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Operator
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.
Cameron
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
Joe Walsh
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.
Cameron
Thanks, Joe, and good morning, everyone. As Joe mentioned earlier, we issued a press release this morning detailing our legacy client upgrade plans for 2024. Since you may not have had a chance to review it yet, I'll provide a brief overview and address any questions during the Q&A portion to follow. With our Thrive platform, including Business Center and the recent introduction of Marketing Center and Command Center, we are aligned with our vision for growth in the SaaS business. By strategically expanding our platform into areas that complement our existing services, we're capitalizing on product adjacency opportunities. Specifically, our new offerings seamlessly integrate with our legacy products into the SaaS platform, creating a natural progression for our clients. As a result, we anticipate a slight acceleration in the decline of billings for marketing services as clients naturally transition to the SaaS platform, attracted by the enhanced features and capabilities that it provides. You know, for eight years, we've been actively engaging with our marketing services clients to encourage them to modernize and adopt our award-winning Thrive platform as an upgrade to their existing services. Thrive will continue to upgrade our clients to our platform as we execute our planned migration away from legacy digital products and services. We've been converting many of our legacy customers to Business Center, a software product designed to help SMBs manage and organize their business, generate invoices, run social campaigns, manage listings, send estimates, and many, many more important elements of running their business. Many of our Business Center clients opt to keep the marketing services products because they consistently rely on them to generate low-cost, high-converting business leads, which they find extremely valuable. This underscores the positive interconnection between SaaS and marketing services usage among our clients. Our dedication to client success isn't limited to introducing new offerings like Marketing Center, Command Center, Thrive Pay, et cetera. It's a move that unlocks NDR expansion. These offerings are not cosmetic enhancements. They serve as catalysts for growth. By simplifying client upgrades and providing enhanced value propositions, we've established a virtuous cycle. Clients gain access to expanded solutions, fueling their success while also generating predictable recurring revenue streams for us. This mutual benefit isn't a one-time thing. It's a symbiotic relationship that lays the groundwork for sustained growth and partnerships. As small businesses thrive and grow, they naturally use more of our platform capabilities. Now, to support our growth, we will streamline operations, reduce complexity, and create efficiencies around our legacy digital systems. We've been upgrading our longstanding clients to our award-winning platform at no additional cost to them in some instances. We have also observed clients who have increased their spend in the platform. We're eager for them to explore, to utilize, and grow into various modules of the platform to empower their businesses. While many of our legacy digital products deliver value, they simply aren't receiving investment or further development. We are investing in our platform, our existing centers, and have plans for new rollouts in 2024 and beyond. By upgrading clients to our Thrive platform, we provide the same value they currently receive, plus numerous additional features to help them solve more problems today, while also offering the opportunity to address future challenges through the addition of new centers. Our marketing services revenue is declining every year in the range of 20%. We are being proactive in retaining clients for the long term by offering them a viable product, a software platform that prepares them for the future. Upgrading them to our platform can address their current and future needs. Every client being upgraded also receives our unique command center, which helps them tackle the universal problem faced by SMBs, which is effective and efficient communication with customers, with prospects, and with their internal team members. In sum, our client upgrade plans for 2024 underscore our commitment to growth in the SaaS business. With the introduction of the Marketing Center and Command Center, we're not just evolving, we're revolutionizing our approach, seamlessly integrating new offerings to enhance client experiences and drive sustained success. In addition, we're excited about the role of Thrive Command Center as a freemium offering and what new opportunity it provides. By offering command center to businesses and developing their usage of their free center, we're building a blue ocean of freemium users who are benefiting from our platform. This allows the company to target those freemium users who begin to activate and become hand raisers, allowing the company to offer these users paid centers to solve additional problems on our Thrive platform. So with that, I'll now turn it over to our CFO, Paul Rouse, to discuss our fourth quarter and full year financial results. Paul?
