Thryv Holdings, Inc. 10-Q Summary: Q2 2024
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2024. Thryv Holdings, Inc. provides marketing services (Print and Digital) and Software as a Service (SaaS) business management tools to small-to-medium-sized businesses (SMBs). The company operates two reportable segments: Thryv Marketing Services and Thryv SaaS. In Q1 2024, the company reorganized its segment reporting structure, consolidating U.S. and International operations into these two segments.
Key Financial Metrics
| Metric (in thousands) | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Revenue | $224,084 | $251,421 | $457,708 | $496,976 |
| Gross Profit | $148,588 | $160,085 | $302,229 | $314,893 |
| Gross Margin | 66.3% | 63.7% | 66.0% | 63.4% |
| Operating Income | $31,338 | $30,707 | $62,472 | $61,492 |
| Net Income | $5,548 | $15,978 | $13,972 | $25,292 |
| Adjusted EBITDA | $59,314 | $69,439 | $113,428 | $127,908 |
| Cash from Operations (YTD) | $27,660 | $57,736 | $27,660 | $57,736 |
| Total Debt (Net) | $342,092 | $348,897 | $342,092 | $348,897 |
| Cash & Equivalents | $15,519 | $18,216 | $15,519 | $18,216 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 10.9% in Q2 and 7.9% YTD compared to 2023. This was driven by a 22.6% decline in Marketing Services revenue (due to secular print decline and digital competition), partially offset by a 24.6% increase in SaaS revenue.
- Profitability: While Net Income dropped significantly (65% in Q2), Operating Income remained relatively stable, increasing slightly in Q2. Gross margins improved by 260 basis points in both Q2 and YTD, driven by a shift toward higher-margin SaaS solutions and cost reduction initiatives.
- Debt Refinancing: On May 1, 2024, the company refinanced its debt, entering a new $350 million Term Loan and an $85 million ABL Facility. This resulted in a one-time $6.6 million loss on early extinguishment of debt recorded in Q2.
- Client Metrics: Total clients decreased 18% to 307,000. Marketing Services clients fell 22%, while SaaS clients grew 52% to 85,000.
Guidance, Outlook, and Risks
- Strategic Shift: Management continues to accelerate the conversion of Marketing Services clients to the SaaS platform. While this reduces short-term Marketing Services revenue, it aims to improve long-term profitability and recurring revenue.
- Liquidity: The company maintains compliance with all debt covenants. As of June 30, 2024, approximately $54.2 million was available under the new ABL Facility. Management believes cash flows and available credit are sufficient for the next 12 months.
- Share Repurchase: A new $40 million share repurchase program was authorized in April 2024. Approximately $0.5 million was utilized in Q2, leaving $39.5 million remaining.
- Risks: Key risks include the secular decline of the print media industry, intense competition in digital search (Google, Yelp, Facebook), potential failure to transition clients to SaaS, and exposure to foreign currency fluctuations (AUD, NZD). The company is also subject to ongoing IRS litigation regarding Section 199 deductions and R&D tax credits, with a reserve of $27.2 million.
Investor Verification Checklist
- SaaS Conversion Rate: Verify the sustainability of the 52% growth in SaaS clients and the associated impact on long-term revenue stability.
- Debt Covenants: Confirm continued compliance with the "Total Net Leverage Ratio" and "SaaS Revenue" thresholds under the new Term Loan agreement.
- Tax Contingencies: Monitor the resolution of the IRS Section 199 and R&D tax credit disputes, which could impact future tax liabilities and effective tax rates.
- Print Revenue Timing: Assess the impact of publication cycle timing on quarterly Print revenue volatility, as revenue is recognized upon delivery rather than evenly over time.
- Cost Management: Review the effectiveness of cost-saving initiatives in offsetting the decline in Marketing Services revenue to maintain operating margins.