Thryv (THRY) Q4 2025: $40M Free Cash Flow Target Signals SaaS Scale, Quality Customer Shift
Thryv’s SaaS transition is entering a new phase, as the company’s focus shifts from legacy upgrades to driving organic growth with higher-value small business clients. The launch of a unified, AI-powered platform and a streamlined go-to-market approach is reshaping its business model, with free cash flow expected to rise meaningfully in 2026. Investors should now track quality customer expansion and SaaS-driven profitability as the clearest signals of long-term trajectory.
Summary
- Quality Customer Shift: Thryv is concentrating resources on higher-value small business clients, driving improved retention and expansion economics.
- AI-Driven Platform Launch: The new unified SaaS platform integrates AI and automation, targeting the full small business growth cycle.
- Legacy Exit in Sight: Managed wind-down of marketing services is unlocking SaaS margin leverage and free cash flow inflection.
Performance Analysis
Thryv’s SaaS revenue base is now the primary engine of growth and profitability, with the company reporting SaaS revenue and EBITDA expansion in line with guidance. Notably, quality customers—those spending $400 or more per month—grew 18% year over year and now represent over 20% of the client base and 69% of total revenue, up from 60% last year. This segment’s retention and expansion rates outpace the blended average, providing a more stable and compounding revenue stream.
Marketing Center, the fastest-growing product, doubled revenue in 2025 and now contributes two-thirds of SaaS revenue, outpacing the broader platform’s 34% annual growth. Meanwhile, the legacy marketing services segment continues its planned decline, with billings down 34% YoY as Thryv accelerates upgrades and prepares for a full exit by 2028. Free cash flow reached $31 million in 2025 and is expected to climb to $40–$50 million in 2026, reflecting the SaaS business reaching scale and driving profitability.
- ARPU Expansion: SaaS average revenue per user rose 15% YoY, reflecting both mix shift and successful upsell into higher-value packages.
- Multi-Product Adoption: 23% of clients now use two or more SaaS products, up from 16% a year ago, supporting deeper client integration.
- Retention Dynamics: Seasoned net revenue retention held steady at 94%, with underlying improvement in the quality customer segment.
The headline: Thryv’s SaaS flywheel is gaining momentum with larger, more embedded clients, while the legacy tail is being managed for cash and eventual wind-down.
Executive Commentary
"The Thrive platform represents a fundamental paradigm shift from selling individual products and centers to delivering a unified growth platform for small businesses. This is an architectural go-to-market and operating model transformation designed to help businesses market, sell, and grow within one integrated system."
Joe Walsh, Chairman and CEO
"Free cashflow was 31.1 million in 2025. And for the first time, we expect a number to grow meaningfully to 40 to 50 million in 2026, a direct reflection of our software business having reached size and scale that is now driving the majority of our profitability."
Paul Rouse, Chief Financial Officer
Strategic Positioning
1. Unified Platform and Product-Led Growth
Thryv is consolidating its software portfolio into a single, AI-powered platform—the Thrive platform—designed to address the entire small business growth journey. This move replaces fragmented product sales with a tiered, outcome-focused offering, aligning pricing and features to business lifecycle stage. Product-led growth, where users onboard and expand usage with minimal sales intervention, is now central for smaller clients, while field sales focus on larger, higher-value accounts.
2. AI and Automation as Differentiators
AI is embedded across the user journey, from automated lead scoring and follow-up to voice-driven workflow automation and call analytics. The CTO’s “bullets versus cannonballs” approach enables rapid experimentation and adoption of best-in-class AI tools, aiming to make the platform “ambient” and proactive for non-technical users. AI-driven features are positioned as critical to reducing customer effort and accelerating time-to-value.
3. Quality Customer Focus and Revenue Mix Shift
Strategic emphasis is on scaling the cohort of quality customers—established small businesses with higher spend, lower churn, and greater expansion potential. Legacy micro-business clients are being actively managed for upsell or churn, with the company accepting higher attrition in this segment to improve overall business quality. This mix shift is driving higher ARPU, stronger retention, and more predictable growth.
4. Managed Legacy Exit and Cash Generation
The marketing services segment is in managed decline, with planned upgrades and a 2028 exit date. This tail is expected to provide cash flow through 2030, supporting the SaaS transition and debt reduction. The company’s leverage ratio improved to 1.7x, reflecting prudent capital allocation as SaaS profitability scales.
Key Considerations
Thryv’s transformation is at an inflection point, with near-term SaaS growth moderating as legacy upgrade pools exhaust, but underlying business quality and profitability improving. The focus is on building a compounding, high-retention SaaS model for established small businesses, with AI and automation as levers for differentiation.
Key Considerations:
- Customer Mix Evolution: Continued shift toward quality customers is critical for sustaining margin and retention gains.
- AI Integration Pace: The success of embedded AI features will determine product stickiness and competitive differentiation.
- Go-to-Market Realignment: Product-led growth for smaller clients and sales focus on larger accounts must be executed without disrupting revenue momentum.
- Legacy Revenue Wind-Down: Managing the marketing services exit while maintaining cash flow and minimizing revenue drag is a key operational challenge.
Risks
Execution risk remains high as Thryv pivots its business model and migrates customers to the new unified platform. Near-term SaaS growth rates are expected to moderate as legacy upgrade pools diminish, and there is potential for customer churn if migration or upsell efforts falter. Competitive pressure from vertical SaaS vendors and rapid AI innovation cycles could compress margins or slow adoption if Thryv’s platform fails to keep pace. Macro headwinds for small business clients could also impact expansion and retention dynamics.
Forward Outlook
For Q1 2026, Thryv guided to:
- SaaS revenue of $114–$115 million
- SaaS adjusted EBITDA of $12–$13 million
For full-year 2026, management guided to:
- SaaS revenue of $461–$471 million
- SaaS adjusted EBITDA of $70–$75 million
- Marketing services revenue of $150–$160 million
- Marketing services adjusted EBITDA of $30–$35 million
Management emphasized a conservative approach as the business transitions, with slower growth expected for a few quarters before reacceleration as the new platform gains traction. Key factors for the outlook include:
- Continued quality customer expansion and higher ARPU
- AI-driven product enhancements and go-to-market efficiency
Takeaways
Thryv’s business model is shifting toward a higher-value, more durable SaaS foundation, with AI and automation as central levers for future growth. The managed exit from legacy marketing services is freeing up capital and focus, but also introduces short-term revenue headwinds as the company navigates the transition.
- Quality Customer Expansion: The $400+ cohort is now the main driver of revenue and long-term value, with rising ARPU and retention.
- AI-Enabled Platform: The unified platform strategy and rapid AI integration are differentiating Thryv in a crowded SMB SaaS landscape.
- Monitor SaaS Profitability: Investors should track free cash flow and margin leverage as legacy drag recedes and SaaS scale accelerates.
Conclusion
Thryv’s Q4 2025 results confirm its SaaS transformation is gaining traction with higher-value clients, while the unified, AI-powered platform sets the stage for renewed growth and profitability. The near-term moderation in growth is a function of mix shift, not demand weakness, and the company’s cash flow inflection in 2026 will be a key marker for investors tracking the SaaS pivot.
Industry Read-Through
Thryv’s transition highlights the importance of focusing on high-value, embedded clients and product-led growth in the SMB SaaS sector. The managed wind-down of legacy revenue streams is a playbook for other software vendors navigating similar transitions. AI and automation are now table stakes for SMB platforms, and the ability to drive ARPU and retention through unified solutions will separate winners from laggards. Competitors in vertical SaaS and marketing automation should note Thryv’s aggressive AI adoption and go-to-market realignment as signals of where the market is heading.