Joe
Thanks, Grant. As a reminder to listeners, we are going to focus on two segments, SaaS and marketing services, which includes results for both domestic and international operations. Additional detail between domestic and international for each segment can be found in the appendix section of the investor presentation. Let's dive into our results, beginning with our SAS segment. SAS revenue was $74 million in the fourth quarter ahead of our guidance, representing an increase of 25% year-over-year and 10% sequentially. Full-year SAS revenue grew 22% to $263.7 million. Moving on to profitability improvements for the quarter, SAS adjusted gross margin increased 690 basis points year-over-year and 310 basis points quarter-over-quarter, which is 69.7%. Full-year SAS adjusted gross margin expanded to 66.6%, an increase of 300 basis points from the prior year. The year-over-year improvement in SAS adjusted gross margin was driven primarily by two factors, a favorable mix shift in revenue towards our higher margin subscription-based centers and cost efficiencies delivered in the quarter related to fulfillment. We expect to see continued expansion in this metric moving forward. We reported notable improvement in SAS adjusted EBITDA in 2023. which significantly exceeded our guidance to close out the year. Fourth quarter SAS adjusted EBITDA was 6.5 million, significantly exceeding our guidance range of 3.5 to 4 million, and resulting in SAS adjusted EBITDA margin of 8.8%. Full year SAS adjusted EBITDA was 12 million, resulting in in a SAS adjusted EBITDA margin of 4.6%. EBITDA margin improvement was directly attributable to the aforementioned improvement in our adjusted gross margin, as well as continued reliance on low CAAT conversions out of our marketing services install base of customers. As previously discussed, we've undertaken a detailed analysis of our inbound acquisition focusing on investment allocation and ideal client selection. This rigorous approach has yielded significant outcomes, not only enhancing efficiency, but also unlocking operating leverage through optimized sales costs. Prioritizing high-value clients with strong potential minimizes upfront sales investment. This laser focus drives sustainable growth by maximizing ROI, and fostering enduring relationships with our ideal customers. This solid foundation unlocks future growth through tailored upselling and cross-selling, ensuring mutual success by aligning with evolving needs and maximizing overall value. We're confident that our new command center, empowering clients with self-service and insights, will serve as a future acquisition driver. attracting new customers, and strengthening existing ones. SAS subscribers were approximately 66,000 at the end of the fourth quarter, an increase of 27% year over year. SAS R crew edged higher sequentially to $370, a decrease of 4% year over year. As previously mentioned in the prior quarter, our adoption of a new multi-center PLG strategy has led to new tax subscribers signing up for lower introductory packages compared to our current average ARPU, thus contributing to the year-over-year decline. Fourth quarter season net dollar retention was 96%, an increase of 500 basis points year-over-year and 400 basis points sequentially. The enhancement in season net dollar retention directly correlates with our upselling and cross-selling initiatives. Historically, our company primarily focuses on selling one business center. However, with the introduction of additional centers and products, such as Marketing Center, Command Center, and Fry Pay, we are now witnessing the positive outcomes of diversifying our offerings reflected in the expansion of our NDR. Our intensified efforts in upselling and cross-selling are yielding these significant results. Moving over to marketing services, fourth quarter revenue was $162.2 million, above the midpoint of our guidance. Full year marketing services revenue was $653.2 million, also above the midpoint of our guidance. Fourth quarter marketing services adjusted EBITDA was $45.8 million, resulting in an adjusted EBITDA margin of 28%. Full year marketing services adjusted EBITDA was $175.5 million, resulting in an adjusted EBITDA margin of 27%. Fourth quarter marketing services billings was $149.2 million, representing a decline of 23% year over year. While billings exceeded internal models in recent quarters, this decline rate more aligns with our long-term vision. The introduction of Marketing Center aligns perfectly with our vision for sustained growth in the SaaS business as there is a clear product adjacency fit. And so we would expect marketing services billings decline to increase given the natural upgrade to the SaaS platform. While it represents a higher value proposition for legacy clients, leading to increased adoption and retention, it also delivers improved gross margins compared to traditional marketing services products. This win-win approach ensures long-term success for both clients and our SaaS business. Fourth quarter consolidated adjusted EBITDA margin was 70%. Full year consolidated adjusted gross margin was 67%. Fourth quarter consolidated adjusted EBITDA was $52.3 million, representing an adjusted EBITDA margin of 22%. For the full year, our consolidated adjusted EBITDA was $187.5 million, which represented an adjusted EBITDA margin of 20%. We recorded a non-cash impairment charge to Goodwill in the amount of $268.8 million, for $7.71 per diluted share, once again attributable to the structural decline in our marketing services business. Net loss was $257.5 million, or a loss of $7.39 per diluted share for the fourth quarter of 2023, and compares to a net loss of $50.4 million, or a loss of $1.47 per diluted share. for the fourth quarter of 2022. Finally, our net debt position was $340 million at the end of the fourth quarter. Our leverage ratio was 1.8 times net debt to EBITDA, which is well below our covenant of three times. The company generated an additional $34 million in free cash flow for the fourth quarter and used $25 million to pay down our term loan. We made 120 million in term loan debt retirement in 2023, which was ahead of plan. Now let's discuss guidance for the first quarter and full year of 2024. For the first quarter, we expect SAS revenue in the range of 73 to 74 million. For the full year, we expect SAS revenue in the range of 325 to 328 million, which implies SAS revenue growth of 23 to 24%. For the first quarter, we expect SAS adjusted EBITDA in the range of 6 to 7 million. For the full year, we expect SAS adjusted EBITDA in the range of 26 to 29 million, which implies SAS adjusted EBITDA margin of 8 to 9%. For the first quarter, we expect marketing services revenue in the range of 152 to 155 million, For the full year, we expect marketing services revenue in the range of $495 to $505 million. For the full year, we expect marketing services adjusted EBITDA in the range of $132 to $135 million. I'll now turn the call back over to Joe.
