Thryv (THRY) Q1 2025: SaaS Revenue Hits 61% of Total, Signaling Accelerated Platform Transformation
Thryv’s SaaS revenue crossed the 60% threshold, marking a pivotal moment in its business model transformation. The quarter saw disciplined execution on margin expansion, robust cross-sell momentum, and deepening customer engagement. Management’s conservative full-year outlook reflects macro caution, but operational signals point to durable growth levers as the company leans into high-value expansion within its existing client base.
Summary
- SaaS Majority Achieved: Software now delivers over 60% of total revenue, cementing Thryv’s pivot from legacy marketing services.
- Expansion Over Acquisition: Strategic focus on cross-sell and ARPU growth is driving margin gains and customer retention.
- Guidance Tempered by Caution: Leadership’s outlook remains conservative despite resilient demand and positive early-year execution.
Performance Analysis
Thryv delivered both top and bottom line beats, with SaaS revenue up 50% year-over-year (24% ex-Keap, the recent automation-focused acquisition), now representing 61% of the company’s total revenue—a clear inflection in the multi-year shift from print and marketing services to a recurring software model. SaaS adjusted EBITDA margin reached 10%, up meaningfully, as gross margin for the segment climbed 490 basis points to 73%. Marketing services, now a minority business, continued its managed decline, with revenue and billings down sharply as planned, but still providing cash flow to fund SaaS growth and deleveraging. Total SaaS subscribers grew 59% year-over-year, reaching 111,000, with ARPU (average revenue per user) rising to $335, reflecting the company’s success in upselling additional products and services to its base.
Net revenue retention reached a record 103%, underscoring the impact of cross-sell and wallet-share expansion. The company’s focus on deepening product adoption—rather than pure customer acquisition—has improved per-rep productivity and reduced churn, especially as clients add multiple paid products. While SaaS customer additions slowed sequentially, management attributes this to typical holiday seasonality and a deliberate shift in sales resources toward expansion. Consolidated adjusted EBITDA margin landed at 12%, with leverage peaking in Q2 as planned before expected deleveraging in the back half of the year.
- SaaS Model Scale: The software business now dominates revenue mix, with margin expansion reflecting operational leverage.
- Cross-Sell Drives Retention: Clients with two or more products see churn rates halved, fueling net revenue retention gains.
- Legacy Wind-Down: Print and marketing services continue their sunset, with cash flows supporting the SaaS transition.
Execution on cost allocation and compensation changes is surfacing in improved profitability and a more efficient growth engine, setting the stage for further ARPU and margin improvement through 2025.
Executive Commentary
"We are transforming this business from marketing services to SaaS. And I know there are a lot of people waiting for us to become completely SaaS. We're just about there. I mean, we're majority SaaS revenue now, and that's a big, big milestone for us as a business."
Joe Walsh, Chairman and Chief Executive Officer
"SaaS adjusted gross margin increased 490 basis points year-over-year, reaching 73%. The first quarter total SaaS adjusted EBITDA increased to 10.8 million, exceeding our guidance range and resulting in an adjusted EBITDA margin of 10%. This performance underscores the progress we're making in scaling our profitable and durable software business."
Paul Rouse, Chief Financial Officer
Strategic Positioning
1. SaaS Platform Majority and Revenue Mix Shift
Crossing the 60% SaaS revenue milestone signals Thryv’s transformation from a legacy marketing services company to a recurring-revenue software business. This shift is not just optical; it brings higher gross margins, lower churn, and a more predictable growth profile. The company’s commitment to fully exiting marketing services by 2028, with cash flows supporting the SaaS buildout through 2030, provides a clear runway for investors focused on long-term value creation.
2. Expansion-Led Growth Strategy
Thryv’s sales organization is now oriented around maximizing monthly recurring revenue (MRR) from existing clients, rather than chasing net new logos. The deliberate compensation overhaul and enablement tools have increased per-rep productivity and reduced customer acquisition costs. With only 17% of SaaS subscribers currently using multiple paid products, there is significant room for further expansion, which management notes is both more profitable and more durable than new customer acquisition.
