As we have done for some time now, we listen intently to the quarterly performance results for any public company that is in the local, small business, digital media, or SaaS space.
Thryv is one company that checks all of those boxes. And that should come as no surprise. Thryv and its various prior incarnations have always been a bellwether for what’s up in local.
The company released its second-quarter results this week. The report paints a pretty rosy picture of the past. And it suggests a very positive future. The company has raised its forward-looking guidance for SaaS revenue. It’s up ever so slightly, but up nonetheless. This comes at a time when companies like Wix are downgrading guidance due to ongoing Covid-19 related issues.
Back to Thryv. CEO Joe Walsh said this about the most recent quarter. “During Q2, we saw strong and continued growth in our SaaS business, small businesses are moving to the cloud and we are providing them the tools they need to automate and modernize their businesses.”
Walsh went on to say that “small businesses need an end-to-end solution, not several different point solutions. Multiple solutions are expensive and are difficult to manage. Thryv provides the frictionless and simplified experience small businesses need.”
These comments are about what we’d expect any CEO of a company targeting a SaaS solution to small businesses to say.
We look for certain metrics to provide some insight on how things are going for Thryv in both their segment businesses. First is marketing services (traditional digital media). And next is SaaS. And of course, there is the split between the two geographies Thryv now covers — the U.S. and Australia (via its Sensis acquisition).
ARPU for the software business increased nearly 40% since the second quarter of last year, from $232 to $323. That’s a monthly measure. So this means on average SaaS customers are spending nearly $3,900 per year on software.
This figure suggests the company’s efforts to identify and target the right customers for their SaaS solution are starting to bear fruit. It also suggests that those SaaS customers who have been on the platform in the past are adding new functionality. That’s a very healthy indicator.
Also contributing to the positive trend was SaaS active users and usage frequency. Daily and weekly active usage were 27% year over year. We should note here that the second quarter last year was perhaps the most pronounced in terms of the Covid-19 shut down so that we’d be surprised if usage didn’t advance over the period.
As we’ve mentioned in past write-ups, net retention is a key driver for the success of all SaaS businesses. Thryv’s results have improved considerably with net dollar retention up 18 percentage points or 24%. The best SaaS companies are at 100% so Thryv has a ways to go to be considered at the top end of the net retention metric.
Customer Growth Concerns
We also pointed out in our last write-up our concerns about the slow pace of new SaaS customer acquisition. According to this quarter’s results, the company’s SaaS customer count stands at just 400 more than it was 12 months ago.
While the company should be super excited about its ARPU growth, achieving the kinds of valuations that befit high-growth SaaS companies requires that they find a way to grow their SaaS customer base. They can do this either through their existing marketing service customers or new targets.
For a company of Thryv’s size to pivot from a marketing services company to a SaaS company is no small task. There are indicators that the team is learning the SaaS playbook well and making great improvements.
At the same time, we wonder about the sales dimension. When will Thryv figure out a playbook that effectively accelerates its customer growth?
We noted earlier today the partnership between Wix and Vistaprint involving literally millions of small business customers. We’d think Thryv will figure out the best way to target and convert existing marketing services customers to SaaS customers. And then go on a hunt for additional properties where they can apply that customer acquisition or sales model.
Time will tell, we’ll be watching Thryv’s progress closely.