Joe Walsh
Thanks, Paul. I'd like to comment on the net dollar retention improvements. So, probably be a little bit of noise in that number as we move along, because we've introduced this. Product led growth motion and that is in some cases, introducing customers. You know, a little bit lower price points who we believe will come up and certainly they'll. 8 our net dollar retention number over time. And also some of the conversions or some of the customers coming from the marketing services base. have come over on promotional pricing, where that represents an opportunity for rate in the future, which will be great. But that's just introducing a little bit of noise into our ARPU number. Before anybody gets too worried about, you know, our ARPU number, I want to just highlight that we've studied seasoned ARPU, looking at people who have been with us at least a year. And we're increasing seasoned ARPU in the mid-teens. So once somebody's with us and settled down and gets going, we see a strong ARPU growth. which, of course, is what's driving the net dollar retention improvement. So all I'm saying is just watch out for a little, there'll be maybe a little bit of bouncing around in ARPU as we bring in mass numbers of new customers, some of which at different price points. I'd like to comment on our, you know, legacy client upgrade. You know, if you came to invest in the phone book business, you know, I have bad news for you. You know, we are rapidly building this SaaS business. And now that we've got more business lead generating tools, we're getting a lot better traction into that legacy zoo, that legacy base. And really excited to see how this thing is happening. And Marketing Center has been a real key in what's driving that. So I wanted to sort of wrap up today's call by just talking about EBITDA. This is a business that has had big EBITDA, but it's been declining EBITDA for a very long time. And we are finally showing up at the place where we're reaching the nadir or the low point in that EBITDA. And that's because the SaaS business is now profitable and that SaaS EBITDA is growing quite quickly and it's chunky now. And so, you know, as we look at the total EBITDA that the company generates, We're reaching the point where they're there about we stopped falling and we'll be around the same place as the transition of source of the dog goes. from the legacy marketing services to now the SaaS business. So we expect that the SaaS business will be approximately 40% of the company's revenue this year. And looking ahead to the next year, we're looking at, you know, reaching parity and coming out of that with the SaaS business actually being, you know, the larger chunk of our business. So it has good margins and has the potential to really carry the EBITDA load. I wanted to comment quickly on international. International is going really well for us. Australia and New Zealand, that area is going great. Our greenfield activity in Canada is making good progress. We're our international leaders looking at taking us into some more markets. The last several years EBITDA has been a bit of a drag out of international and As Australia is now reaching profitability, as we look forward, international will stop being a drag and begin to contribute, certainly as we look into 2025 and beyond. So when you think about EBITDA sources and minuses, that goes from having been a minus being a neutral this year to being positive in the future. So, you know, we're pretty excited about our international business and how that's going. So I'm going to wind up just by saying this has been quite a journey. You know, I'm coming up on my 10th anniversary here at what used to be DEX and is now Thrive. And You know, we set out a pretty ambitious thing to take, you know, this big legacy media business and transform it into a fast-growing SaaS business. And we're now just a few quarters away from it being the predominant source of revenue and being very profitable and driving forward. So we're pretty excited about that. And I think almost anybody can see that now. It was hard for people to see a couple of years ago, but it's pretty easy to see it now. And so thank you for your support. We really appreciate our investors that have had the vision to hang with us and to see this thing unfolding. And I think you're going to be rewarded now.
