the company has grown its private label or first-party initiatives which they call Drive and Storefront. These solutions are for those larger, more sophisticated merchants who want to build out their own delivery channels.
Of course, the rationale for a restaurant operator to shift to its own delivery channel is because the large aggregators — e.g. DoorDash, Uber Eats, and GrubHub — are making their model unattractive with their high commission fees. We have covered the launch of co-operatives in some cities and other guerilla start-ups to take on the large players by offering significantly reduced commissions. And of course, local governments are also taking varying approaches to help the “little guy” out during these challenging times.
All of this is interesting and good color to consider what’s next and where will the demand curves will head. We’re pretty certain they won’t stay at the levels seen during the core pandemic months. And we don’t expect them to fall back to pre-pandemic levels. But where exactly they do fall will be a function of many factors. Time will tell and we’ll be eager to see the earnings from other operators such as GrubHub to see if their results offer any additional insight into the future direction of the demand curves.