3. Keap Acquisition Synergy and Partner Channel Leverage
The Keap acquisition is already delivering on its strategic rationale, particularly by unlocking a robust partner channel and automation capabilities. Keap’s higher ARPU ($428) and focus on verticalized, online, and agency clients complement Thryv’s traditional small business base. Early partner feedback is positive, with demand for a unified product catalog and new automation features. Integration is ahead of schedule, with minimal attrition and clear cultural alignment.
4. Margin and Retention Levers
Margin expansion is being driven by both revenue mix and operational discipline. As more clients adopt multiple products, churn drops sharply, and ARPU rises. The company’s net revenue retention at 103% is a strategic differentiator in the SMB SaaS landscape, where churn is structurally higher than in enterprise software. The move to a 24-month print directory cycle also smooths cost allocation and improves visibility for both segments.
5. Macro Resilience and Cautious Guidance
Management repeatedly emphasized the resilience of its customer base, which is concentrated in non-discretionary, “break-fix” small businesses. While macro headlines are cited as a reason for conservative guidance, current demand signals remain robust, especially for marketing and growth-oriented products. Leadership’s “Goldilocks” characterization suggests the company may benefit from increased client focus on lead generation in times of uncertainty.
Key Considerations
Thryv’s Q1 marks a strategic inflection as the company approaches a pure-play SaaS model, with execution levers clearly shifting toward deeper product adoption and operational efficiency.
Key Considerations:
- ARPU Expansion Potential: With only 17% of subscribers using multiple products, cross-sell remains a large, underpenetrated lever.
- Retention and Churn Management: Net revenue retention at 103% is a record, but ongoing focus will be needed as the base scales and legacy migrations continue.
- Keap Integration Upside: Early partner enthusiasm and minimal overlap with Thryv’s core base position the acquisition for incremental growth and higher ARPU.
- Print Wind-Down Execution: Managing the decline of marketing services while extracting cash flow is critical to funding SaaS growth and deleveraging.
- Cost Allocation Dynamics: Temporary cost attribution headwinds will reverse as print cycles normalize, supporting margin improvement in coming quarters.
Risks
Key risks include the pace and effectiveness of cross-sell within the existing base, potential macroeconomic shocks affecting SMB clients, and execution risk in sunsetting legacy marketing services. While management maintains a conservative outlook, any material slowdown in expansion or higher-than-expected churn could pressure SaaS growth and margin targets. Integration risk with Keap remains, though early signals are positive.
Forward Outlook
For Q2 2025, Thryv guided to:
- SaaS revenue of $113 million to $115 million
- SaaS adjusted EBITDA of $18.5 million to $19.5 million
For full-year 2025, management maintained guidance:
- SaaS revenue of $460.5 million to $471 million
- SaaS adjusted EBITDA of $67 million to $71 million (15% margin implied)
- Marketing services adjusted EBITDA of $77.5 million to $78.5 million
Management highlighted several factors that shape the outlook:
- Conservative stance due to macro uncertainty, not current demand softness
- Continued ARPU and margin expansion expected as cross-sell initiatives mature
Takeaways
Thryv’s business model transformation is now visible in the numbers, with SaaS as the clear growth and margin engine.
- Revenue Mix Shift: SaaS is now the dominant business, with print and marketing services in managed runoff supporting the transition.
- Expansion Efficiency: Cross-sell and wallet-share expansion are driving record net retention and ARPU, with ample runway ahead.
- Risk-Adjusted Growth: Conservative guidance may set up for future beats if current demand resilience holds, but execution on expansion and churn management remains paramount.
Conclusion
Thryv’s Q1 2025 results mark a decisive step in its SaaS transition, with operational and financial metrics aligning behind a software-first strategy. With legacy business in runoff and expansion levers gaining traction, the company is positioned for durable, margin-accretive growth—if execution on cross-sell and retention stays on track.
Industry Read-Through
Thryv’s successful SaaS transformation and cross-sell strategy offer a playbook for other legacy services firms seeking to pivot to recurring revenue models. The emphasis on ARPU expansion, partner channel leverage, and operational discipline is highly relevant for SMB-focused software providers navigating similar market dynamics. The company’s experience also highlights the importance of managing legacy wind-downs to fund innovation, as well as the resilience of non-discretionary SMB clients in uncertain macro environments. Investors in the broader software and SMB enablement space should watch for similar inflections in revenue mix and margin as signals of durable business model evolution.