THRY earnings call transcript, November 9, 2026

After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please. Press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Cameron Lessard, Senior Vice President of Corporate Development and Strategy. Cameron, please go ahead.

We have made a clear choice as a company to focus on guiding local service businesses to efficient growth and not trying to be all things to all people, not having all the different centers. We're really focused on a more narrow patch. We feel like... In this current AI environment that we're in, trying to compete in many different areas is a much harder thing to do. And we've found a lot of value in working within the ecosystem, partnering with other players. For example, Wix. We've previously announced that Wix is going to basically handle our payments business for us. So we'll have significant payments capabilities that we can offer to our customers, and we'll make some money doing it, but we won't be in the payments. Business in the way that we had been previously. And the same goes for workforce center, payroll business. And as we move away from some of these other businesses, particularly the CRM type businesses, we've got a little. A little bit of revenue headwind as we focus the business. So we'll see that headwind in the numbers in the near future. It will eventually get past it. But the core growth aspects of our business are growing double digits, growing very strongly. We're excited about the progress that we're making there. Partnerships are our next lever for growth. I'm pleased to welcome Robin Brenner, our new head of partnerships. Robin will scale this effort by working with large companies that already own the relationship with.

Small businesses who need help getting found and winning customers. We bring the platform that turns that relationship into growth. Welcome Robin. We're also putting the same AI tools in front of our own sales organization. Thrive Tap gives every rep a view of each customer and a prepared plan before every conversation. Our reps now go to market with the platform in hand and they are winning. Next, the sale of our print directories business to Carolwood LP for $142 million, which we expect to close here in the fourth quarter, is a catalyst for our shareholders for three reasons. First, value. In December 24, at our... Last Analyst Day, we forecasted $250 to $300 million of unlevered free cash flow from print from 2025 to 2030. Through September, we had collected approximately $150 million. This sale brings the total to roughly $292 million near the top of that range, and we will have achieved it in about 24 months instead of six years. Second, it's a clean exit. There is no earn out, no retained stake, no tail to explain each quarter. We have a transition services agreement between both parties where we will help them stand up systems and support them post-sale. What is an operator and has committed to honoring existing customer and employee relationships. We keep our search properties, including yp.com, Dexnos, and Super Pages. Third, our balance. Net proceeds after transaction costs and closing adjustments go to improving our balance sheet, repaying debt, and other liabilities. With print gone, the company is a simpler, leaner, and faster company.

We expect that marketing services, our digital services for local businesses, will stop being a reporting segment by the second half of 2027, and we exit the legacy billing and IT infrastructure. From the directories era, the remaining digital marketing services clients will either move on to our new platform or end up exiting the business by mid-27, and those who move gain AI tools, lead insights, and reporting the platform is built around. We know the fourth quarter 2026 will look messy, and fourth quarter guidance reflects this. I want to be clear about this. As we pull out a 140-year-old directory business out from our company, there are a lot of restructuring and cost changes that have to happen. We previously announced the investment that we're making to streamline the business and have long-term run rate savings. So we expect the fourth quarter to reflect all that and look ugly. But as we go into 2027, we are going to be a much better. It's a leaner, more focused business, a business that's much, much easier for investors to understand. So with that, let me turn it over to Paul to take you through some of the numbers. Paul?

A note to our listeners on our... ...results and guidance. Following the announcement of the sale of our print business, which is now presented as discontinued operations, we report results on two bases. Continue... Discontinued operation reflects our SaaS business as it will exist after the transaction closes, with costs allocated to that business. Discontinued operations includes the print business. Until the date of sale. So the two basis is together show how the company performed overall and how the business we are keeping performed on its own. We are also in a miss. of an ongoing restructuring of the business, which is affecting our cost base and the timing of certain charges across those two bases. The results for the third quarter on a. Continuing operation basis reflects the costs we are actively working on removing from the restructuring program. However, on a like for like basis, our results were strong. As such, after we speak to the SAS results, we will compare the results to the updated guide for the third quarter, presenting SAS on a continuing operations basis. Reported SAS revenue was $112 million in the third quarter and at the top range of our guidance. On a continuing operations basis, SAS suggested gross margin. SAS was 69.3% and SAS suggested EBITDA was $9.5 million in the third quarter. Year to date, SAS suggested EBITDA was $22.1 million. SAS reported expense rose this quarter.

Shared sales and marketing and G&A costs were previously split between SAS and marketing services on a percentage of revenue. Since print left, SAS absorbed a larger share, specifically $5.7 million for the third quarter. Let's be clear, we are currently reducing the impact of these shared costs, evidenced by the previously announced restructuring plan. Our headcount and systems are reduced, our margins will be expanded even as soon as the beginning of 2027. Even with increased costs, on a continuing operations basis, SAS EBITDA margin improved for both the third quarter and year-to-date 2026 periods. SAS EBITDA margins for the third quarter and year-to-date 2026 periods were 8% and 6% respectively. Compared to 5% for both periods in 2025. Also, had we originally presented our outlook with print costs, classified as discontinued operations, our third quarter SAS EBITDA... ...would have been approximately $2.9 million to $3.9 million. Thus, on a like-for-like basis, we exceeded third quarter guidance by more than $5 million. This is reflected... ...in our earnings release and page 7 of the investor presentation. In the third quarter, SAS ARPU was $373, an increase of 2% euro... ...of a year. We ended the third quarter with 98,000 SAS subscribers. Seasoned NRR was 89%. Reflects the natural attrition of smaller, low-spend clients within our base. Quality clients accounted for 72% of our revenue, an increase of 300 basis points year over year.

