Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SaaS revenue grew by 25% year-over-year to $77.8 million, within the company's guidance range.
- SaaS adjusted gross margin increased by 460 basis points year-over-year to 69.7%.
- SaaS EBITDA grew over 60% year-over-year to $10 million, achieving a 13.1% adjusted EBITDA margin, the highest as a public company.
- Subscriber growth was strong, with a 52% increase, reaching 85,000 clients.
- The marketing center tool has been successful, with more than 10% of clients having two or more paid centers, up 200 basis points sequentially.
Negative Points
- SaaS ARPU decreased to $333 due to promotional pricing discounts and timing of billing.
- Marketing services billings declined by 28% year-over-year, impacted by the transition to the SaaS platform.
- The environment for customer spending is challenging, with clients opting for lower-priced options.
- Command Center, a new product, is not yet performing as expected and requires further development.
- The company is experiencing choppy metrics as it transitions from marketing services to SaaS.
Q & A Highlights
Q: Joe, I noticed that your SaaS performance was slightly below the midpoint of your guidance range this quarter. Was there anything outside of the ARPU dynamics and the transition that surprised you in terms of SaaS performance?
A: Joseph Walsh, Chairman and CEO: The metrics are always a bit noisy as we transition. Our customers are feeling the challenging environment, opting for lower-priced options. However, we're still adding subscribers and have a system to grow these customers. It's not a frothy environment, but we're making steady progress.
Q: As customers migrate over and you see an acceleration in SaaS clients, what are your expansion priorities? Do you want them to grow their usage of marketing center or cross-sell into the business center?
A: Joseph Walsh, Chairman and CEO: The best outcome is adding another center, which brings more margin and engagement. There are smaller steps before that, like using our signatures or team chat. We're seeing strong uptake of additional centers, which provides operating leverage.
Q: Did you see customers come aboard more in any of the other centers, or is it really all marketing center-driven?
A: Joseph Walsh, Chairman and CEO: Marketing centers have eclipsed the business center as our fastest-growing product. It's a smaller leap for customers from legacy marketing services to marketing center, which is why it's currently the hot product.
Q: Can you elaborate on some of the AI examples you've implemented and whether these tools are more critical as a selling or retention tool?
A: Joseph Walsh, Chairman and CEO: AI helps our clients develop content for landing pages, promotional offers, and social posts. It's a sales aid and improves customer satisfaction and engagement. Customers who bought before AI was introduced have seen increased satisfaction and platform engagement.
Q: How should we think about free cash flow generation with the new debt facility and the accelerated conversion activity within marketing services?
A: Paul Rouse, CFO: We are confident in our ability to manage amortization with free cash flow. The new credit facility provides flexibility, and we are exploring better uses for our cash flow in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
