Thank you for standing by. My name is Celine and I will be your conference operator today. At this time, I would like to welcome everyone to the Thryv First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Mr. Cameron Lessard. Please go ahead.

Good morning and thank you for joining us for Thryv's first quarter 2025 earnings conference call. With me today are Joe Walsh, Chairman and Chief Executive Officer; Grant Freeman, President; and Paul Rouse, Chief Financial Officer. During this call, we will make forward-looking statements that are subject to various risks and uncertainties. Actual results may differ materially from these statements. A discussion of these risks and uncertainties is included in our earnings release and SEC filings. Today's presentation will also include non-GAAP financial measures which should be considered in addition to but not as a substitute for our GAAP results. Reconciliations of these measures can be found in our earnings release. As a reminder on this call SaaS revenue reflects the combined performance of Thryv and Keap. We will only specify Keap's performance when discussing its revenue contribution for the quarter and fiscal year. With that I'll turn the call over to Joe Walsh, Chairman and CEO.

Thank you, Cameron and good morning, everyone. Thryv started 2025 on really good footing, just continuing the momentum that we had in 2024. And for the first quarter, we delivered both the top and bottom-line guidance beat. So we're really proud of that. Our execution has been excellent. Our teams are working really hard to develop additional products and build additional services, and the marketplace is responding well to them. So I'm pretty happy with what's happening with Thryv as we continue to develop as a software platform. When we look at the actual results for the first quarter, we had 50% year-over-year revenue growth. And when you normalize for the Keap acquisition, we had 24% growth. So SaaS EBITDA margin expanded to 10%. SaaS revenue is now 61% of revenue for this quarter. So if you think about that, 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 milestone for us as a business. Another thing that happened is our ARPU increased. $335 a month was the ARPU that we delivered, up nicely from the last period. I think you're going to see that trend throughout this year as we continue to go back to existing customers and add more products on. Our season net revenue retention reflected that motion too – 103%. So a pretty solid outcome there for net revenue retention. We're pleased with that. Subscriber growth was 37%, bringing the Thryv total to 96,000. And if you include the Keap subscribers in there, it's 111,000 overall. One of the key drivers in acquiring Keap was the partner channel. They have an excellent partner channel. They've been at it for a long time. A few weeks ago I was able to attend our Partnerkon Conference out in Arizona, which was a combined Thryv and Keap partner conference with more than 100 of our partners in attendance, some from as far away as Europe and Australia. It was great to have a chance to talk to them about what they're thinking. And what they're thinking is they want to sell the full Thryv product catalog. The idea that they can add the top of the funnel where Thryv is really good at helping you build your list, helping you meet new customers, helping you be found, to the very strong Keap products in the middle and bottom of the funnel where you nurture your list and convert sales and then follow up post-sale for more business in the future kind of gives them a more complete marketing funnel. And they feel like it's going to help them grow their business and that they're excited about that. So it gives me a lot of hope for what 2026 and 2027 are going to look like in terms of us beginning to really build out that partner channel as they have the full catalog of Thryv and Keap products to sell. So to tell you more about the progress of our business I'm going to bring Grant Freeman on our President. Grant?