Operator
so with that i'm going to wrap up and turn it back to the operator operator thank you we are now opening the floor for questions if you would like to ask a question please press star followed by the number one on your telephone keypad to raise your hand and enter the queue when you are selected you will be introduced by name and company and if you are using a loudspeaker kindly switch to your handset to ensure your question is heard clearly To accommodate as many participants as possible, we do request that you limit yourself to one question and one follow-up. And if you have additional questions, please re-enter the queue and we will address them should time permit. Your first question comes from the line of Arjun Bhatia from William Blair. Your line is open.
Arjun Bhatia
Perfect. Thank you, guys. I appreciate all the color and nice job on Q4 here. Joe, if I can touch on the transition and the upgrade plans that you've laid out a little bit. How should we think about maybe handicapping how many of the marketing services customers will migrate over or will upgrade versus some that may not? And what are you kind of incorporating into the guidance for that? And maybe as a follow-on to that, When customers do move over, do you anticipate they're going to buy business center, marketing center, or is it going to be a little bit of all of the above?
Joe Walsh
Those are two great questions. They really get at the core of, you know, the way this is going to unfold over the next couple of years. I want to, if you'll permit me, just back the camera up a little bit and think about bigger picture. So it's, you know, February of 2024. Let's just go out to the latter part of the decade. Let's go out to, you know, 29, 30, like, you know, sort of, you know, five, six years from now. Let's just go out in time a little ways. All of those businesses, if they're still in business, will be using cloud tools at that point. So, today, a lot of them are, you know, what I often affectionately refer to as the unclouded, where they're really still using spreadsheets and, You know, they've got dry erase boards showing where the trucks are going, and they're still doing manual things. And a lot of them are, you know, kind of blue collar, you know, businesses, a lot of them. And they don't have advanced educations. They haven't been exposed to a lot of technology. And so they require a little help. But if we go forward, say, five or six years, virtually everyone that's still in business will be on the cloud. So then the question becomes, they've been with us for 15 years or more. When those businesses make the transition to the cloud, are they going to do it with us? Are they going to do it with their trusted business advisor and with a company that they have this relationship with that has the category-leading software that's focused on making it easy to use, that has literally hundreds of people guiding, teaching, showing, helping them get there? So we think that we're very well positioned to literally get them all, to get all of our legacy customers over on the staff tools and to get their friends and their neighbors. And as we're seeing our referrals the last couple of years at our largest source, we think that they're going to bring their friends in droves. The guys they play golf with on Saturday morning, the guys they bowl with on Tuesday night, they're going to say, look, I've been struggling with this too. I've just gone with Thrive. It's working out really well. I think you should talk to my guy. And our email rings on Monday morning. So I do think that the entire base, can eventually come over too fast. Now I'm not suggesting that'll happen in the balance of 2024 or even in 2025. I think this is still unfolding and it's a kind of a mega trend that takes a little while to happen. Sometimes they form slowly, accelerate slowly, and then all of a sudden there's a big whoosh and it happens. You've seen that in other tech adoption phases. So that's my answer on, you know, how I think we'll do over time. The second question you asked was, what are they going to buy? Are they going to buy a business center? Are they going to buy a marketing center? What are they going to buy? And what we're finding is that the jump over to business center is a little bit longer jump than jumping over to marketing center. Because marketing center is effectively helping them get more business leads, helping them do that smarter, do it more efficiently, analyze it, know the source of their leads, know what's working, know what's not working, and generate some. And that is a pretty close kith and cousin to what they were buying in the past. And in many cases, they're still buying the legacy marketing services lead sources. And they're adding the marketing center element. So marketing center, it turns out, is kind of a blockbuster product for us. And its growth is really accelerating. Business center has been around for a long time. And marketing center is quickly catching it in terms of our numbers of customers on it and revenue and all that stuff. So those are two answers to your question. Did I get what you wanted?
Arjun Bhatia
Yeah, that's super helpful. And actually, just kind of dovetailing off of that, because I think the transition certainly makes sense. It was kind of inevitable anyways, right? But when you're thinking of how to run the business through this process, how are you thinking about kind of internal resource allocation? Because I mean, one of the obviously potential and likely outcomes is that this drives a host of transitions to the SaaS business. And so to onboard these customers, to get them ramped up on the product and start even the cross-sell motion at some point, right? Internally, do you have the resources set for that? Or is that something that, you know, maybe an incremental investment we should expect to keep growing the SaaS business?
