Business context and reporting period
Thryv Holdings, Inc. filed this Form 10-K for the fiscal year ended December 31, 2023. The company serves small and medium-sized businesses with marketing services and SaaS business-management tools across four segments: U.S. and international Marketing Services and SaaS. It reported 346,000 total clients at year-end. The April 2023 acquisition of New Zealand-based Yellow contributed $12.3 million of revenue after acquisition.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $917.0 million | $1,202.4 million |
| Gross profit / margin | $578.2 million / 63.1% | $780.4 million / 64.9% |
| Operating income (loss) | $(200.0) million | $99.3 million |
| Net income (loss) | $(259.3) million | $54.3 million |
| Adjusted EBITDA | $187.5 million | $333.3 million |
| Cash from operating activities | $148.2 million | $148.6 million |
Revenue fell 23.7%. Marketing Services generated 71.2% of 2023 revenue and SaaS 28.8%. U.S. Marketing Services revenue declined 37.7% to $510.5 million; U.S. SaaS revenue rose 19.7% to $253.6 million. International Marketing Services revenue fell 14.0% to $142.7 million, while international SaaS revenue rose 123.1% to $10.1 million. Adjusted gross margin was 66.1%, versus 68.1%.
The $259.3 million net loss included $268.8 million of non-cash goodwill impairment charges, recorded against U.S. Marketing Services. Adjusted EBITDA, a non-GAAP measure, decreased 43.7%. Cash and cash equivalents were $18.2 million at year-end. Recorded debt was $348.9 million, net of unamortized discounts and issuance costs; approximately $37.5 million was available to draw under the ABL Facility. The company reported compliance with debt covenants at year-end and said it expected cash flows, cash on hand and ABL availability to meet liquidity needs for the next 12 months.
Material changes versus the prior year
- Marketing Services revenue contracted sharply: U.S. Print revenue fell 47.9%, partly reflecting publication timing, and declined 22% on a publication-by-publication basis. U.S. Digital revenue fell 28.7%, amid client losses and competition.
- SaaS growth did not offset Marketing Services declines. Year-end SaaS clients rose 27% to 66,000, while Marketing Services clients fell 13% to 314,000 and total clients declined 11% to 346,000.
- Monthly Marketing Services ARPU decreased 11% to $158; SaaS ARPU increased 1% to $372. SaaS monthly active users were 40,000, down 2% year over year.
- Goodwill impairment increased from $102.2 million in 2022 to $268.8 million in 2023. The company cited declining print demand, Marketing Services client trends, competition and its accelerated client-conversion strategy.
- Debt declined from $469.8 million to $348.9 million recorded net debt. Interest expense was $61.7 million, compared with $60.4 million in the MD&A comparison (the audited income statement reports $60.4 million total, including related-party interest in 2022).
Outlook, commentary, risks and unusual items
Management’s strategy is to grow SaaS while preserving Marketing Services profitability and using the legacy business as a channel to acquire SaaS clients. In the fourth quarter, Thryv accelerated conversions of digital Marketing Services clients to its Marketing Center platform at no cost. Management expects this shift to move revenue over time from Marketing Services to SaaS, but cautions that it could raise churn, reduce total clients or lower SaaS ARPU. The filing provides no specific 2024 revenue or earnings guidance.
Key risks include continued decline in print and Marketing Services, failure to convert clients or sustain SaaS growth, competition and pricing pressure, SMB churn and credit losses, reliance on search and technology partners, cyber and privacy risks, and economic weakness. Debt is predominantly floating-rate and matures in 2026; the company estimated a 100-basis-point rate increase would add approximately $3.6 million of annual interest expense. Other items to monitor include $69.9 million of net pension obligations, a $26.1 million reserve related to the Section 199 tax dispute, and $17.1 million of unrecognized tax benefits. The company said pending legal matters were not expected to have a material adverse effect, while noting uncertainty in the tax case and potential tax settlement developments.
Important facts for investors to verify
- Whether SaaS growth and client conversion can offset continuing Marketing Services declines without materially increasing churn or weakening margins.
- How much of the Print revenue decrease reflects publication timing versus underlying demand, and whether the disclosed publication-by-publication decline persists.
- Cash generation, debt repayment capacity, covenant headroom and refinancing risk before the 2026 debt maturity.
- Assumptions behind the $268.8 million goodwill impairment and the remaining goodwill, particularly the limited fair-value cushion reported for International Marketing Services.
- Progress and ultimate cash impact of the IRS Section 199 matter, other tax uncertainties and pension funding requirements.