Thanks, Joe, and thank you all for joining us. In 2025, we're entering a new chapter of growth for our SaaS business. Many of you have tracked our progress cross-selling and upgrading marketing services customers to SaaS products. As you probably know, most of the legacy customers we converted to SaaS were upgraded to our Marketing Center product, which, as you probably remember, helps clients boost their online presence, gives them lead attribution tools so they know what marketing and advertising is working, and also helps them manage their social media posting across multiple platforms in addition to other features that are tied to growth. Our sales strategy will remain focused on growing our SaaS subscriber base through upgrades, cross-sells, and new sales. Of course, our most efficient path forward is deepening relationships within our existing software base and expanding their spend. At the end of the first quarter, 17.2% of our SaaS subscribers use multiple paid products, a nice increase from where we were. As we've analyzed retention trends across our customer base, one thing has become glaringly clear, expansion within our existing clients is one of our most compelling opportunities. When a customer adopts a second paid product, their churn rate drops significantly. Recently, we've seen it dropping as much as half compared to just those with one product. Not only does this increase revenue per account, but it dramatically extends customer lifetime, making expansion a far more efficient growth lever than relying solely on net new customer acquisition. At the start of the year, we reoriented our sales organization around growing monthly recurring revenue rather than prioritizing new account acquisition. Each business adviser now manages a large book of business with improved cadences, better automations, and enablement tools to help the rep efficiently increase average spend for each account. The result is a more consultative value-led approach that has meaningfully improved per rep productivity in recent quarters. This shift was deliberate and the results are really encouraging. We've done things like overhauling the compensation to reward MRR and expansion. We've encouraged reps to focus less narrowly on selling individual centers and more broadly on selling the full scope of SaaS solutions that may benefit a given customer, and we've encouraged reps to focus on existing customers where wallet share expansion is more efficient. The strategy is working. Our productivity is improving. And importantly, we spend less to acquire higher quality growth from within our existing SaaS client base. Customers are responding positively to our growth-oriented tools like Marketing Center, Growth Packages, and other customer acquisition add-ons that we offer. These products serve as a natural springboard for introducing CRM and workflow automation later on in the journey. We're also seeing encouraging results moving upmarket with modestly growing average customer size and higher ACVs through more consultative sales approaches and multi-center deals. This is particularly important as we go deeper into specific verticals and higher-performing SMB segments. Maybe what's most gratifying is that our clients are happy, and they are bringing their friends to learn about our platform. So we have a large referral flow. As such, a large portion of our new clients come via these referrals, which continues to be a strong motion for our business advisers. On the product side, we've built five robust centers and added more products to bring to market with the introduction of Keap Automation. This phase focuses on deepening adoption rather than just expanding subscribers. Finally, Keap provides strategic advantages through its automation engine, its partner network, and R&D capabilities. We're just beginning to explore cross-selling opportunities between our customer bases. And at the end of the day, when we help clients do more, they stay longer, creating compounding growth. And with that, I'd like to introduce Mr. Paul Rouse.

