This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
Hello, my name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Thrive Holdings Inc. Q1 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Cameron Lessard, Head of Investor Relations. You may begin.
Chris
Thank you, Operator. Hello, and good day to everyone. Welcome to Thrive's first quarter 2023 earnings conference call. On the call today are Joe Walsh, Chairman and Chief Executive Officer, Paul Rouse, Chief Financial Officer, and Elise Falsili, our Chief Revenue Officer for Thrive Australia. A copy of our earnings press release and investor presentation can be found on our website at thrive.com or in the investor section at investor.thrive.com. Please acknowledge comments made on today's call and responses to your questions may contain forward-looking statements about the operations and future results of the company. These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Thrive has no obligation to update the information presented on this conference call. Finally, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on our website. With that introduction, I would now like to turn the call over to Joe Walsh. Thank you, Cameron, and thank you all for joining our call.
Joe Walsh
I'm pleased with our Q1 performance. Our continued focus on optimizing our predictable, scalable, and repeatable model to drive revenue growth while improving the bottom line is evident in our results. Every success metric is steady or increasing year over year and showing solid performance versus our expectations. This gives us strong predictability and durable smart growth. Our first quarter SAS revenue grew 24%, which was at the top of our guidance. SAS subscribers ended the quarter at 54,000, an increase of 15% year over year. This is attributable to our best-in-class software platform and continued strong sales velocity. We are seeing each month yielding better results than the prior month. Everything from qualified leads to demos to conversions, it's all up and to the right. Now, I've mentioned in the past that we expect a balance between ARPU growth and subscriber growth. And you'll have to forgive us, subscriber growth just sort of took off in this period. And, you know, it's just really going well, and we're having a lot of strong uptake. So, there won't always be a perfect balance between the two, but we expect, you know, a relative balance between subscriber growth and ARPU growth. We continue to set records in user engagement on our SAS platform. Engaged users at the end of the quarter was 45,000. an increase of 25% year over year and 10% quarter over quarter. On the bottom line, once again, SAS EBITDA came in better than our guidance. We've been getting more efficient each quarter, and let me explain how. First, there's a big tailwind at our back. More small businesses are adopting these type of SAS tools. We've mentioned before our business comes in kind of three chunks. The first is in making our regular rounds, talking to the approximately 400,000 small businesses in our customer base, our zoo, we sometimes call them. Well, more of those feel ready to modernize now and are moving forward and beginning to adopt these tools. So sales have been very strong into our base. Secondly is referrals. Those 54,000 subscribers are bringing their friends. They're telling their neighbor, the guy they're in the bowling league with on Tuesday night. And We're getting increasing referrals and that's a bigger and bigger piece of our pie. And that means that our cost of acquisition is low on those. We're not having to spend huge amounts of money to get a conversation with a new business. We're able to work with basically friends and family. And so that allows us to have a really efficient model. Now we do still have an inbound outbound machine like other software companies do, but we haven't had to rely really heavily on that. and that's part of where the great economics and the improved profitability are coming from. We're on a journey to be a Rule of 40 company, and we believe we can continue to have very strong growth and pair that with profitability. Turning to our marketing services, revenue came in better than expectations, and we continue to see very predictable performance in billings. You know, we've had success in the past of acquiring well-run, marketing services businesses at fair prices and introducing our Thrive software to those clients. This next one really fits that profile well. We're pleased to announce that we've acquired Yellow Holdings Limited, known as Yellow, New Zealand's leading marketing services company for over 50 years. Yellow has a similar history to our own in that it's basically come out of being the official telephone company, Yellow Pages. This is the old You know, New Zealand Telecom now Spark, the official telephone directory of that market. And they've built a pretty big, pretty significant digital marketing services business. In fact, they have over 10,000 digital clients there. And so we're confident that many of these local Kiwi businesses will benefit from modernizing and automating with our SaaS products. This is a relatively small tuck-in acquisition, and our CFO, Paul Rouse, can share more about Yellow's financial contributions and our updated guidance. Our international expansion is a key focus area for us. And given this announcement, I wanted to invite Elise Balsele, Thrive Australia's Chief Revenue Officer, onto the call today to highlight the successes we've had in the Australia market with the prior acquisition of Census Holdings. Similar to Yellow in New Zealand, Census Holdings, before rebranding to Thrive Australia, was a leading and highly profitable digital marketing and directory services company. We acquired Census at an attractive valuation and integrated the company in an effort to reshape the perspectives of SMBs in Australia by providing an easy to use solution to modernize their operations. Fast forward to today, Thrive Australia has been a success and one of our top producing regions for SaaS. Elise has been instrumental in leading the Thrive Australia business. So with that, I'd like to ask Elise to join and share more about our impressive progress in Australia. Elise?
