Thryv Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; comparisons are with the corresponding 2021 periods unless noted. Thryv provides marketing services and SaaS business-management tools to SMBs. It reported four segments: U.S. Marketing Services, U.S. SaaS, International Marketing Services and International SaaS.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $334.0m | $291.0m | $642.4m | $571.7m |
| Gross profit / margin | $228.0m / 68.3% | $178.4m / 61.3% | $425.8m / 66.3% | $360.9m / 63.1% |
| Operating income / margin | $83.3m / 24.9% | $54.3m / 18.7% | $135.0m / 21.0% | $119.0m / 20.8% |
| Net income | $58.0m | $24.4m | $91.5m | $60.9m |
| Diluted EPS | $1.61 | $0.66 | $2.47 | $1.72 |
| Adjusted EBITDA (non-GAAP) | $116.0m | $96.8m | $199.7m | $201.7m |
For the six months, operating cash flow was $56.9m, down from $81.8m; capital spending was $9.6m, and cash used for acquisitions was $22.8m, net of cash acquired. Cash and cash equivalents were $13.7m at June 30, 2022. Management said expected operating cash flows, available cash and ABL availability should meet liquidity needs for the next 12 months.
Recorded debt was $539.2m, net of $16.9m in unamortized discount and issuance costs; principal outstanding was $499.5m on the Term Loan and $56.6m on the ABL Facility. ABL borrowing capacity was $76.2m. The Term Loan matures in March 2026, bears floating-rate interest (LIBOR plus 8.5% for LIBOR loans), and requires $17.5m quarterly amortization. The company reported compliance with debt covenants and expected continued compliance for 12 months. A hypothetical 100-basis-point rate increase was estimated to add about $5.6m to annual interest expense.
Material changes and drivers
- Q2 revenue rose 14.8%; six-month revenue rose 12.4%. U.S. SaaS revenue increased 23.6% in Q2 and 25.3% for the half, reflecting demand and a focus on higher-spend, higher-engagement customers.
- Marketing Services revenue growth included the January 2022 Vivial acquisition and, in International Marketing Services, comparison effects from the 2021 Thryv Australia acquisition and its deferred-revenue accounting adjustment. Management also cited secular print declines and intense digital competition.
- Reported gross margin expanded, while six-month Adjusted EBITDA declined 1.0%. Management attributed the decline primarily to secular pressure in Marketing Services, partly offset by acquisition effects and SaaS growth.
- Marketing Services clients fell to 395,000 from 422,000; SaaS clients increased to 50,000 from 45,000. Monthly SaaS ARPU rose to $358 from $323, while Marketing Services ARPU decreased to $183 from $187.
Outlook, risks and unusual items
- No quantitative revenue, earnings or cash-flow guidance is provided in the supplied filing text. Management expects liquidity to cover the next 12 months, but notes that forecasts are subject to uncertainty.
- Q2 and first-half earnings included an $8.7m pension remeasurement gain (within a total pension benefit of $9.2m for the half). First-half results also included a $7.0m bargain-purchase gain from Vivial. These items affect comparability with operating performance.
- Vivial was acquired for $22.8m cash, net of acquired cash, and contributed $53.0m revenue after acquisition. Purchase accounting remained preliminary. Vivial represented 9% of Q2 and 8% of first-half consolidated revenue; management excluded its related internal controls from the quarter-end ICFR assessment. Management concluded disclosure controls were effective.
- Risks highlighted include declining print demand, competition in digital marketing, SMB churn and credit losses, inflation and broader economic weakness, floating interest rates, foreign-exchange movements, technology and cybersecurity risks, and the ability to integrate acquisitions and grow SaaS. The company said COVID-19 had not materially affected results or liquidity to date.
- Tax matters include approximately $32.8m reserved for the Section 199 dispute and $25.2m of related indemnification assets. The company said it may resolve up to $20.2m of gross unrecognized tax benefits within 12 months, which could affect its effective tax rate. Management did not expect pending legal and regulatory matters to have a material adverse effect.
Important facts for investors to verify
- How much reported growth reflects acquired revenue and prior-year acquisition accounting or directory-publication timing, versus organic growth.
- Whether SaaS customer growth, ARPU gains and engagement persist, and whether they can offset Marketing Services client and print declines.
- Why six-month operating cash flow fell, including working-capital movements, and whether cash generation can support debt service and pension contributions.
- Floating-rate debt exposure, covenant headroom and refinancing or repayment needs; the filing does not provide a clear numerical covenant cushion.
- Final Vivial purchase accounting, integration and control remediation; outcomes of tax disputes and the recoverability of indemnification assets.