Thanks, Grant. Let's dive into the numbers. SaaS reported revenue was $111.1 million in the first quarter and above guidance, representing an increase of 50% year-over-year and up 7% sequentially. Keap contributed $18.9 million in the first quarter. Excluding Keap, Thryv SaaS business grew 24% year-over-year. 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 are making in scaling our profitable and durable software business. As we noted last quarter, the first quarter included a temporary headwind of approximately $2 million to $3 million tied to shared cost allocations. With fewer print publications scheduled in the beginning of the year, a greater portion of operating expenses was attributed to the SaaS segment under our current allocation methodology which follows revenue activity. This dynamic will begin to reverse in the second quarter as print revenue recognition ramps, shifting these costs back to the Marketing Services segment. Importantly, this will also begin to smooth out for the remainder of the year and beyond as we extend the majority of our print publications onto a 24-month cycle. That change improves visibility and leads to a more consistent cost attribution across the business. We remain focused on driving profitable growth in SaaS, balancing top line expansion with disciplined cost management and we expect continued adjusted EBITDA margin improvements as we move through the year. We concluded the first quarter with 111,000 SaaS subscribers including 15,000 Keap subscribers. This reflects a substantial 59% increase in our subscriber base year-over-year. As Grant mentioned in his remarks, a key element of our go-forward strategy involves focused effort on our existing customer base to drive increased value and revenue. With a significant portion of our current subscribers utilizing only one paid product, we are strategically positioned to expand their engagement and adoption of our broader offerings. This initiative to drive greater spend within our existing customer base is not only a pathway to ARPU expansion throughout 2025, but also represents a more efficient and significant contributor to our bottom line profitability. In the first quarter, our overall SaaS ARPU reached $335. Thryv contributed an ARPU of $320, showcasing positive quarter-over-quarter growth. Keap-specific ARPU was a robust $428, similar to last quarter. Looking ahead, we have good line of sight for continued ARPU expansion throughout the year, driven by the inherent strength of our software platform with its multiple adoptable products as well as our recently updated compensation plan designed to incentivize and drive increased NRR. We reached our highest reported seasoned net revenue retention this quarter of 103%, emphasizing the differentiated value we create and the sustained return our clients experience. We've discussed previously that our long-term goal is to maintain retention near 100%, which we expect to continue to achieve. Additionally, clients with two or more Thryv SaaS products grew to 16,000 at the end of the quarter compared to 12,000 in the prior year further highlighting the expansion we are seeing with existing clients. Thryv Centers per client also grew to 14% at the end of the quarter compared to 8% in the prior year further highlighting the traction we are seeing with existing clients. Moving over to Marketing Services. First quarter revenue was $70.2 million and above guidance. First quarter Marketing Services adjusted EBITDA was $10.1 million resulting in an adjusted EBITDA margin of 14% and just above guidance. As anticipated this quarterly performance is subject to the dynamics of the print schedule and we project a return to normalized levels starting in the second quarter. First quarter Marketing Services' billings were $81.4 million reflecting a 42% year-over-year decline. This trend more closely aligns with our strategic direction for Marketing Services as we continue to convert many of our legacy Marketing Services clients to our SaaS offerings. The pace of this transition impacts the rate of decline in marketing services billings. As previously disclosed, we are exiting the Marketing Services business by 2028 with cash flows from the business extending into 2030. This will provide the company with ample liquidity to meet its obligations during the transition to a fully SaaS-focused model. First quarter consolidated adjusted gross margin was 68%. First quarter consolidated adjusted EBITDA was $20.9 million, representing an adjusted EBITDA margin of 12%. Finally, our net debt position was $298 million at the end of the first quarter. Our leverage ratio was 2.2 times net debt to EBITDA, in line with our expectations. Net debt increased primarily due to planned upfront vendor payments, the timing of corporate bonus payouts, and the extension of our print directory assets to 24 months. This lengthening of the directory cycle is a component of our previously communicated strategic plan to exit the Marketing Services business by 2028. As we've previously discussed, the aforementioned factors are expected to result in peak leverage during the second quarter on a trailing 12-month basis, notwithstanding our anticipated strong EBITDA generation in that period. We expect a substantial deleveraging in the back half of the year as these impacts normalize. Turning to our outlook for 2025. For the second quarter, we expect SaaS revenue in the range of $113 million to $115 million. For the full year, we expect SaaS revenue to be in the range of $460.5 million to $471 million. In the second quarter, we expect SaaS adjusted EBITDA in the range of $18.5 million to $19.5 million. For the full year, we expect SaaS adjusted EBITDA in the range of $67 million to $71 million, which implies a SaaS adjusted EBITDA margin of 15%. The adjustment is related to projected traffic costs. For the full year, we are confirming our Marketing Services adjusted EBITDA guidance range to be $77.5 million to $78.5 million. Now, back to Joe.

Thank you, Paul. We started the year strong with solid core metrics and healthy customer spending. While we acknowledge the challenging economic forecasts, I want to address that. Our customers handle essential repairs, like fixing broken windows, leaky roofs, check engine lights, or dental issues. They address these non-discretionary needs, making them quite resilient. We don’t cater to luxury or discretionary spending. I've worked with small businesses for a long time, and I believe they will remain resilient if we face a recession. Currently, we're in a favorable situation where, even when conditions are good, small businesses sometimes hesitate to invest in marketing tools. However, right now they're focused on ensuring they have plenty of work and are actively purchasing Marketing Center and its growth package add-ons. This approach is generating additional traffic costs, which I view positively. It indicates that small businesses are eager to engage with us and invest in our offerings. Regarding our yearly guidance, we have taken a conservative stance due to the current climate. We want to ensure that we can keep up our commitments. As of now, we don’t foresee any significant issues, and this cautious outlook doesn’t diminish our confidence in our current results and products, which suit the present circumstances well. With that, we can open the floor for questions.

Thank you. We will now begin the question-and-answer session. Your first question comes from the line of Arjun Bhatia with William Blair. Please go ahead.

Perfect. Thank you, guys. Congrats on a nice strong start to the year here. Joe, one of the things that stuck out to me this quarter was the net retention rate that you called out at 103% and it sounds like that was a record high. It seems like the priority on cross-sell and expansion is working already. But can you maybe just elaborate a little bit on that? What are customers buying in addition to their core Thryv SaaS implementations? Which new products are you seeing traction for? And then for either you Grant, I'd be curious to hear just in terms of how sales force readiness is playing out to be able to kind of sell these newer products that you've launched recently.