Paul Rouse
Thanks, Joe. In March 2021, Thrive acquired Census in Australia. Within a matter of months, we were in market positioning the Thrive software to our Yellow Pages clients. We had strong relationships with tens of thousands of clients here in Australia, and that trust is what supported us in presenting Thrive. Building a brand in market takes time, and by leveraging our trusted position, we were able to accelerate this process. Our marketing team then worked hard in the background, building our brand and reputation more broadly across the Australian market to support us in attracting new clients. The competition in Australia was not at the same level as the United States. While some of our clients use point solutions in their business, the vast majority of them didn't know where to start. Every small business has problems. Problems that keep their small business owners awake at night. From getting paid to managing their staff, being bogged down in admin and never getting to their son's football game. We could finally help them and far more impactfully than just driving leads to their business. The go-to-market approach was critical. We managed a significant volume of customers and revenue in our marketing services business. Whilst we were leveraging those relationships to have thrive conversations, we were not doing it at the detriment of our marketing services revenue or EBITDA. Our sales force was already proficient in selling leads through their marketing efforts. We introduced Strive as a natural extension, enabling businesses to convert more leads into clients, improve their client experience, and nurture the relationships post-sale to promote customer loyalty. By integrating marketing and client experience, we aim to increase the client base and maximize the lifetime value of each client. We trained and coached our sales teams to identify problems and gaps in their client journeys. This approach allowed us to position Thrive as a tailored solution, addressing the most pressing needs of each business. We're seeing strong NPS results, Net Promoter Score, coming through from our SaaS customers at all points of the customer journey, and our volume of engaged users is growing each month. We're specifically pleased with the number of engaged users, showing that our clients are truly embedding the software into the business. I'm really excited about the growing number of advocates we have and the strong feedback they're providing. Like Tyler and Eve from a popular decking business in Melbourne. Thrive is like an employee. It's like having another person in the business to take the pressure off us. In Q1, Thrive Australia has delivered strong performance, exceeding all key metrics. Our SaaS performance was incredibly strong, exceeding our target for the quarter. And each month we've outperformed the prior by greater than 10%. The Australian region is now one of the top performing regions globally. In Q1, we launched our partner channel here in Australia, an exciting milestone, which has given us a new channel to bring Thrive to market. We've seen positive results with our first partners signed on and trained and our first partner sales being secured. Working across a number of key trade expos in Australia during Q1 has helped us grow both the recognition and awareness of the Thrive brand, especially in key verticals, and has resulted in many partnerships being secured. We're exciting marketing center will launch in Australia later this year, and we'll have an opportunity to expand the value that we're delivering to our SAS clients, whilst also increasing the overall customer recurring revenue. The team is primed and ready to launch these new centres in market as they're delivered. Signatures have just launched, ThrivePay being the perfect extension for the service segment. In addition to our success with building the Thrive Australia SaaS business, we've continued to deliver exceptional results across our marketing services revenue and reached our targets for Q1. Overall, we're incredibly pleased with the performance of the Australian business. what we've been able to achieve in less than two years in market and what we envisage for the future. I'll now turn the call back to Joe Walsh.
Joe Walsh
Thank you, Elise, and thank you for the amazing job you've done of leading Thrive Australia. You know, each time we enter a new market, one of these new international markets, we expect two to three years of investment as we get that market set up. And Australia is no different. You know, we've been investing the last two years there. We expect in 2024, Thrive Australia will be contributing a positive EBITDA, positive cash flow. And so we're just about at the end of the investment period. And the losses they're making this year are actually relatively small. I'm going to turn and broaden the international to just a little bit to talk about Canada. You know, in Canada, we didn't make an acquisition. We've gone in just greenfield building. And so there'll probably be a full, you know, three or so year investment cycle there. We're talking single digit millions, not huge amounts of money that we're investing. And the profitability of the U.S. is able to carry that small investment. And similarly with New Zealand, there will be an investment for a couple of years as we get it set up, but it'll be reduced because we made the acquisition of yellow, which gives us a zoo to hunt in and will give us lower CAC. and make it a more efficient market entry. So with that, I'd now like to turn the call over to our CFO, Paul Rouse, to discuss our first quarter financial results. Paul? Thank you, Joe.
