Thryv (THRY) Q3 2025: SaaS Revenue Jumps 33% as Vertical and AI Strategies Accelerate Upmarket Shift
Thryv’s transformation to a SaaS-first model gained momentum in Q3 2025, with vertical solutions and AI integration fueling upmarket expansion and improved client quality. While ARPU and SaaS growth outpaced legacy declines, temporary noise from legacy client migrations and partner channel rebuilding remains a near-term headwind. Management’s confidence in verticals, AI, and a higher-value sales mix sets the stage for margin expansion and a more resilient business model in 2026.
Summary
- Vertical and AI Push: Thryv’s focus on vertical SaaS and embedded AI is driving upmarket penetration and higher-value client acquisition.
- Legacy Migration Noise: Revenue and margin gains are partially offset by short-term ARPU and NRR dilution from legacy service transitions.
- 2026 Growth Setup: Renewed partner engagement and product velocity position Thryv for accelerated SaaS expansion next year.
Performance Analysis
SaaS revenue surged 33% year over year to $115.9 million, with the Keep, small business automation, acquisition contributing $16.8 million in the quarter. Excluding Keep, core Thryv SaaS grew 14%. Adjusted SaaS gross margin improved 80 basis points to 73%, and SaaS adjusted EBITDA margin reached 17%, exceeding guidance. Total SaaS subscribers grew 7% to 103,000, but management emphasized that spend per customer (ARPU) and multi-product adoption are now the primary growth levers as the company targets larger, more stable clients.
On the legacy side, marketing services revenue continued its planned decline, falling 33% in billings as the business systematically migrates clients to SaaS. Free cash flow of $14.6 million and leverage below 2x underscore the company’s improving financial flexibility. However, seasoned Net Revenue Retention (NRR) dipped to 94%, a byproduct of onboarding lower-ARPU legacy clients at grandfathered rates, temporarily diluting SaaS metrics. Management stressed this is a transient effect as the client base transitions to higher-value cohorts.
- ARPU Expansion: Thryv SaaS ARPU rose to $365, with the core business at $355 and Keep at $437, reflecting the mix shift toward upmarket and multi-product clients.
- Multi-Product Penetration: Clients with two or more SaaS products now comprise 20% of the base, up from 16% a year ago, supporting higher LTV and lower churn.
- Legacy Wind-Down: Marketing services revenue is declining by design, with exit targeted by 2028 and cash flows through 2030, funding the SaaS transition.
The business model is clearly pivoting to quality over quantity, with management prioritizing ARPU growth and retention among larger, multi-product clients, even as total subscriber growth slows in the near term.
Executive Commentary
"Our execution wasn't flawless in this quarter. You guys often ask me about the macro and whether that's the economy, I can't blame anything outside at all. Our execution just was a smidge shy of where we wanted to be. And I think we are doing the things that we need to to make sure we continue to execute even better going forward."
Joe Walsh, Chairman and CEO
"With a large established customer base now in place, our focus is on increasing spend per customer by driving adoption of more products and solutions, especially among our high-value clients and larger businesses. This approach meaningfully expands SaaS lifetime value and is a more efficient driver of profitability."
Paul Rouse, Chief Financial Officer
Strategic Positioning
1. Vertical SaaS and Upmarket Expansion
Thryv’s vertical focus, beginning with HVAC and expanding to broader home services, is delivering tangible results: pilot clients reported a 10% lift in jobs booked, 25% revenue increase, and 12% boost in repeat business. This verticalization tailors automation and marketing tools to industry-specific workflows, enabling Thryv to win larger clients who value integrated solutions. The company’s strategy is to package automations and marketing tools for each vertical, accelerating ARPU and retention by solving pain points unique to those industries.
2. AI Integration Across Product and Operations
AI is now embedded throughout Thryv’s product suite and internal operations, from social captioning and review response to call analysis and website building. AI-powered features are driving efficiency for both clients and Thryv’s own teams, with new CTO Sean Wechter doubling down on AI velocity and integration. This is expected to quicken product roadmap delivery and enhance interoperability, a key requirement as Thryv moves upmarket and integrates with industry-specific CRMs.
3. Partner Channel Rebuild and Ecosystem Leverage
Partner sentiment, especially from the Keep ecosystem, has shifted from frustration to optimism following substantial product and support investments. While partner-driven results were “just okay” in 2025, management expects a “reacceleration in 2026” as new deliverables and tools roll out. Re-engaged partners will be crucial for scaling upmarket and expanding reach, especially as Thryv targets higher-value verticals.