Thank you for your question, Arjun. Over the past couple of years, we have been focused on investing not only in creating new software centers to enhance our platform but also in strengthening our go-to-market strategy. We've made significant efforts in this area. Our sales representatives now have access to their sales force automation tools, enabling them to reach out to customers effectively and engage in meaningful conversations. You can see the positive results of this work. We are implementing specific strategies targeting our customer base, and they are proving effective. For example, we are adding new centers alongside our existing ones—if a customer has a Business Center, we might add a Marketing Center, and vice versa. Additionally, we are developing straightforward add-ons to increase market presence and generate more leads and new customers. I've noted recently that this approach has been performing exceptionally well. Although many people are concerned about the economy, our team is doing well, and we are not encountering significant macroeconomic challenges. We are prepared for what we hear in the news, but so far, we've not seen any impact. As I indicated earlier, our customers rely on us for essential services, and they will continue to seek solutions even in a softer economic climate. They are keen to keep their order books full, which I hope clarifies our position.

Yeah, that's very helpful. For my second question, you mentioned an increase in traffic expenses due to elevated demand for the Marketing Center. Is that primarily related to your inbound marketing costs and lead generation costs? What specifically is contributing to the additional traffic expenses you're experiencing?

One of the tools that is an add-on to Marketing Center so Marketing Center is a platform that instruments all your marketing allows you to make data-driven decisions you can manage your social in there, there's a whole bunch of good things you can do. We've added on top of it now some add-on tools where we'll help you optimize your position of your website to help you show up better in more organic results. And we've also added some things that have traffic in them. So we're actually driving some search into your business as well. And that product has continued to sell well. It's actually sort of in the mix of things outstripped what we thought it would do. So we had planned for a little bit of TAC in there and there's just a little bit more. So it's not a giant thing. I just want to bring it up as one of the moving parts. And it's sort of contra to at least what I read sometimes in the media that small businesses are going to just roll over and stop. We're finding that, they're marketing they're out there doing their thing looking ahead trying to make sure their order books are full.

Okay. Yeah. That's super helpful. Perfect. Thank you, guys.

Your next question comes from the line of Scott Berg with Needham. Please go ahead.

Hi everyone. It was a nice quarter. Thank you for taking my questions, Joe. Let's begin with the Keep partner conference, which was your first. Considering the acquisition was just under six months ago, what were your takeaways from the conference? What feedback did you receive from the platform partners regarding the potential of this combination moving forward?

Thank you for being here. The partners have been very pleased with Keep's automation tools and their flexibility. These tools are crucial for the services they deliver to different customers. Many of our partners focus on specific industries, such as wellness, dentistry, or gyms, helping them manage their marketing efforts. They use Keep’s tools for various automations that extend beyond marketing, including hiring and service fulfillment. However, Keep does not assist in building customer lists; it nurtures existing lists instead. This is where Thryv comes in, helping partners expand their lists and engage new prospects. Essentially, Thryv excels at the top of the marketing funnel, while Keep effectively nurtures leads and converts them at the middle and bottom. This partnership is seen as a valuable completion of the funnel, and partners are eager to integrate more of Thryv’s offerings. Although we didn't immediately have all the necessary systems in place for a seamless transition, our teams have been working diligently to make this happen. Partners were previously in a stagnation phase and didn’t see ample growth or investment in their channels or product innovation. Since taking over at Keep, we've prioritized accelerating improvements to meet partners' expectations. We were able to present some completed projects at the partner conference and promise more enhancements to enhance their experience with Keep. The mood was positive as partners traveled from around the world to be there. We aimed to provide them with valuable insights, or they would have left feeling disappointed. Many attendees have been involved with Keep and these conferences for over a decade, forming strong personal connections. We also organized a networking session that allowed attendees to meet new people in a dynamic way, reminiscent of speed dating. Overall, the conference was a success, and we are planning a much larger customer event in the fall, surpassing the recent partner conference.

