THRY

Strategic Transformation

• Thrive is executing a multi-year transformation to become a pure-play SaaS company focused on the AI-native Thrive Growth Platform, streamlining costs and growing its core SMB software business while winding down non-core legacy offerings.
• The company narrowed its strategic focus to the Thrive Growth Platform and its add-ons, prioritizing investment in product development for the new platform over near-term sales and marketing headcount expansion.
• Thrive has been officially reclassified as a software company by the JIC, validating its multi-year transformation progress.

New Product Launch

• The Thrive Growth Platform, a fully AI-native platform built from the ground up for the current AI era, launched to general availability on August 3, 2026. The legacy Marketing Center product was designed before modern AI and cannot be upgraded to match the new platform's capabilities.
• The platform targets the large underserved segment of established local service businesses, offering a flexible hybrid model (do-it-yourself software or done-for-you growth services) that works alongside existing tools small businesses already use, eliminating the need to replace current systems.
• The platform creates a closed-loop data flywheel: AI is trained on full-funnel data from lead generation through invoicing, which improves client outcomes, increases retention, and deepens the company's data advantage over time.
• The disciplined rollout sequence starts with net new clients via the direct sales channel in 2026, with migration of existing Marketing Center clients scheduled to begin in 2027 to protect current retention levels.
• For shareholders, the platform model is expected to drive increasing revenue per client from existing customers (low-cost, high-margin revenue), higher lifetime value and longer client retention, and enable Thrive to capture category leadership in the underserved hybrid software/services segment for local SMBs.

MSG Core Growth

• Thrive's core Market, Sell, Grow (MSG) offering grew 21% year-over-year, marking 12+ consecutive quarters of double-digit growth. ARPU grew 12% year-over-year, and 72% of clients now spend $400 or more annually (up 2 points from the prior quarter), reflecting successful upmarket expansion.

New Strategic Partnerships & Integrations

• Thrive entered two new strategic partnerships this quarter to expand distribution via warm introductions to qualified potential customers, avoiding high-cost cold customer acquisition:
  • Wix: A multi-pillar partnership combining Thrive's marketing platform with Wix's global website and unified commerce solution, serving hundreds of thousands of combined SMB customers, with plans for additional collaboration pillars to be announced later.
  • UMA: A cross-promotional partnership that places Thrive in UMA's customer portal (reaching over 1 million UMA business communication users) and recommends UMA to Thrive clients, leveraging warm introductions to qualified growth-oriented business owners.
• Two new third-party integrations were launched to extend the platform's reach and functionality:
  • Breezy AI: Integrates Thrive lead generation with Breezy's AI operating layer for multi-location franchise home service organizations, extending Thrive's reach into the previously underserved franchise segment.
  • Jobber: Thrive is live on the Jobber marketplace, with AI-scored high-intent leads synced in real time to Jobber's field service management platform, working with existing client workflows.

Restructuring Program

• Thrive announced a new restructuring program to simplify the business around the single growth platform, consolidating teams, systems, and non-core vendor spend. The company expects total restructuring charges of approximately $25 million, half incurred in 2026 and half in H1 2027, with $60 million in annual run-rate cost savings expected from the program.

• Marketing Services: Full-year 2026 revenue guidance is revised to a range of $161 million to $163 million, with the low end of the range raised from prior guidance. Full-year adjusted EBITDA guidance for marketing services is revised to $31 million to $33 million.
• SaaS: Q3 2026 SaaS revenue guidance is set at $111 million to $112 million, and Q3 2026 SaaS adjusted EBITDA guidance is $8.5 million to $9.5 million. Full-year 2026 SaaS revenue guidance is revised to $453 million to $457 million, and full-year SaaS adjusted EBITDA guidance is revised to $42 million to $44 million.
• The downward revision to full-year SaaS guidance reflects the company's deliberate decision to prioritize product development investment for the new Thrive Growth Platform over near-term sales and marketing expansion in the first half of 2026. With the platform now launched, the company will ramp up sales and marketing investment in the second half of 2026, entering 2027 positioned to fully monetize the new product.