Elise
As a reminder to listeners, we are going to focus on our two segments, SaaS and marketing services, which includes results from domestic and international operations. We feel this is more beneficial in modeling and understanding the business. Additional detail between domestic and international for each segment can be found in the appendix section of the investor presentation. Okay, let's jump into the results, beginning with our SAS segment. SAS revenue was $59.9 million in the first quarter, representing growth of 24% year over year. And at the top of our guidance, SAS subscribers totaled approximately 54,000 at the end of the first quarter, an increase of 15% year over year. SAS ARPU increased to $379 in the first quarter and represents 8% growth year over year. Turning to the bottom line, first quarter SAS adjusted EBITDA was negative 204,000 and ahead of our guidance. As Joe described in his previous remarks, we have been emphasizing productivity in our SaaS business and championing efficient growth by managing our spend in our new acquisition channels. I'm excited to announce that our US SaaS business has achieved positive EBITDA for the past four quarters. Additionally, negative EBITDA contribution in our international markets came in better than expectations, which resulted in our overall EBITDA being near break-even. We are encouraged by the strength we are seeing in the U.S. and by the success of our international investment efforts and believe we are on the path to becoming a Rule of 40 software company. We are confident that our strong growth and profitability will continue to drive our success in the years to come. First quarter season net dollar retention was 91%, and unchanged versus the prior quarter. As a reminder, season net dollar retention represents clients that have been with us for over one year. With the rollout of our additional centers like Marketing Center, the company is on the path to achieve 100% NDR. By providing our subscribers with a better experience, Additional centers can help to increase customer satisfaction and loyalty. This can lead to clients renewing their subscriptions, upgrading to higher value packages, and recommending the company to their friends and colleagues. We also believe by addressing these factors, we will keep churn low while generating new revenue streams via new centers to offset the cost of customer acquisition, which leads to higher NDR. Moving over to marketing services, first quarter revenue was 185.6 million, which came in better than expectations due to timing and shipment of print publications from Q2 into Q1 in both our U.S. and Australian markets. First quarter marketing services adjusted EBITDA was 58.7 million, resulting in an adjusted EBITDA margin of 32%. First quarter marketing services billings was 193.4 million, representing a decline of 21% year-over-year. Please note this metric now includes billings for our FIVIO holdings for 2022 comparative period. First quarter consolidated adjusted gross margin was 66%. First quarter consolidated adjusted EBITDA was 58.5 million. representing an adjusted EBITDA margin of 24%. As previously discussed, these measures were impacted by revenue recognition in our marketing services segment around the timing and shipment of our print product. Finally, our net debt position was $451 million in the first quarter. Our leverage ratio for the first quarter, in accordance with our credit facility, was just under 1.5 times net debt to EBITDA and well below our covenant of three times. The company generated an additional $27.2 million in free cash flow in the first quarter and paid $35 million towards our term loan. Now, let's turn to guidance. We are reaffirming our prior full-year SAS revenue guidance in the range of 257 to 259 million, but upgrading our profit outlook for the full year as follows. For the full year of 2023, we now expect SAS EBITDA in the range of 2.5 to 3.5 million, which we previously guided to as turning profitable or breakeven. For the full year 2023, we are increasing our outlook for marketing services. We now expect revenue in the range of 653 to $663 million, and adjusted EBITDA in the range of $187 to $190 million. This upgraded guidance for marketing services reflects our recent acquisition in New Zealand, which we believe will contribute around $10 million in reported revenue. You can find additional information related to our 2023 guidance in our press release and investor presentation available online. As communicated on our last earnings call, we expect to ship fewer print publications in the third quarter of 2023, and due to the accounting treatment, it will impact our third quarter results. However, this does not impact free cash flow and our ability to retire debt, and we expect a very high cash flow conversion in the third quarter. For this reason, we want to point investors to our marketing services billing performance an operational metric in our investor presentation which shows steady performance for our many historical periods. We realize the nonlinearity of our print is a bit complicated, and we try to provide as much information as possible to be transparent. I'll now turn the call back over to Joe.