Thank you for that. Joe, my last question is regarding the decrease of 3,000 in your SaaS customer additions this quarter, which seems related to your core Thryv customer base. Could you provide some insight into why this number has dropped quarter-over-quarter? I understand your focus has been on expansion activities and attracting new customers, but I expected to see numbers that were closer to flat compared to the previous quarter.

Yes, that's a good question. The holiday season is typically slow for us. In the early part of Q4, we generally perform well, but as we approach Thanksgiving through New Year's and even a bit beyond, it becomes more challenging to engage with small businesses. They are preoccupied with their own plans, taking vacations, and managing home service jobs, all while under pressure to prepare for the holidays. Our employees also tend to have personal trips during this slow period, which creates a cycle of reduced activity. In Australia and New Zealand, it intensifies since it's summer for them, and they take significant breaks starting a week or so before Christmas, returning in late January. Their lifestyle involves considerable international travel, which we appreciate, but it consistently contributes to a softer business environment. Historically, we've seen similar trends during this time. Our business isn't seasonal in nature, but the ability to connect with clients can be affected. Additionally, we intentionally focus on leveraging our existing customer base, which consumes some of the sales time that could have been used for prospecting. However, our business advisers are motivated by referrals that continue to come in, although even that slows down during the holidays. It’s not always a priority for clients to invest in new software during this time. I wouldn't be overly concerned about the decline, especially considering the significant growth we had leading up to this period. We're eager to connect with new customers and discuss further opportunities.

Understood. Thanks for taking my question.

Your next question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead.

Great. Thank you guys. Maybe I'll start with Grant. You had highlighted some changes in the sales motion. Just curious, if we go into a more challenging macro environment, is there a different product suite that you think resonates better with your customers that you would try to lean into?

Well, it's funny. There have been times in recent memory when the economy was so hot that our guys were booked solid. So when you would go to them and talk to them about putting in additional marketing instrumentation or better ways to run their social media or just different things that would be marketing-oriented and help them grow, they weren't necessarily at the very top of their list. And if there's a threat that things are going to slow down or let's say, things even do slow down a little bit, they're much more anxious to prioritize meeting with you about that stuff and focusing on that stuff so that they can get work. So I mentioned, I almost feel like the current environment is sort of Goldilocks because it's not bad at all. It's more that it's supposed to get bad in the future. And I think it's that supposed to get bad in the future thing that's causing them to really pay attention. So yes, I guess the answer to your question is to answer it directly is all of the grow your business type stuff that we offer is particularly in demand if things slow down. And then when things are hot as a firecracker, we may be leaning a little bit more into the run your business stuff getting into the – I sometimes use the expression the broccoli stuff you should be doing, CRM type stuff, working on your scheduler, your estimates, invoices, billing, working on your ratings and reviews, all that stuff. And at the moment the marketing and sales kind of stuff is really in both.

Appreciate that. Just wanted to see if you can unpack – you gave a lot of good commentary on what you're seeing right now. You haven't seen incremental pressure things like that. But can you maybe pair that with how you're thinking about the guide, your decision to maybe pull back on expectations for SaaS revenue this year? Is it just cautionary for what may come? Or just any more thoughts there?

Yes. You just answered your own question. That's exactly what it is. We just – we feel like a more cautious stance is appropriate, given the really just the tremendous uncertainty that's in the market. Our – I mentioned before our guys fix the broken things in the world, but they have to get subzero refrigerators from somewhere. They have to get fancy window packages. They have to get stuff that potentially gets affected by tariffs. So there's lots of concerns about that. And then there's just overall economic noise and sort of scary media headlines. So I think it was just prudent in all honesty. It's not linked to anything specific that we're seeing. We delivered I think nicely on our first quarter and we have great line of sight into the next quarter. But the whole rest of the year is a long time. And with all the prognostications, look you've read some of them about recessions and other things, it just seemed prudent to back off a smidge. We didn't move it very much in all honesty, but we just thought it seemed to make sense to take a little bit more of a cautious stance.

That makes sense to me. Thank you. Appreciate it.

Your next question comes from the line of Zach Cummins with B. Riley Securities. Please go ahead.