4. Legacy Services Migration and Revenue Stabilization
The deliberate wind-down of legacy marketing services is a double-edged sword: it depresses short-term billings and introduces ARPU/NRR noise as lower-value clients are migrated, but it also funds the SaaS transformation with cash flow and reduces long-term drag. By 2028, Thryv aims to be a pure-play SaaS business, with a more stable, higher-margin revenue base and minimal exposure to print or legacy digital services volatility.
5. Quality Client Cohort Focus
Thryv’s go-to-market now prioritizes clients spending $400/month or more, typically multi-employee businesses with higher retention and cross-sell potential. This cohort now represents 77% of the base and is driving improvements in churn and expansion metrics, supporting a shift from volume to value as the core SaaS engine.
Key Considerations
Thryv’s Q3 2025 results highlight a business in active transformation, with execution, product, and go-to-market strategies all pivoting toward higher-value, more resilient SaaS revenue streams. The company’s ability to manage the transition noise while accelerating upmarket and vertical penetration will determine the sustainability of its growth and margin profile.
Key Considerations:
- AI-Driven Productivity Gains: AI integration is both a client differentiator and an internal efficiency lever, with measurable impact on product velocity and operational throughput.
- Verticalization as a Growth Catalyst: Industry-specific solutions are unlocking higher ARPU and retention, but require continued investment in integrations and go-to-market training.
- Partner Channel as a Force Multiplier: Renewed focus on partner enablement is expected to reignite channel-driven growth in 2026, after a year of rebuilding trust and delivering on product needs.
- Legacy Drag and Metric Noise: Temporary NRR and ARPU dilution from legacy migrations will persist into early 2026, masking underlying SaaS momentum until the client base fully transitions.
- Upmarket Sales Mix: Field sales are now focused on $6,000+ annual deals, with legacy low-ARPU clients deprioritized, supporting a margin and LTV inflection as the mix shifts.
Risks
Execution risk remains as Thryv balances migration of legacy clients with upmarket SaaS growth, risking temporary volatility in ARPU, NRR, and subscriber metrics. Partner channel recovery is not guaranteed, and competitive pressure in vertical SaaS and AI-enhanced marketing tools is intensifying. Delays in product roadmap or integration capabilities could slow progress upmarket, while over-indexing on ARPU growth may limit net new customer additions in the near term.
Forward Outlook
For Q4 2025, Thryv guided to:
- SaaS revenue of $118 million to $121 million
- SaaS adjusted EBITDA of $19.2 million to $21.2 million
For full-year 2025, management raised guidance:
- SaaS revenue of $460 million to $463 million
- SaaS adjusted EBITDA of $73 million to $75 million
- Marketing services revenue of $323 million to $325 million
Management highlighted several factors that will shape results:
- Continued migration of legacy clients to SaaS, with temporary ARPU/NRR noise
- Accelerated rollout of vertical and AI-powered products, especially in home services
- Partner channel momentum expected to improve in 2026
Takeaways
Thryv’s SaaS-first transformation is gaining traction, with verticalization and AI integration driving higher-value client acquisition and improved economics, even as legacy drag and migration noise cloud near-term metrics.
- Upmarket and Vertical Push: Field sales and product development are now aligned to serve larger, more stable clients, with vertical solutions delivering measurable lifts in client KPIs and retention.
- Partner Channel Inflection: Reinvigorated partner engagement is set to become a growth lever in 2026, following a year of investment and product delivery.
- Metric Clarity Ahead: As legacy migrations complete, ARPU and NRR should normalize, revealing the underlying strength of Thryv’s SaaS engine and supporting a return to sustainable growth.
Conclusion
Thryv’s Q3 2025 results confirm that its pivot to SaaS, driven by vertical solutions and AI, is progressing as planned. While short-term metrics remain noisy, the company’s focus on higher-value clients, partner ecosystem recovery, and operational efficiency provides a clear path to more durable growth and margin expansion in 2026 and beyond.
Industry Read-Through
Thryv’s experience highlights several sector-wide trends for software providers serving SMBs: verticalization and AI integration are becoming essential for differentiation and upmarket migration. Legacy service transitions introduce temporary metric noise but can fund SaaS reinvestment if managed carefully. Partner ecosystems, often neglected post-acquisition, require sustained investment and product alignment to reignite growth. Competitors in marketing automation, vertical SaaS, and AI-powered SMB solutions should monitor Thryv’s ARPU and client quality focus as a signal of where the market is heading, especially as answer engines disrupt traditional search and visibility dynamics.