Joe Walsh
Thank you, Paul. So I guess it's sort of the headlines here from today's call. I'd like to underscore a couple things. The profitability of our SaaS business is coming along a little faster and a little stronger than we expected. And that's really owing to our great model. The fact that we've got 400,000 existing customers that want to talk to us, that we're able to have a conversation with and help make this journey, you know, in modernizing their business. And they're bringing their friends. They're introducing us to referrals at an ever faster pace. as our subscriber base gets bigger, they're introducing more and more referrals. So it's sort of a self-regenerating model. Our marketing center launch is going well. We're just in the early days of that. Obviously, we just began at the very end of last year, but sales are coming along nicely. Our sales organization is really learning how to talk about the product and how to do it the best possible way. We've got some early successes from customers that are excited about what they can do with marketing centers. So more to come on that later, but That seems to be percolating along really nicely. I guess sort of the final couple takeaways that I would offer you is our North Star is an engaged user. And more and more small businesses are running their businesses on drive. And you can see it in the huge gains we're making in engagement. And that is a great leading indicator to what revenue is going to look like in another year or two. The dogs are eating the dog food. This is working. Proof point of that is look at subscriber growth, you know, 15% subscriber growth. They're coming in almost as fast as we can sign them up and get them onboarded. I mean, it's really outstripping our expectations even. It's been very good. And that's because the software is so excellent and making such a big difference for small businesses. So with that, we'll wrap the call up and I'll turn it over to the operator.
Operator
Thank you. And as a reminder, if you would like to ask a question, please press star then 1 on your telephone keypad. Our first question is from Rob Oliver with Baird. Your line is open.
Rob Oliver
Great. Thanks, guys. Good morning. Appreciate you taking the questions. Joe, one, I'll start with you. Strong on the subscriber front, you mentioned that. You also alluded in your prepared remarks to working towards that balance between subscribers and ARPU. Just on the ARPU side, growth dropped below 10%, and I'm just wondering, is that just a function of the economy and people changing? you know, kind of starting out with a smaller bite at the apple or maybe being a little bit slower to upgrade? Is it because people are waiting for some of the new products or, you know, help us just understand that? And then I had a quick follow-up.
Joe Walsh
Yeah, I think it's probably a mix of things. I mean, our customers, we've talked about them before. These are very resilient, you know, small businesses. Our average clients have been with us for more than 15 years. on the marketing services side. So these are the really old line established businesses, not new starts. You know, so they don't tend to, you know, just go out of business if the wind blows. But they read the same newspapers you do, you know, and, you know, they hear that there's a great, you know, recession coming and it's going to be, it's all going to be very challenging and, you know, what's the Fed saying? I mean, they hear all that same stuff. And so there is definitely a you know, a tinge of conservatism out there in the market and, you know, people, you know, measuring twice, maybe three times before they cut. But as you can see, we continue to do really well. We're continuing, I guess, maybe say it differently. The tailwind behind our business of cloud adoption is bigger than the crosswinds of, you know, of the economy. But yeah, look, when they make the decision as to what to buy, Do they sometimes buy a little bit more conservatively in this environment? Yeah, they do. So I don't think it's anything to particularly worry about, really. We're continuing to see very strong uptake. We did more demos in the first quarter than we've ever done, ever. We're setting a lot of internal records as things keep moving along. So I think demand's there. I think we're growing along. And we see people, once they enter the ladder of our products, they tend to move up because the products are good and they work. And it tends to develop. So we're not troubled by it at all. I don't think you should be either.
Rob Oliver
Great. Okay. Thanks, Joe. Appreciate that. And then I'm sure there's going to be a bunch of questions on yellow from some of the other analysts, but I'll just ask a quick one to start. You know, you guys mentioned 10,000 digital clients there in New Zealand. Is that like, what is digital there? Is that like SEO, SEM? And then is there a print business here too? Appreciate it. Thanks, guys.
