Thryv Holdings, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Comparisons below are primarily with FY 2021.
Business context
Thryv provides print and digital marketing services and cloud-based business-management software to small and medium-sized businesses (SMBs). At year-end it reported approximately 387,000 total clients. The business has four segments: U.S. Marketing Services, U.S. SaaS, International Marketing Services and International SaaS. Vivial was acquired in January 2022; operations in Canada began in July 2022. SaaS represented 18% of FY 2022 revenue, while Marketing Services remained the larger revenue source.
Key financial results
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $1,202.4 million | $1,113.4 million | Up 8.0% |
| Gross profit / margin | $780.4 million / 64.9% | $705.3 million / 63.4% | Margin up 1.5 percentage points |
| Operating income / margin | $99.3 million / 8.3% | $190.0 million / 17.1% | Down 47.7% |
| Net income | $54.3 million | $101.6 million | Down 46.5% |
| Diluted EPS | $1.49 | $2.78 | Down 46.4% |
| Adjusted EBITDA (non-GAAP) | $333.3 million / 27.7% of revenue | $350.5 million / 31.5% | Down 4.9% |
| Operating cash flow | $148.6 million | $170.6 million | Down $22.0 million |
Revenue by segment: U.S. Marketing Services $820.0 million (up 2.8%); U.S. SaaS $211.8 million (up 24.2%); International Marketing Services $166.0 million (up 14.6%); and International SaaS $4.5 million, versus $0.6 million for the ten months reported in 2021. International comparisons are affected by the 2021 Australia acquisition and the timing and accounting of acquired deferred revenue.
FY 2022 net income included a $102.0 million non-cash goodwill impairment charge, principally in U.S. Marketing Services, and a $44.6 million pension benefit (including a remeasurement gain) and $10.9 million Vivial bargain-purchase gain. The effective tax rate was 45.1%, versus 24.4% in 2021, in part due to non-deductible goodwill impairment. These items make net income and year-over-year comparisons less representative of underlying operating trends.
Cash, debt and liquidity
- Cash and cash equivalents were $16.0 million at year-end, compared with $11.3 million a year earlier. Cash flow from investing was negative $52.0 million, including $22.8 million paid for Vivial; financing cash flow was negative $91.1 million. Cash increased $4.6 million.
- Recorded debt was $469.8 million, net of $14.1 million of unamortized discount and issuance costs, comprising $429.4 million of Term Loan principal and $54.6 million outstanding under the ABL Facility. ABL borrowing capacity available was $91.9 million.
- The Term Loan matures in March 2026 and bears floating-rate interest; the filing reports a LIBOR-based margin of 8.5%. A hypothetical 100-basis-point rate increase would add approximately $4.8 million to annual interest expense at year-end debt levels.
- The company reported compliance with its Term Loan and ABL covenants at year-end and expects compliance over the next 12 months. Management believes operating cash flows, cash and available ABL capacity will meet liquidity needs for that period, while noting projections are uncertain.
Material changes and management commentary
- SaaS grew, with U.S. SaaS revenue up 24.2%, year-end SaaS clients up 13% to 52,000, and SaaS monthly ARPU up 11% to $369. Monthly active SaaS users rose 37% to 41,000.
- Marketing Services client count fell 7% to 362,000, and monthly ARPU declined 16% to $178. Management attributes pressure to print’s secular decline and intense competition in digital search and display. U.S. print revenue rose year over year, helped by Vivial and extending new publication terms from 15 to 18 months; management also reported an underlying 14% decline net of publication-timing effects.
- Management’s strategy is to grow SaaS and cross-sell to Marketing Services clients while managing the legacy business for profitability. Approximately 39% of new SaaS clients originated from Marketing Services.
- Print revenue is recognized when directories are delivered, so publication schedules can cause significant quarterly volatility. The filing specifically anticipates fewer U.S. directories delivered in Q3 2023 than in Q3 2022, shifting some revenue to later quarters.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings or cash-flow guidance. Management states that it expects available liquidity to cover requirements for the next 12 months and does not expect a material COVID-19 financial impact absent renewed shutdowns. It expects approximately $10.0 million of qualified-plan and $0.8 million of non-qualified-plan contributions in 2023.
Key risks include faster-than-expected decline in Marketing Services, inability to convert clients to SaaS, SMB churn or lower spending, competition and pricing pressure, dependence on search platforms and third-party technology providers, cybersecurity and privacy exposure, economic weakness, and floating-rate debt and covenant constraints. The company also faces litigation and tax matters. It had reserved $34.0 million for the Section 199 tax dispute and less than $0.1 million for the related R&D credit issue; in February 2023, it informally accepted a proposed settlement for certain years and expects to release some tax reserves. An Ohio use-tax audit reserve was $1.3 million. Management did not expect pending legal matters to materially affect the financial statements, but outcomes remain uncertain.
The financial-statement auditor issued an unqualified opinion. Management and the auditor reported effective internal control over financial reporting as of year-end; both excluded Vivial’s controls from their assessment while integration continued. The filing identifies goodwill impairment and pension obligations as critical audit matters.
Important facts for investors to verify
- Whether SaaS growth, client engagement and ARPU can offset ongoing Marketing Services client and print declines.
- How much of reported revenue growth and margin performance reflects acquisitions, directory delivery timing and other nonrecurring or accounting effects.
- Whether cash generation, interest costs, required debt payments and covenant headroom remain adequate as floating rates and operating conditions change.
- Progress and final outcome of the IRS settlement, related reserve releases and other tax examinations or contingencies.
- Whether further goodwill impairment, pension funding needs or Vivial integration costs could materially affect future results.