Joe Walsh
That's another excellent question. We've been actually doing what you just described, sort of transitioning to that footing, really throughout the last year. If you remember, we kind of brought Marketing Center along slowly in Q1 and Q2 of last year, and then it really hit stride when we let it out for full release in the summer. Up until that time, we did not allow the sales force to just sell it to anybody, and we really had kind of a gated process As you know very well, churn is a thing that we just do not want. So we wanted to make sure we sort of, you know, brought it along slowly and were successful. So if you go back and you look at Q3 of last year, you saw a pretty strong acceleration in subscriber ads. That was us really getting onto that footing and us, you know, organizing around that. So it's past tense. We've already done it.
spk05
So you've already seen it flow through our numbers. Okay, perfect. Appreciate it. Thank you, guys. Thanks, Arjun.
Operator
Your next question comes from the line of Zach Cummins from B. Reilly Securities. Your line is open.
Zach Cummins
Hi, good morning. Thanks for taking my questions and congrats on the solid Q4 results here. I was hoping to maybe ask a question towards Grant in terms of this transition process within that legacy marketing services base. I mean, can you talk about, has there been any sort of change in terms of incentives that are offered to some of these legacy customers or the approach to really accelerate that jump over to either marketing center or business center?
Cameron
Yeah, good morning, Zach. It's a great question, actually. So I think what we've been laser focused on during this process is ensuring that we still provide a value that's commiserate with what they were receiving on the digital marketing services side, but then focus on giving them access to the additional tools that the more modern and up-to-date and invested in platform can afford them. So bringing them across while still generating them, whether it's leads or the exposure that they had on the old side, still giving them that, still doing things like managing their listings, et cetera, but now giving them more modern technology, as I mentioned before, at really, in many cases, no additional cost. And that also increases their level of engagement in the platform when you speak to, for example, people that are moving over from more passive value digital marketing services, lead generation products to the platform, to marketing center, for example, where you will now see them understanding things like attribution, the return on investment that they're getting, where their customers are coming from, et cetera. So again, it's really important to us and we're laser focused on giving the value that they had on the digital marketing services side and delivering upon that, but then adding more in many cases at no additional cost. So it's been received very well and we're turning people that were relatively passive yet happy clients into more active and engaged, happier clients. So I hope that answers your question, Zach.
Zach Cummins
Yeah, extremely helpful. Thanks for that, Grant. And Joe, just one question for me around just the number of SaaS subscribers. You had a big jump up in Q3, and it seems, while strong growth year over year in Q4, essentially pretty similar from Q3 to Q4. Can you talk about any moving parts around that metric and kind of what played out in Q4 for that SaaS subscriber metric?
Joe Walsh
Yeah, I mean, it's actually a pretty natural process. Our customers are seeing value in, as Grant said it so beautifully there, in adding these analytics and diagnostic tools. And we're basically allowing them to do it for little or no additional money. We're kind of moving them over. And that is going to set up the opportunity for us to probably get a little bit of rate as the next couple of years go by. There's a little bit of an upgrade path, I think, that'll be able to happen there. I think you'll see that flowing through in net dollar retention and some of our growth numbers in the future. But it's allowing us to, you know, also reduce or really even eliminate some of the investments that we would have been making in some of those older platforms as people are moving over. So in terms of the, I guess the, you know, what to expect, you know, as you keep going forward, We think there's a lot more. Our sales force really has this story down. They're comfortable telling the story now. The product is performing well. And we think there's going to be more.
spk05
We think what you've been seeing, you will see for a while. Understood. Well, thanks for taking my questions and best of luck here in 2024. Thank you very much.
Operator
Your next question comes from the line of Rob Oliver from Baird. Your line is open.
Rob Oliver
Hey, great. Thanks, guys. Good morning. I appreciate it. Joe, I appreciated the color that you gave around some of the ARPU trends and the fact that newer customers are coming in at promotional pricing. Can you talk a little bit about how we should think about customer growth versus ARPU in 2024? Because while there is some pressure on those new customers, the season ARPU number is actually really nice. I just wanted to understand how you guys were thinking about that, and then I just had a quick follow-up.