Joe Walsh
Yep. No problem. As I mentioned, they were and are, Phil, the sort of official company directory company, you know, in New Zealand. So New Zealand's about a 5 million population, you know, country. We're talking about, you know, 20 directories that cover the country in total. So it's not a giant business. But yes, they have a directory business and, you know, they have that essentially just like, just like Census was when we bought it or just like You know, the Thrive business in the U.S., very similar, a lot like Vivio when we bought that. It's a traditional directory business that had pivoted over. In addition to their printed directories, they also have a very strong online directory, which is quite profitable and highly used. And then they also do general small business agency stuff where they build websites and do SEO and SEM stuff. and all that stuff. So they've got a nice, trusted relationship with those small businesses, and that's what we're going to build on.
Phil
Thanks again.
Operator
Thank you. The next question is from Arjun Bhatia with William Blair. Your line is open.
Arjun Bhatia
Hey, guys. Thanks for taking the question. Joe, maybe just to follow up on what you're expecting out of New Zealand on the software side, can you maybe just compare some of the market characteristics between New Zealand and Australia, which seems like it's been a success thus far? I remember Australia was relatively early in terms of SMB software adoption. Do you see those similar characteristics in New Zealand as well?
Joe Walsh
Yes. Yeah, I would say the two markets are very similar in that regard. If anything, New Zealand is probably, you know, a year or two behind Australia in terms of, you know, digital sophistication, software adoption, et cetera, et cetera. There is an initiative in the country to, you know, move small business or move business in general more digital to more paperless, more, you know, adopt more of these tools. So it's definitely a thing there that they're working toward. And I think our entry into the market will really be
Arjun Bhatia
well-timed and welcomed in terms of supporting those initiatives okay um got it and then just when we think about when i'm looking at the sas metrics for for q1 it looks like the subscriber growth i mean i think you had one of your best quarters in in adding net new clients on the fast side but we didn't really see that flow through to to revenue this quarter is there anything different about the characteristics of the customers that you're adding that might be different this quarter versus what we've seen historically? I'm just trying to square those two trends a little bit.
Joe Walsh
Yeah, not really. I think the prior question got to it a little bit. I think there's a little bit more conservatism out there in terms of what people are buying. And there are a variety of add-ons that also make the make that ARPU number move around a little bit. And, you know, I think maybe people during the prior period were a little bit more conservative around that. People really took the holidays off this year, you know, and we've had a really strong, you know, Feb and March and now April. But the holiday period was a little tiny bit soft for us just because people, you know, took the time off is nice. So there's always a little noise in the numbers, Arjun, but, you know, I don't see any big trend to identify. And to the extent that people come in a little lower on our kind of good, better, best scale when they enter, we find they tend to migrate up. So that just is more scope for increasing them later. I'm not really concerned about it.
Arjun Bhatia
Okay. That makes sense. Thanks for taking the questions.
Joe Walsh
Thank you, Arjun.
Operator
The next question is from Robert Morelli with Needham & Company. Your line is open.
Phil
Hey, I have a question for Scott Berg. In this macro, are you seeing any behavior changes in your marketing services customers intent to move to your SaaS solution?
Joe Walsh
I mentioned, I think, in the prepared remarks, there are a lot of these very established, very mature HVAC plumbing companies, roofers, whatever, that were aware, have been aware for a while that we provide these tools and they just weren't ready to move. And we're finding increasingly they're more ready. We come around and we call on them this year and they go, okay, I'm ready now to talk about that. I'm ready to embrace that. The world's moving on. That mega trend that we've described that we watched enterprises adopt the cloud over the last decade, that's trickling down now and the small businesses are looking to use these tools. And in some cases, they're coming right from paper and pencil. I call them the unclouded. We're moving them right into digital. In other cases, especially with the little bit bigger businesses in our base, they have already begun to onboard some point solutions. They might have brought something in to help them with payments. Many of them do their accounting in a cloud-type tool. They might have gone and started to do some point solutions. And they're now in search of a platform. And Thrive is a platform. And I don't know if you guys make that distinction when you analyze these different things. But there are elements or point solutions or tools out there. And a lot of them are really good. And then there's platforms. And Thrive is a platform. And it is really an all-in-one complete tool you can run your business on. And then we're super interoperable. with the various point solutions that are out there. So when our sales reps are in the field and they encounter somebody who started to screw around a little bit with MailChimp or Constant Contact and do a little bit of email marketing, they say, well, you know, I have that. And we say, well, no problem. You can just integrate that in with your Thrive. It's a one-plug API, and the data will share back and forth. And we also have email automation in our tool, but we don't mind if you use that one. No problem. And it just makes it easy. And so that's what we've tried to do is just reduce that barrier to adoption, reduce that friction, and make it easy for customers. We exist at Thrive to make small businesses' lives easier and better and allow them to compete more effectively. So anything that we can do to lower the friction, we try to do. So that's kind of the way we think about the answer to that question.
