Thryv Holdings, Inc. — Q3 2022 Form 10-Q
Business context and reporting period. Thryv provides print and digital marketing services and SaaS business-management tools to small and medium-sized businesses. It reported for the quarter and nine months ended September 30, 2022. The company had approximately 399,000 clients at quarter-end. Results include Vivial, acquired in January 2022; prior-year comparisons also reflect Thryv Australia only from its March 2021 acquisition date. Segment reporting was revised in 2022 to show U.S. and international marketing services and SaaS separately.
Key financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $280.7 million | $297.3 million | $923.0 million | $868.9 million |
| Gross profit / margin | $175.6 million / 62.6% | $193.1 million / 65.0% | $601.5 million / 65.2% | $554.0 million / 63.8% |
| Operating income / margin | $31.1 million / 11.1% | $65.8 million / 22.1% | $166.1 million / 18.0% | $184.8 million / 21.3% |
| Net income | $13.3 million | $35.6 million | $104.8 million | $96.5 million |
| Diluted EPS | $0.37 | $0.95 | $2.86 | $2.67 |
| Adjusted EBITDA (non-GAAP) | $65.4 million | $102.4 million | $265.1 million | $304.0 million |
Cash flow and liquidity. Nine-month operating cash flow was $104.2 million, down from $121.5 million. Investing used $42.1 million, including $22.8 million net cash for Vivial; financing used $57.7 million. Cash and cash equivalents were $14.3 million at September 30 ($16.3 million including restricted cash). Current assets were $387.1 million and current liabilities $295.9 million. The company reported $72.3 million of ABL borrowing capacity.
Debt. Recorded debt was $503.7 million, net of $15.6 million of unamortized discount and issuance costs; principal outstanding comprised $460.5 million on the term loan and $58.9 million on the ABL facility. Both facilities mature in 2026. The term loan bears floating interest, including a LIBOR margin of 8.5%, and requires $17.5 million of quarterly amortization. Management reported compliance with debt covenants and expected continued compliance for the next 12 months.
Material changes and management commentary
- Q3 revenue declined 5.6% year over year, while nine-month revenue increased 6.2%; the nine-month comparison is affected by acquisitions and differing periods of Thryv Australia ownership.
- Q3 U.S. SaaS revenue rose 23.6% to $55.4 million, but U.S. marketing services revenue fell 7.5%. International marketing services revenue declined 31.5% in Q3, including foreign-exchange effects; international SaaS revenue grew from a small base.
- Management attributed marketing-services pressure to secular print declines, client attrition, and competition in digital search and display. U.S. SaaS growth reflected stronger demand and a focus on higher-spend clients. SaaS clients rose by 6,000 year over year to 51,000; marketing-services clients declined by 30,000 to 374,000.
- Q3 adjusted EBITDA fell 36.1%, primarily due to declines in marketing services. Nine-month adjusted EBITDA fell 12.8%. The Q3 gross margin also fell 2.4 percentage points.
- Management said operating cash flows, available cash, and ABL availability should cover liquidity needs for the next 12 months, while noting projections remain subject to substantial uncertainty. No quantified revenue or earnings guidance is provided in the filing.
Risks, contingencies, and unusual items
- Most debt carries floating rates; the company estimated a 100-basis-point rate increase would add approximately $5.2 million of annual interest expense. It has not hedged foreign-currency transactions and is exposed particularly to the Australian dollar.
- Vivial generated a $10.2 million bargain-purchase gain in the first nine months; acquisition accounting remained preliminary. The acquisition contributed $72.8 million of revenue after closing.
- Q3 pension expense included a $3.5 million remeasurement loss; nine-month pension results included a $5.2 million remeasurement gain.
- The company reserved approximately $33.3 million for the IRS Section 199 tax dispute and less than $0.1 million for disputed research-and-development credits. A $25.8 million indemnification asset partly offsets exposure, subject to contractual limitations. The company said resolution of pending legal matters was not expected to materially harm consolidated results.
- A New York sales-and-use-tax audit proposed $0.5 million including interest; the company reversed a prior $3.2 million reserve. It also had a $1.3 million reserve for an Ohio use-tax audit.
- Management identified inflation, higher interest rates, foreign-exchange movements, recession risk, competition, client renewals, cybersecurity, and its ability to integrate acquisitions and grow SaaS as important uncertainties. Disclosure controls were deemed effective; the Vivial business was excluded from management’s internal-control assessment while integration continued.
Important facts for investors to verify
- Whether SaaS growth and higher SaaS ARPU can offset continuing marketing-services client and revenue declines.
- How much of reported revenue growth and segment performance reflects acquisitions, publication timing, or foreign-exchange movements.
- Cash generation, working-capital trends, debt repayment capacity, floating-rate exposure, and covenant headroom.
- Final Vivial purchase accounting, integration progress, and whether expected acquisition benefits are realized.
- Developments in the IRS disputes, indemnification recovery, and other tax audits or contingencies.
- Reconciliation of non-GAAP Adjusted EBITDA to GAAP results and the effects of its exclusions.