1. SaaS Segment: Q2 2026 revenue was $114.5 million, which was within the prior guidance range. The segment accounted for 76% of Thrive's total company revenue in the quarter. SaaS adjusted gross margin was 66.6%, adjusted EBITDA was $13.6 million, for an adjusted EBITDA margin of 12%. The segment ended Q2 with 95,000 SaaS subscribers, a 12% year-over-year increase in ARPU to $394, a seasoned net retention rate (NRR) of 90%, and 29% of subscribers holding two or more SaaS products (up from 28% year-over-year).
2. Marketing Services Segment: Q2 2026 revenue was $36.2 million, which came in above the prior guidance range. The segment accounted for 24% of total company revenue. Marketing services adjusted EBITDA was $7.3 million, for an adjusted EBITDA margin of 20%. Q2 2026 billings were $48.7 million, down 36% year-over-year, reflecting the company's deliberate strategy of migrating legacy marketing services clients to the SaaS platform.

• Forward-looking statements about the Thrive Growth Platform's performance, future revenue growth, and partnership benefits are subject to material risks and uncertainties that could cause actual results to differ materially from projections, as detailed in Thrive's most recent SEC filings.
• The company has made multiple significant strategic and product shifts in recent quarters, creating uncertainty around when the business will reach a stable product and go-to-market strategy that supports consistent performance expectations.
• Lower guidance for full-year 2026 SaaS EBITDA creates near-term pressure on profitability, though management maintains cash flow remains sufficient to service existing debt.
• Legacy marketing services billings are declining rapidly as clients are migrated to the SaaS platform, a trend that will continue as the company executes its transformation strategy.
• Core generic CRM functionality has become increasingly commoditized in the AI era, which was a key driver of Thrive's decision to exit broad all-in-one business management tools and narrow focus to growth marketing for local service businesses.
• A disciplined rollout of the new platform is required to avoid negatively impacting existing client retention, which is the foundation of the company's long-term revenue model.

Q: Analyst Scott Berg asked when Thrive will reach stability in product and go-to-market strategy, noting recent larger-than-expected strategic shifts. / A: CEO Joe Walsh acknowledged the point, explaining that the new AI-native Thrive Growth Platform launched the day before the call, after two years of development. The legacy Marketing Center aged quickly due to rapid AI-driven changes in customer expectations, so the company decided to rebuild rather than upgrade. Thrive has now sharpened its focus exclusively on growth for local service businesses, its original core market. Management expects the new growth platform to become the company's core growth story over the next few quarters, with non-core legacy businesses winding down.

Q: Berg followed up asking how Thrive will service its outstanding debt after the large downward EBITDA revision, with no debt paydown year-to-date. / A: CFO Paul Rouse responded that Thrive's cash flow remains strong, and the company does not see any issues making required debt payments for the rest of 2026 and into 2027. The company has prioritized paying down its revolver rather than its term loan, and the new $60 million annual run-rate cost savings from restructuring will further support cash flow.

Q: Analyst Elinda Lee asked if investors should expect more strategic ecosystem partnerships like the new Wix and UMA deals going forward. / A: CEO Joe Walsh confirmed the company will continue pursuing additional complementary ecosystem partnerships, following this new distribution model that gives Thrive access to warm, qualified prospects without paying for high-cost cold acquisition. The narrowed focus on the Thrive Growth Platform allows Thrive to fit seamlessly alongside other business tools, and this strategy is expected to drive faster, higher-margin growth.

Q: Lee also asked how the $25 million restructuring charge splits between workforce reductions and vendor efficiency savings. / A: SVP Cameron Lessard explained that half of the $25 million total charge is for workforce reductions and half is for vendor contract exit costs. Half of the total charges will be recognized in fiscal 2026, with the remaining half recognized in the first half of 2027.

Q: Analyst Jason Krayer asked how the go-to-market strategy for the new Thrive Growth Platform differs for existing customers vs greenfield, and how the new free trial capability changes growth expectations for greenfield. / A: President Grant Freeman noted that partnerships add an entirely new distribution channel focused on aligned, pre-qualified prospects, while direct sales will now use more precision targeting focused on upmarket businesses that already use tools Thrive integrates with. The new free trial (not available for the legacy Marketing Center) lets sales teams leave a functional product with on-the-fence prospects to demonstrate value before purchase, improving conversion rates. It also enables passive distribution through partner ecosystems like Wix and UMA, without requiring direct salesperson interaction for initial sign-ups.