Phil
Got it. Thanks for that. And then, again, just given the macro, have you seen any material change to churn with your non-season customers?
Joe Walsh
Oh, I see what you're saying. You're trying to get past season into the, okay, I got the question now. It hasn't improved. You know, we certainly see people that are, you know, more nervous about things and you know questioning their expenses and so on but it had we haven't seen a big move up or anything um you know there's always a little bit of noise in the data it might it might have moved a tenth or something one way or the other but i wouldn't say there's any big trend i can identify that it's surging up got it thanks for the color the next question is from zach cummins with b rally securities your line is open
Grant Freeman
Thanks. Good morning. And thanks for taking my questions. I mean, Joe, just kind of following up on net dollar retention, it's remained pretty steady here at about 91% over the past couple of quarters. But how do you think about consistently trying to drive that number higher over time?
Joe Walsh
Well, we on record as saying we believe this will be 100% net dollar retention business. And that's That's how we see the model. That's what we believe is going to happen. And I think that there's not a huge amount of scope for us to move churn down, because it's pretty low now. Maybe we can grind off a tenth or two in better economic times. It really is going to come more from upsell. And that upsell will be driven by a lot of the wonderful products that our engineering and product team are in the back room inventing. You know, I get the great benefit of getting to spend time with those guys and see what they're doing and see what they're working on. And, you know, the product roadmap is very, very exciting. And I know a lot of you guys follow other software companies. You follow giant ones like Salesforce.com and really big ones like HubSpot. And, you know, I think that HubSpot is a very similar business to ours. I mean, they're obviously way upmarket from where they are. I guess they're ideal client is 2,000 employee companies, where ours is more like 20. So we're way below them. But as they've added more hubs, you've seen their ARPU go up, up, up, up, and their business grow. And we only have two centers out right now, and the second center only just came out. But the other centers are really in advanced stages of development and coming along very quickly. And as they come out, we're very confident we'll be able to serve more needs and broaden the footprint we have in these businesses just at the very time that their interest and their readiness and their willingness to adopt those things will be there. I mean, if we had those products sitting right there right now, they may not be as ready, but we're seeing that adoption curve just accelerate. So we're quite confident that we can move that over the next number of years from 91 to 100. You might even see it bounce around a bit, where it might go up to 94 and then back up to 93 and then move to 95. I can't promise you it'll go in a perfect straight line. But we genuinely believe that this will be 100% net dollar retention business in just a few years. And you guys should think about the model that way.
Grant Freeman
Understood. That's helpful. And the final question for me is just really around acquisition channels for the SaaS business. It sounds like you really had pretty strong referral volume here. at least in the recent quarter. How are you thinking about just where those new customers are coming from? Is there a greater emphasis being placed on, on kind of that referral channel and leaning into that? Or how are you thinking about just the overall customer acquisition engine?