Thanks. Good morning. And appreciate you taking the questions. Joe I wanted to ask about just retention of many of these Marketing Services customers that are moving over to the SaaS customer base. I mean can you talk about – I know you had a huge influx of those customers coming over in 2024. So can you just talk about the initial conversations and kind of the success you have of maintaining those customers for kind of a year plus after bringing them over last year?

Yes. That's a wonderful question. Same. We haven't been able to tease out any difference in the churn rate. I mean it's the same. The same as the other customers that we've sold that we've sold before, it's the same. We are dealing with very small businesses. So when you're dealing with DSPs you're going to have a little higher churn. And I think we've talked about that. We've established that. But we're not seeing any difference in churn with the folks that we've selected and brought over from Marketing Services. And furthermore, what we are seeing is good, strong add-on and spending habits, when you look out six months, a year, you look at that second year, we're having success, adding additional things. And as Grant said in the prepared remarks, when customers buy more products, more than one product they end up having a few different things. Their churn profile meaningfully comes down. In the most recent data that we were looking at, it's like it's cut in half, kind of thing. So we're really optimistic that we've moved them from a legacy old platform that we want to shut down, that we're trying to turn off that we've been maintaining for years, that probably came through an acquisition somewhere, and had limited capabilities. And we're giving them a real improvement where they're getting a lot more functionality, a lot more capability, a lot more value for money in the change. And they are responding by beginning to use some of it, and access some of that, and being receptive to having conversations about adding more products. So I think that's the big success story of the last recent period, is the success we've had with those. Now, obviously on the math, if you're adding big numbers like that, you are going to have a little bit more churn. You're poking the bear, right? You're taking and you're moving them over and you're moving big numbers over. So we have to outrun that a little bit. And you saw a little of that in the last quarter, where between seasonality and just the big quantity, we were sequentially down a little bit. And I've said very clearly, that we don't expect this year to be anywhere near like last year in terms of a big surge in subs. It's going to come more from the expansion of spend this year. Our long-term guide on this is that our roughly $4,000 per customer will expand to $8,000 over the next couple of years now, that the platform is more close to being built out. And a lot of our energies and attentions are going to go into expanding that spend. And quite frankly, as investors, you should love that because that's a more efficient motion than out prospecting. You get your return on your time is better; your return on the investment of energy is better when you're selling to existing customers rather than having a prospect. So I hope that answers the question.

Absolutely. Really helpful on that front. And my one follow-up question. I know your core Thryv SaaS customer base and just all of those customers tend to be pretty resilient despite whatever the macro environment is. I was just curious if there's any meaningful contrast with the Keap customer base. And really as we think about the updated guidance, are there any changes in assumptions for the core SaaS business versus maybe what Keep is going to be contributing this year?

Yes, the Keap acquisition is progressing very well. We previously made commitments regarding the synergies from combining the businesses, and we have solidified those. We feel optimistic about achieving profitability and EBITDA from the Keap business, along with the essential operational aspects like managing computers, email sign-on, phone systems, and employee benefits. We have efficiently organized all these elements, and we take pride in that. We also value the cultural integration we’ve achieved, discussing our missions with the Keap team and how their objectives align with ours to create a stronger combined purpose. There has been very little turnover, indicating that the team is excited about the future. We are enthusiastic about the Keap acquisition. Regarding the customer base, Keap's customers primarily consist of online businesses like coaches, consultants, and agencies that support traditional businesses. There is minimal overlap, with only about 50 shared customers between the two companies. However, Keap's customer base has demonstrated resilience and strength. They aren’t heavily involved in discretionary spending, such as fine dining. At a recent partner conference, I met some travel-related partners who organize specialty trips for specific demographics. While there might be a slight presence of such businesses, none expressed any concerns, and one speaker discussed her year-over-year growth and future plans driven by automations and insights gained from the partner network. So far, I am not seeing any red flags. With 15,000 customers in that group, it’s still a smaller segment of our overall base, and I lack extensive experience with them yet. I will keep you updated in future quarters, but for now, there aren’t significant high-end restaurant concerns in that customer base.

Your next question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

Hi. This is Will on for Dan. I think you said that your long-term net revenue retention goal is staying at 100%. As you shift your sales focus to recurring revenue, increasing average spend per account, would you evaluate raising that goal?

