THRY

Thryv Holdings, Inc. 2024 Annual Report (10-K) Summary

Business Context and Reporting Period

This summary covers the fiscal year ended December 31, 2024. Thryv Holdings, Inc. operates two primary segments: Thryv Marketing Services (print and digital solutions) and Thryv SaaS (cloud-based business management platform). The company serves approximately 300,000 small-to-medium-sized businesses (SMBs). A pivotal strategic decision was made in Q3 2024 to terminate Marketing Services solutions by the end of 2028, accelerating the transition of clients to the SaaS platform. On October 31, 2024, Thryv acquired Keap, a SaaS email marketing and sales automation platform, for $76.9 million in cash.

Key Financial Metrics

Segment Performance: Marketing Services revenue declined 26.4% to $480.7 million, while SaaS revenue grew 30.2% to $343.5 million. The SaaS segment includes $13.4 million in revenue from the Keap acquisition.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased primarily due to a $172.6 million drop in Marketing Services revenue, driven by the secular decline of print media and the strategic conversion of digital marketing clients to the SaaS platform.
• Impairment Charges: The company recorded a non-cash goodwill impairment charge of $83.1 million in Q3 2024, reducing the goodwill in the Marketing Services reporting unit to zero. This was driven by the decision to exit the Marketing Services business by 2028. This compares to a $268.8 million impairment in 2023.
• Net Loss Reduction: Despite the impairment charge, the net loss improved significantly from $259.3 million in 2023 to $74.2 million in 2024, aided by lower operating expenses and a $24.8 million pension remeasurement gain.
• Debt Refinancing: In May 2024, the company refinanced its debt, entering a new $350 million Term Loan and an $85 million ABL Facility. Total debt decreased due to repayments and lower interest rates.

Guidance, Outlook, and Risks

Outlook: Management remains focused on transitioning fully to a SaaS-driven business model by 2028. The company expects to maintain profitability in the Marketing Services segment during the wind-down while investing in SaaS growth. The Keap acquisition is expected to drive synergy and expand the SaaS client base.

Risks and Contingencies:

• SEC Investigation: In October 2024, the company received an SEC subpoena regarding its strategic conversion of clients from digital marketing services to SaaS. The company is cooperating, and the investigation is currently a fact-finding inquiry.
• Client Churn: There is a risk that clients converted from Marketing Services to SaaS may churn at higher rates than organic SaaS clients, though 2024 data indicated churn was in line with other SaaS clients.
• Integration Risks: Successful integration of Keap is critical; failure to realize synergies or retain key employees could adversely affect results.
• Debt Covenants: The company must maintain specific financial ratios (Total Net Leverage Ratio and SaaS Revenue thresholds) under its new credit facilities.

Key Facts for Investor Verification

• Transition Execution: Verify the rate of client conversion from Marketing Services to SaaS and the associated churn rates to ensure the 2028 exit strategy is viable without excessive revenue loss.
• Keap Integration: Monitor the financial performance and retention metrics of the Keap client base post-acquisition.
• SEC Subpoena Status: Track developments regarding the SEC inquiry into the client conversion strategy for potential regulatory or financial repercussions.
• Debt Service: Confirm compliance with the new debt covenants, specifically the minimum SaaS revenue thresholds and leverage ratios.
• Print Revenue Volatility: Assess the impact of the 18-24 month print publication cycles on quarterly revenue recognition as the business winds down.