Thryv Holdings, Inc. — Q1 2024 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. Thryv provides marketing services and SaaS business-management tools to SMBs. It reported two segments—Thryv Marketing Services and Thryv SaaS—and served approximately 328,000 total clients at quarter-end.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $233.6 million | $245.6 million | Down 4.9% |
| Gross profit / margin | $153.6 million / 65.8% | $154.8 million / 63.0% | Profit down 0.8%; margin up 2.8 points |
| Operating income | $31.1 million | $30.8 million | Up 1.1% |
| Net income | $8.4 million | $9.3 million | Down 9.6% |
| Diluted EPS | $0.22 | $0.25 | Down $0.03 |
| Adjusted EBITDA (non-GAAP) | $54.1 million; 23.2% of revenue | $58.5 million; 23.8% | Down 7.4% |
| Operating cash flow | $5.4 million | $32.3 million | Down $26.9 million |
| Capital expenditures | $7.3 million | $5.1 million | Up $2.1 million |
Marketing Services revenue fell 14.2% to $159.3 million; SaaS revenue rose 24.0% to $74.3 million. Marketing Services segment Adjusted EBITDA was $50.7 million, versus $58.7 million; SaaS segment Adjusted EBITDA was $3.4 million, versus a loss of $0.2 million. Print revenue increased 9.4% because of publication timing, although revenue on a publication-by-publication basis declined 31%. Digital revenue fell 31.0%; management cited client attrition, competition, and migration of clients to SaaS.
Cash and cash equivalents were $14.4 million at March 31, compared with $18.2 million at year-end. Current assets were $275.0 million and current liabilities $239.7 million. Reported debt obligations were $347.6 million net of unamortized discount and issuance costs, including $300.0 million of Term Loan principal and $55.7 million drawn on the ABL Facility. Approximately $27.9 million was available to draw under the ABL at quarter-end. The company reported compliance with debt covenants and expected continued compliance for the next 12 months.
Material changes and management commentary
- Gross margin improved as SaaS represented a greater share of sales and the company reduced resale of lower-margin third-party digital services. Cost of services fell 11.9%, while sales and marketing expense declined 8.2%.
- General and administrative expense increased 9.9%, including higher bad-debt expense. The allowance for credit losses was $17.9 million, up from $13.2 million a year earlier.
- Operating cash flow declined substantially, primarily due to working-capital movements, including accounts receivable and accounts payable, and the timing of incentive payments; tax payments also replaced tax receipts. Lower interest payments partly offset the decline.
- Marketing Services clients fell 15% to 295,000; SaaS clients increased 30% to 70,000; total clients declined 12% to 328,000. Monthly ARPU decreased 13% for Marketing Services and 3% for SaaS.
- Management said SaaS growth reflected demand for cloud-based tools, improved sales and onboarding focus, and accelerated conversion of Marketing Services clients. It also cited ongoing secular pressure on print and competition in digital advertising.
Outlook, financing, risks, and contingencies
- No specific revenue or earnings guidance was provided. Management said expected operating cash flow, cash, and available ABL capacity should cover liquidity needs for the following 12 months, while noting projections are subject to uncertainty.
- After quarter-end, on May 1, 2024, the company refinanced its term loan with a $350 million facility maturing in 2029, at SOFR plus 6.75% (or base rate plus 5.75%). Required amortization is $52.5 million annually for the first two years and $35 million annually thereafter. A new $85 million ABL facility matures in 2028; approximately $44.4 million was available to draw on May 1.
- On April 30, the board authorized a share repurchase program of up to $40 million through April 30, 2029. No shares had been repurchased under it as of May 2; repurchases are subject to liquidity, market conditions, and debt covenants.
- Substantially all debt outstanding at March 31 bore floating rates. Management estimated that a 100-basis-point rate increase would add approximately $3.6 million to annual interest expense based on quarter-end debt.
- The effective tax rate was 39.0%, versus 32.6%. The company had $17.8 million of unrecognized tax benefits and a $26.6 million reserve related to an IRS dispute over Section 199 deductions; the IRS had not issued a final settlement. Management said pending legal and regulatory matters were not expected to have a material adverse effect.
- Risks highlighted include Marketing Services client declines and competition, retaining and attracting SMB clients, economic conditions, cybersecurity and privacy, and the use and regulation of AI. The filing added that deficient or biased AI outputs, security incidents, or evolving regulation could create reputational, competitive, or legal harm.
Important facts for investors to verify
- Whether SaaS growth and client additions can offset continued Marketing Services revenue and client declines, particularly as migration between offerings affects ARPU and revenue mix.
- How publication timing affects Print comparisons and whether underlying demand continues to weaken.
- Cash conversion and working-capital trends, including collections, credit-loss provisions, and the effect of recurring investment and pension contributions.
- The cost, amortization schedule, covenant terms, and liquidity impact of the May refinancing, alongside floating-rate exposure and required debt payments.
- The outcome and timing of the IRS tax matter, and whether any resolution changes the tax rate or cash requirements.
- The use of Adjusted EBITDA and other non-GAAP measures alongside GAAP results; the filing notes these measures are supplemental and may not be comparable with similarly titled measures at other companies.