Joe Walsh
I wish I could tell you it was some genius idea that I had or what somebody on the team had. We're just seeing more referrals. It's just that simple. I mean, the, The existing base, I mean, you could see it in the engagement numbers surging up quarter over quarter over quarter. We're seeing engagement drive. And, you know, our chief customer officer, Grant Freeman, was really articulate about this at our investor day. He told a story about one of our customers and he said, our North Star, what we wake up every morning thinking about is helping these small businesses and driving that engaged user number up. And as engaged users have have risen dramatically over the last two years, they're bringing their friends. And I've talked to a couple of analysts over the years have said, well, once you get through your Yellow Pages base, how are you going to sell more customers then? And it just keeps regenerating. They keep introducing us to more and more people. And we're actually getting more sales from referrals than we are directly out of the channel now. That perfect third, a third, a third has been a little pear-shaped lately because we're getting so many referrals. One customer is not referring us to one other one. They're referring us to two. We're feeling that accelerate. So that, if I'm just completely transparent with you guys, that has allowed us to take our foot off the gas a little bit on kind of the inbound funnel, which in that regard, we're like any other software company. We're out there spending money, trying to meet people to get conversations. I pity the fools, you know, those other small businesses out there that are having to go out there and spend mightily just to get a conversation with somebody. We have 400,000 customers that have a whole lot of friends. And so most of our life is a pretty friendly kind of farmer conversation, talking to, you know, relationships or introduced relationships, really warm conversations where the customer's already kind of pre-sold. We're not doing a lot of ice cold, cold calling and a lot of spade and pick work trying to get a conversation with somebody who doesn't really want to talk to us. So it's a nice life we have. And I think you can see it in the EBITDA swinging to the positive. Our SaaS business is now profitable everywhere, not just the US, but everywhere. And that comes from the big installed base of happy customers. And I believe over the next couple of years, more and more of those traditional old Yellow Pages customers in the base, we'll decide it's time for them to modernize and we'll decide to do it with us because we've been calling on them, we've been nurturing them, we've been sharing videos with them, we've been teaching them, we've been talking to them about it now for six or seven years. And I think when they're ready to move forward, they'll move forward with us.
Grant Freeman
Understood. Well, thanks for the additional commentary and best of luck with the coming quarter.
Joe Walsh
Thank you very much.
Operator
The next question is from Dan Moore with CJS Securities. Your line is open.
Dan Moore
Hi, this is Ross Kesselman in for Dan Moore. Can you talk a little bit about the progress you're making with the Marketing Center, and when should we expect to hear more details regarding other centers you plan to introduce over the next few years?
Joe Walsh
That's a great question. So Marketing Center came out at the very tail end of last year. And we brought it out in kind of a gated or a staged way where we sold it to a limited group of customers with a limited group of salespeople initially. And then we ramped it slowly because we wanted to make sure that there weren't bugs or edge cases or problems that we needed to work out. And that's gone really well. By the way, there were a couple. We worked them out. That's the basics of software, right? But it's been scaling gradually and nicely through the year. We're still only allowing customers to buy Marketing Center if they're already Thrive customers, meaning they're already in the software, they're already Thrive Business Center customers, and they've already been so for at least a month. So it's still kind of a smaller universe, but it is our plan very soon this summer to open it up more broadly and allow Marketing Center to be sold and marketed to really the whole base. And you'll realize that we've got a very big marketing services business. So there's a lot of people interested in marketing and so on, even those that maybe are not interested in software yet. And so we think that's quite a big market and we feel it'll accelerate very nicely as we open it up more broadly. But it's an all new product and it's been a bit of a learning curve. for the Salesforce to really understand who the ideal client is and how to position it correctly. But the good news is we've got a bunch of customers that are in the software now, they're using it, and they're giving us a lot of positive feedback about how they're using it and what it's doing to help them. And they're also giving us some feedback about what they'd like to see different, like they'd like to see this menu different, it should do this. And so we've got some fast follow improvements that we're doing as well. So in terms of how you should see it flow through the numbers, which I know is what you're trying to get to, I think you'll see Marketing Center begin to show up in our numbers and influence the numbers in the back half of this year, probably strongest probably in the fourth quarter as we start to get closer to a year under our belt. When we make the sale, it's only $199 a month. And you just get that $112. So it's not against our big base a whole lot of money initially. It'll take a little time for it to percolate up. We haven't even rolled it out in any of the other countries yet. We just have it in the US. So we'll be rolling it out in the other countries relatively soon. So I think you'll see in the back half of the year, probably closer to the fourth quarter, you'll start to see those numbers influencing our total numbers. The second piece of your question was, how are we thinking about other centers? We guided at our investor day, you guys to think about us coming out with a center per year. And, you know, I'm very confident that we can fully deliver on that, maybe even do a little better than that. So, you know, you will certainly see the next very big center coming out this year. And, you know, we think this next center will open up the market a lot for us and broaden the application and the number of people that we have an opportunity to go have a conversation with. And I'm really excited to tell you more about that when it's ready.
Dan Moore
Thank you for that additional color. If I could ask one follow-up. Over the past several quarters, you have accelerated the timeline of generating positive profitability in your SaaS business. Can you talk a little bit about why you feel that is the right decision in light of the material growth and upside opportunity in front of you, and whether or not the decision has any implications for achieving long-term growth targets you laid out roughly a year ago?