That's a really good question. I believe our focus will have its ups and downs. Last year, we saw a significant increase in new subscribers as we brought in marketing services personnel to enhance the upgraded experiences I discussed earlier. Our current task is to establish a solid relationship with these customers, meet with them, and guide them on how to utilize our services effectively. We invest heavily in ensuring these customers receive excellent support after their transition. This remains a major priority for us. However, there may be future fiscal periods where we will shift our focus towards acquiring new customers. For 2025, we're particularly focused on retaining our current base. In our Investor Day guidance and materials, we've indicated that we operate at around 100% net revenue retention, emphasizing that we sell to digital service providers, not enterprises. While some may go out of business or fail, which leads to uncontrollable losses in our metrics, it is mitigated by the extensive number of potential customers. Our total addressable market consists of around eight million businesses, allowing us to easily replace those that leave in relatively short sales cycles. The DSP segment is just beginning its move to the cloud, making it still relatively new for them. I view this as an excellent market, potentially even better than the enterprise market. I understand if that raises some eyebrows, but the sheer size and early stage of this market offer tremendous growth potential. However, it does come with slightly higher churn and lower net revenue retention. Your question is quite valid. We might see substantial increases in net revenue retention over the next few fiscal periods due to our intensive focus on our existing base. Yet, we could also redirect our efforts towards expansion in the future. For now, I'll maintain our guidance of around 100%. If we continue to exceed expectations, you can certainly revisit that question in a few quarters, and we can discuss the possibility of raising the goal then. But for now, I'll stay conservative in our outlook.

Thanks for that. And then just one more. Now that you've accelerated the migration to a fully SaaS-based business, what is your target leverage range over the next two to three years?

Yes. Right now, with the leverage we have, we plan to continue paying down debt. I think you can expect leverage to improve consistently over time. That's our current plan.

And your last question comes from the line of Matt Swanson with RBC. Please go ahead.

Yes. Great. Thanks for taking my question and congrats on the strong start to the year. Joe, as you're seeing more success cross-selling, can you just talk a little bit about how you're working to kind of ensure that continued success post implementation and make sure customers are seeing kind of the compounding value of the combined platform?

Thank you for the question. That's an important topic for us. Customer experience is one of our top areas of investment, as our customer base continues to grow and requires attention. We prioritize their experience through our customer experience team, which utilizes various methods to engage with them. This includes making phone calls, holding Zoom meetings, sending in-app messages, and emails. We are reaching out to them in large numbers to ensure effective communication. Additionally, we schedule time for one-on-one Zoom sessions to walk them through their needs. Our business advisers also visit them in person to provide support. We understand that small businesses often have busy and unpredictable lives, which can lead to missed appointments. Nonetheless, we are committed to this effort. The evidence lies in the churn rates of customers who have upgraded; they have remained consistent, and their spending has increased over the past six months to a year. This indicates that when customers engage with us, they tend to invest more. Focusing on this area has been crucial for us recently and will continue to be important this year. We are constantly innovating in our approach, and I believe we are making significant progress.

That's really helpful color. And then we've mentioned a couple of times on the call, the Goldilocks moment for the customers. But I guess just maybe acknowledging like how your customers see the same news articles we do, like does this change your go-to market motion at all, maybe like emphasizing the ROI of the platform more? Or is there any way you can kind of incorporate that into actually like a positive or a tailwind for the company?

It's a great question because different situations call for different approaches. I often compare the growth aspects of our software to hot French fries, while the operational side is more like steamed broccoli. We know broccoli is good for us and beneficial, but it isn't always the most exciting. There have been times when we focused heavily on operational tasks like improving scheduling and CRM systems. Currently, we're seeing a strong interest in growth discussions, which is where the Goldilocks comment comes into play. I recall a time when, after COVID, the government provided financial support, leading to our clients in construction being extremely busy, often booked for a year. They were so swamped that discussing marketing with them was challenging. Now, however, there is more uncertainty about future orders, and clients are eager to engage in meetings and figure out how to secure ongoing work. This aligns with my Goldilocks comment. Customers are not in a position where they can't invest—they're still doing well, but they are paying attention to headlines that make them more cautious about their marketing strategies. Does that make sense to you?

That concludes our question-and-answer session. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.