Moving over to marketing services, third quarter revenue was $6.9 million. As a reminder, marketing services revenue... ...only reflects digital clients expected to be converted to our SaaS products over the next several quarters. For avoidance of doubt, we believe marketing services will cease to be a material... ...part of our business for the second half of 2027. Third quarter marketing services adjusted EBITDA was a negative 5.3 million. Note that marketing services costs were also impacted by the increase... ...in shared cost allocation as part of the continued operations reporting basis. During the quarter, we recognized a non-cash goodwill impairment charge of $94.8 million... ...or a negative $2.13 per diluted share. In the third quarter, we generated free cash flow of $4.7 million, which brings the year-to-date free cash flow to $16 million. We ended the third quarter with net debt of $236 million, bringing our leverage ratio to 2.5 times. Now I'll turn it to Cameron to give an update on restructuring programs.

Let's start with our plan around costs. As previously stated, our restructuring plan will run from the middle of this year to the middle of 2027 and will touch operational spending and capital expenditures. Part of our product engineering efforts previously qualified for treatment as capitalized software, and we expect as we reduce the organization, much of that work will move toward maintenance and wind down, which must be expensed. For clarity, we're taking cost actions at R&D and CapEx as we shift our focus on helping small businesses grow efficiently with our marketing focused products and away from being an end to end platform. Now for guidance. With the print business now being presented as discontinued operations in our disclosures, our fourth quarter and full year outlook has been recast to reflect the continuing operations treatment. Previously, adjusted EBITDA guidance allocated shared costs to the print business. Under GAAP, only print specific costs can be allocated to the discontinued operations. As such, our fourth quarter and full year margin outlooks are impacted by the costs we are actively working to remove from the business. OK, I'm looking at page eight of the presentation for those that are following along. Let's start with marketing services guidance. Continuing operations basis for the fourth quarter, we expect marketing services revenue in the range of two million to three million and marketing services adjusted EBITDA in the range of negative 11 million and negative 12 million.

As a reminder, we expect the remaining. Customers in marketing services, which is effectively digital revenue, will either be upgraded to our software platform or cease to be customers in 2027 and that business will cease to be a reporting segment. Now for SaaS. For the fourth quarter, we expect SaaS revenue in the range. of 110 million to 111 million and SaaS adjusted EBITDA in the range of negative 4.5 million and negative 5.5 million. For comparative purposes on a continuing operations basis, SaaS revenue and adjusted EBITDA were 118.9 million and 6.6 million. respectively, for the fourth quarter of 2025. Please note that we are reducing headcount in product and engineering and our reduction plan removes roles from capitalizable projects, thus impacting R&D in the quarter to the tune of a few million. Spending, it is just a classification effect. For the full year, we are revising SAS revenue guidance to a range of 453 million to 454 million and SAS adjusted EBITDA guidance to a range of 16.5 million to 17.5 million. For comparative purposes, on a continuing operations basis, SAS revenue and adjusted EBITDA were 461 million and 23.3 million, respectively, for the full year 2025. Again, as discussed throughout this call, these guidance figures reflect current operations and costs without the print business. We look forward to updating you on our progress in streamlining expenses and driving revenue growth as a pure play software business.

With that, I'll turn it back over to Joe Walsh.

I know the four quarter has a lot of moving parts and it's messy with the print sale and discontinued operations, restructuring charges, all the stuff that's there. It's kind of messy. I would invite you to look ahead, though, at the business with me. We're a company that has a brand spanking new AI growth platform. That fits perfectly in the market. It will help these scaling local businesses grow efficiently and really understand what works and what doesn't work. And it's the dream of everybody is to make sure your investments in marketing and advertising are. And we'll be able to track it all the way to return on ad spend. We are working in an environment now where we're partnering with people. We are CRM agnostic. Yes, we have a CRM, but we're plugging in other folks' CRM. Gathering data and sharing our leads through them as well. We're very definitely moving up market. We're focused on larger businesses with larger spend. And you can see that in the progress we're making with monthly ARPU, which I think will. Even accelerate in the future. And, you know, in terms of what we used to do was hunt in the zoo. Now we're working with partners and partnerships. And we think there's a lot of opportunity in those partnerships to continue to grow and accelerate our growth. And speaking of growth, you know, if you look at the growth products that we're focused on for 13 straight quarters, we've had very strong double digit growth. So, you know, is Thrive growing? The core area that.

We're focused on is, and, you know, we have a little bit of headwinds to work through the pivot that we've made, but there's a lot here. There's a lot of energy around the success that we're having. We've got a lot of happy customers that are growing their. Spend introducing their friends. We have a lot of momentum as a business and really anxious to just get through the separation of these two businesses, get through the TSA and into next year. And we think we can have, you know. A very strong business that's accelerating into the future. So with that, operator will take questions.

Your first question.

The question comes from the line of Alinda Lee with William Blair. Your line is open. Please go ahead.

This concludes today.