Joe Walsh
Yeah, you got your finger on it exactly right. The reason we broke out the seasoned ARPU was to make sure you guys were comfortable that the customers that we have in the base that have been with us a while are spending more, are growing, even if the ARPU number gets noisy because of some of the crosswinds that are coming through. There's two big crosswinds that are going to kind of shake up the ARPU number and make it bounce around a little bit. One is what we've been talking about, and that customer's coming over. and us moving them in some cases for what they're currently spending on an old tool over the new one, or maybe only a small step up, but not all the way to full rate. So that gives you a little bit of noise there. And that should be a good guide for growth going forward. And the second thing that's going to be introducing some noise as we go through 24 and into 25 is our product-led growth motion, where command center customers can literally discover the product on their own, sign up and use it for free forever. And then if they want to add channels or they want to add users or they want to upgrade it, they can upgrade on their own or after a certain amount of usage, they'll kind of turn green on our dashboard and we're going to go talk to them and they're going to upgrade. But in a lot of cases, they'll be coming in at smaller price points and that's more of a land and expand motion. It's to help us build a new zoo, a new blue ocean out there of customers to go work with and call on. So I expect those numbers to be fairly small in the beginning. So I don't think that it'll have a massive impact to ARPU. But I think our ARPU number will just be a little bit noisy as we kind of work through those two trends. Even though overall, if you go back to our investor day guide, we think that the kind of 4,000 a year we were getting at the time of the investor day moves to 7,000 a year per customer as they buy additional centers, additional add-ons, additional features. And we grow with these successful businesses. I wanted to comment that the Thrive business within the community is doing better than the guy next door that's not on Thrive. He's delivering a much better experience for his customers. He's getting paid digitally. He's getting next day funds. He's got a pretty slick business operation going. And if he goes to sell it, it'll be worth more than the business next door that's got a pile of paper. So Thrive customers are thriving, and we're growing with them. And a lot of them have gone from three or four employees to seven or eight or ten, and we're growing with them. We think we'll be able to keep growing with them and adding centers, adding functionality. And that's part of who we talk to every day in our high-priority group and as we talk to customers in the field. And I continue to do my customer visits each week. We talk to customers who are doing well and talking about, you know, what would be next for them and what they would need. And that's been animating our roadmap and part of why we have another center coming out in a few months and another one coming out next year to help soak up some of those needs. So final comment on ARPU. We think ARPU gradually rises toward that 7,000 a year number over the next, you know, three, four, five years. But it might be a little noisy for a minute as some of these processes play out.
Rob Oliver
Great. That's really helpful detail. Thanks, Joe. And then just one follow-up. I would love to hear your perspective. I mean, you mentioned your 10-year anniversary here. Obviously, looking back, there's been a tremendous amount of progress and the move to kind of really transforming into a SaaS company here. And Just in that context, I wanted to just get your thoughts on M&A because, you know, on the one hand, you guys have really proven that, you know, buying these zoo-like businesses globally is a core competency of yours and your ability to convert them as, you know, better than anyone out there into SaaS customers. And you're sort of hitting the knee of the curve on that right now. On the other hand... you know, buying more of those companies would push out, you know, that transition point to becoming a SaaS company further. So I just would love to hear how you're thinking about that, particularly in light of the SaaS momentum you guys are currently experiencing. Thank you.
Joe Walsh
Well, it's a really good question. It's kind of a complex question, and I don't want to take too terribly much time. So I'll tell you that we've been really successful with these you know, adding customers to the zoo and converting them. That's gone well. We're pretty much at the end of that or nearing the end of that. There's not, you know, not a lot of that left. We anxiously look forward to making SAS acquisitions and, you know, moving in that direction. It's really for us, you know, a financial question. You know, we're currently valued in a place where it makes significant SAS acquisitions hard to do. And, you know, we think that will change, you know, in the near future. But for the moment, that's sort of where we are. So we've had to be kind of cautious there. We also have a particularly lousy, you know, credit facility, which at some point we'll swap out. And that will give us a lot more flexibility and help us a lot. But you know that. And, you know, as far as postponing, when the crossover point on SAS revenue is and all that stuff. We're paying attention to that. That's something that we think about. But we've had some really incredible economics with the acquisitions that we have made. And so, you know, we're not sorry that we made them. And I think the improved traction we're getting in the zoo with Marketing Center and some of the other new developments that we've made, give us a lot of confidence that that crossover point is nobody should worry about that you know whether it's six quarters away or seven or eight quarters away it's not that far away um and if you're an investor and you're not thinking at least a few years out we just assume not have you in our equity to be honest with you we're looking for people that want to invest in a growing business so um that's kind of how we think about it okay thank you very much
spk05
Thanks. And your final question today is from the line of Richard Francis from INFI. Your line is open. Your line is open.
Operator
That brings our Q&A session to a close. Thank you to our speakers for today's presentation and thank you all for joining us. This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.
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