Joe Walsh
Great. That's a great question. You know, we're in constant dialogue with our kind of page one big investors. We meet with them regularly. We have conversations with them. And, you know, they have their own investment committees and their own evaluation and their own process. And they share with us, you know, what's going on. And, you know, without any question, over the last five quarters or so, six quarters, there has been a reevaluation where these kind of growth at all costs models where people are just, you know, spending money hand over fist in order to capture market share and grow have sort of fallen out of favor. And we were never doing that by any stretch. But we were leaning in a little hard and investing. And this desire to see the business, our SaaS business, positive, positive cash flow has been communicated very clearly. So it really wasn't a gigantic shift for us because it was happening naturally. The scale of the business was getting to the point and the referral contribution. Remember, our cost of acquisition on referrals is really pretty low. We get typically an email or a phone call from somebody that says, hey, my friend told me about this. I want to learn more about it. When we get over there to meet with them, they've already been through the software with a friend and they're pretty much ready to buy. we don't have an enormous amount of sales costs in that. And that has helped us a lot. I mean, if the environment around us was, you're supposed to grow at all costs, go, go, go, go, go, we could be spending a little bit more on our inbound funnel and probably perk growth up a couple of extra points. But those sales would be more costly. And rather than making, you know, whenever we said $2.5 or $3.5 million this year, we might lose $2.5 or $3.5 million this year. And apparently, that's a really big deal to people. The difference between positive cash flow and positive EBITDA with no need for additional funding, our business generates a ton of cash. And so we're not a company that's going to have to go out and seek funding in an environment that's going to punish us for doing that. And I think that that's important to our investors. Back to your question about its effect on our long-term plan, we're still very bullish on our long-term plan, and we still feel that we're operating in a very, very big total addressable market, and that the decade of small business software is very much happening, very much playing out. And the second half of this decade, it's going to be standard for people to be seeking a platform like this. where it might still be the minority of businesses that are ready for a platform today, three, four years from now, it'll be the majority of them looking. And we're in pole position to capture them. And we're going to continue to work at that. We believe that if you, and we plan, we're planning an investor day later this fall. We're going to lay this out in some more detail. But we feel that the cohorts of our additional centers that we'll be rolling out, each capturing a new element of spend, a new part of a small business's operation. Those cohorts will grow, and the new markets that we're entering, we've just entered New Zealand, we plan to enter more countries, more geos, will drive us to those billion and $4 billion numbers. And we'll update on that a little later this year. Thanks for that question. It's a really good one.
Dan Moore
Thank you for the additional call.
Joe Walsh
You're welcome.
Operator
We have no further questions at this time. I'll turn it over to Joe Walsh for any closing remarks.
Joe Walsh
Thank you very much, Chris. Appreciate that. Well, thank you. Thanks, everyone, for attending today, listening to the call. You know, my kind of big thoughts at the moment on our business are that swinging the business to profit is a big milestone. We have been profitable in the past, but we were then not profitable for however many, you know, eight or nine quarters, whatever it was. We're back to profitability. We'll never go back the other way. Our SaaS business is profitable. And as we start new markets, new centers, new countries, we will continue to be a profitable business and use kind of the business's own juices for the growth and expansion. And we're fortunate we have this very big base of high NPS score, highly engaged customers that we think can propel us along. We have a really great model and, you know, I'd like to say that we're an excellent management team, but we really do have an unfair advantage. I mean, having 400,000 customers that have been with us for 15 years and like you and trust you and want to hear what you have to say, nobody else has that, and that makes us special. Marketing center we're super excited about, and some of you guys might have expected it would come out and just be another business center overnight, but it is developing beautifully, and we're happy with how it's coming along. And I do think you'll see that as a big lift to our business as we get to the back half of the year. The engaged users are what make me happy every day. When I turn my computer on, I've got an intranet site that scrolls by and shows me how many engaged active users we have. And that number is steadily going up. And that's driving the subscriber growth. And I think if you want to confirm what's the health of Thrive, look at what's happening in subscriber growth. I mean, it's just melting up. Thank you all for your attention today. Really appreciate the support and I look forward to updating you again soon. Thank you.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer