THRY

Thryv Holdings, Inc. (THRY) - Q1 2025 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended March 31, 2025. Thryv Holdings, Inc. operates two primary segments: Thryv SaaS (cloud-based business management tools) and Thryv Marketing Services (print and digital marketing). The company is executing a strategic transition to shift clients from legacy Marketing Services to its SaaS platform. Notably, the company completed the acquisition of Keap (a SaaS email marketing and sales platform) on October 31, 2024, which is now consolidated into the SaaS segment results.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 22.4% year-over-year. This was driven by a 55.9% drop in Marketing Services revenue ($89.1M decrease), partially offset by a 49.5% increase in SaaS revenue ($36.8M increase).
• Profitability Shift: The company reported a net loss of $9.6M compared to net income of $8.4M in the prior year. Operating income turned negative ($3.0M loss) due to the revenue mix shift and continued operating expenses.
• Segment Performance:
  • SaaS: Revenue grew to $111.1M, aided by the Keap acquisition ($18.9M contribution) and the conversion of ~44,000 digital marketing clients to the SaaS platform.
  • Marketing Services: Revenue fell to $70.2M. Print revenue dropped 55.4% due to publication cycle timing and secular decline. Digital revenue dropped 56.4% due to client conversions to SaaS and competitive pressures.
• Cash Flow: Operating cash flow turned negative ($10.5M used) compared to positive $5.4M in Q1 2024, primarily due to working capital changes and lower sales volume.

Outlook, Risks, and Management Commentary

• Strategic Transition: Management continues to accelerate the conversion of digital marketing clients to the Thryv Platform. While this boosts SaaS revenue, it temporarily reduces Marketing Services revenue and lowers SaaS monthly ARPU due to the "no additional base cost" upgrade strategy.
• Keap Integration: The company is integrating Keap to expand its SaaS market share. Pro forma results suggest the acquisition would have increased Q1 2024 revenue to $255M.
• Liquidity: The company maintains a $350M Term Loan (maturing 2029) and an $85M ABL Facility. As of March 31, 2025, approximately $18.1M was available to be drawn under the ABL. Management expects cash flows and available credit to meet liquidity needs for the next 12 months.
• Risks:
  • SEC Investigation: The company is cooperating with an SEC subpoena regarding the strategic conversion of clients from digital marketing to SaaS platforms.
  • Client Churn: Risk that converted clients may churn at higher rates than organic SaaS clients.
  • Macroeconomics: Potential impact of tariffs, inflation, and recession on SMB spending.
  • Print Decline: Continued secular decline in the print media industry.

Investor Verification Checklist

• Client Conversion Quality: Verify the retention rates and upsell potential of the ~44,000 clients converted from Marketing Services to SaaS to ensure they do not churn at unsustainable rates.
• Print Revenue Timing: Confirm the impact of the shift from 18-month to 24-month publication cycles on future revenue recognition stability.
• Debt Covenants: Monitor compliance with the "Total Net Leverage Ratio" and "SaaS Revenue" minimums under the Term Loan, especially given the revenue decline.
• SEC Subpoena Status: Track the outcome of the SEC inquiry regarding client conversion practices for potential regulatory or financial liabilities.
• Keap Synergies: Assess the realization of projected synergies and revenue growth from the Keap acquisition in subsequent quarters.