Thryv Holdings, Inc.

Good day and welcome to the Thrive Holdings Inc fourth quarter and full year 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Cameron Lessard, Head of IR to begin the conference. Cameron, over to you.

Thank you, Operator. Hello and good day to everyone. Welcome to Thrive's fourth quarter 2023 earnings conference call. On the call today are Joe Walsh, Chairman and Chief Executive Officer, Paul Rouse, Chief Financial Officer, and Grant Freeman, President. 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 the 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 like to turn the

Good morning, Cameron, and thank you all for joining us on the call today to discuss our fourth quarter and full year results. 2023 was a stellar year for Thrive, and we capped it off with an incredible fourth quarter that once again exceeded our expectations. For the full year 2023, we delivered SAS revenue of $264 million, up 22% year-over-year, with SAS adjusted EBITDA of $12 million, which represents an adjusted even margin of 5%. Recall when we started the year, we were projecting somewhere around break even for our SAS business. We've more than delivered on that objective. And for the quarter, we're really happy to announce two notable improvements in our SAS metrics. SAS adjusted gross margins improved to 70% in the fourth quarter. You know, our gross margins have been trending towards the 75% that we guided in our long-term guidance. And it's really a function of us having built out our platform. We've got more to go, but we're able to sell multiple centers now to existing customers. And so you end up with a lot better gross margin. So that's a trend that we think, you know, we'll see continuing. The next stat I wanted to mention was net dollar retention. We came in at 96% for the fourth quarter. And again, that has to do with us selling additional centers to existing customers. Previously, when we only had one center, there just wasn't a lot else to sell them. We had some small add-ons. But now that we're building out more centers with another one coming later this year, we expect net dollar retention to continue trending toward that 100% that was given in our long-term guidance. We generated $148 million of cash from operations and free cash flow of $115 million, which was very similar to the prior year, even after accounting for the print revenue recognition dynamic in the third quarter and our acquisition of Yellow New Zealand, which occurred in the second quarter. This allowed us to retire a significant amount of debt in 2023. Later in this call, Paul will delve into our impressive fourth quarter and four-year results. However, I wish to direct everyone's attention to the press release we issued alongside our earnings results this morning. For those familiar with our company on this call, you are well aware of our ongoing multi-year transformation. We're shifting from a massive marketing services entity selling both digital and print products to small to medium-sized businesses to a rapidly expanding and innovative SaaS powerhouse catering to the same client base. Our unparalleled advantage lies in the strategic selling of our SaaS products directly into the client base within our marketing services business. We refer to it as the zoo. With our recent product launches, notably marketing center and command center, I'm excited to share today that we're seeing an acceleration of clients coming from the zoo into the SaaS platform. As we journey along this digital transformation, we're excited to share an update on our ongoing initiative to transition marketing services clients to the Powerhouse Thrive platform. This isn't a sudden shift or anything new, but the next natural step in a decade-long commitment to equipping small businesses with the best tools for success. This will be a significant growth lever for the company in 2024, and I'm delighted to welcome our president, Brad Freeman, to provide a more in-depth commentary on the transformative process.