Thryv Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented and should be read in conjunction with our unaudited interim consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report. This discussion and analysis contains forward-looking statements, including statements regarding industry outlook, our expectations for the future of our business, and our liquidity and capital resources as well as other non-historical statements. These statements are based on current expectations and are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in “Risk Factors” in our 2024 Form 10-K, elsewhere in this Quarterly Report on Form 10-Q, particularly Part II, Item 1A. "Risk Factors," and “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by these forward-looking statements.

Overview

We are dedicated to supporting local, independent businesses and franchises by providing innovative marketing solutions and cloud-based tools to the entrepreneurs who run them. We are one of the largest providers of SaaS end-to-end customer experience tools and digital marketing solutions to small-to-medium sized businesses (“SMBs”). Our solutions enable our SMB clients to generate new business leads, manage their customer relationships and run their day-to-day business operations.

Our expertise in delivering solutions for our client base is rooted in our deep history of serving SMBs. In 2025, SMB demand for integrated technology solutions continues to grow as SMBs adapt their business and service model to facilitate remote working and virtual interactions.

We serve approximately 280,000 SMB clients globally through two business segments: Thryv SaaS and Thryv Marketing Services.

Thryv SaaS. Our Thryv SaaS segment generated $111.1 million and $74.3 million of consolidated revenues for the three months ended March 31, 2025 and 2024, respectively. Our primary SaaS offerings are comprised of Thryv®, our flagship all-in-one small business management platform, which includes Command Center, Business Center, Marketing Center, ThryvPay®, Thryv Add-Ons, and Keap Automations (collectively referred to as our “Thryv Platform”). Thryv Command Center enables SMBs to centralize all their internal and external communications through a modular, easily expandable, and customizable platform. Command Center allows an SMB to perform the following tasks to provide a centralized inbox for all customer communication:

• connect their pre-existing email, Facebook and Instagram accounts;
• install Command Center’s WebChat client on their website; and
• use Voice over Internet Protocol in-platform telephony services, Short Message Service and video calls.

Thryv Business Center is designed to allow an SMB everything necessary to streamline day-to-day business operations, including customer relationship management, appointment scheduling, estimate and invoice creation, and online review management. Thryv Marketing Center is a fully integrated next generation marketing and advertising platform operated by the end user. Marketing Center contains everything a small business owner needs to market and grow their business effectively, including easy to understand, AI driven analytics and lead attribution, helping them understand what marketing is working for them. ThryvPay®, is our own branded payment solution that allows users to get paid via credit card and ACH and is tailored to service focused businesses that want to provide consumers safe, contactless, and fast-online payment options. Thryv Add-Ons include AI-assisted website development, search engine optimization tools, Google Business Profile optimization, Hub by ThryvSM, and Thryv Leads. These optional platform subscription-based add-ons provide a seamless user experience for our end-users and drive higher engagement within the Thryv Platform while also producing incremental revenue growth. Keap Automations is Thryv's sales and marketing automation engine that helps SMBs efficiently grow, allowing automation of repetitive tasks, campaigns, processes, and tools.

Thryv Marketing Services

Our Thryv Marketing Services segment provides both print and digital solutions and generated $70.2 million and $159.3 million of consolidated revenues for the three months ended March 31, 2025 and 2024, respectively. Our Marketing Services offerings include our owned and operated Print Yellow Pages (“Print”), which carry the “The Real Yellow Pages” tagline, our proprietary Internet Yellow Pages, known by the Yellowpages.com, Superpages.com, and Dexknows.com URLs, search engine marketing solutions and other digital media solutions, which include online display and social advertising, online presence, and video and search engine optimization tools (collectively referred to as “Digital”). Our Thryv Marketing Services segment includes Thryv Australia Pty Ltd (“Thryv Australia”), and Yellow Holdings Limited (“Yellow”), a New Zealand marketing services company. Thryv Australia and Yellow serve approximately 75,000 and 15,000 Marketing Services SMBs, respectively, many of which we believe are ideal candidates for the Thryv Platform. During the third quarter of 2024, we made a strategic decision to terminate our Marketing Services solutions by the end of 2028.

Factors Affecting Our Performance

Our operations can be impacted by, among other factors, general economic conditions and increased competition with the introduction of new technologies and market entrants. We believe that our performance and future success depend on several factors that present significant opportunities for us, but also pose risks and challenges, including those listed below and those discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements.”

Ability to Attract and Retain Clients

Our revenue growth is driven by our ability to attract, retain and expand the spend of SMB clients. To do so, we must deliver solutions that address the challenges currently faced by SMBs at a value-based price point that SMBs can afford.

Our strategy is to expand the use of our SaaS solutions by introducing our SaaS solutions to new SMB clients, as well as our current Thryv Marketing Services clients and our existing SaaS client base, offering them additional SaaS solutions. This strategy includes capitalizing on the increased needs of SMBs for solutions that facilitate a remote working environment and virtual interactions. This strategy will require substantial sales and marketing capital. This strategy poses a risk if our Marketing Services clients do not fully embrace the transition to SaaS offerings by purchasing additional SaaS offerings or if they have higher churn rates.

Transition of Digital Marketing Services Clients to the Thryv Platform

During the fourth quarter of 2023, we made a strategic decision to accelerate the transition of clients with digital Marketing Services solutions to our Thryv Platform by converting clients with certain Marketing Services products to the Thryv Platform outside of the sales process at no additional base cost to these clients at the time of upgrade. During the trailing twelve months ended March 31, 2025, we converted approximately 44,000 clients from our digital Marketing Services to our Thryv Platform, generating a $11.3 million increase in SaaS revenue during the three months ended March 31, 2025. As of March 31, 2025, approximately 34,000 of these clients remained as active SaaS clients.

The conversion of these clients decreases the number of clients in and the revenue of the Thryv Marketing Services segment and increases the number of clients in and the revenue of the Thryv SaaS segment. While we believe these clients are receiving a valuable upgrade to our Thryv Platform and will be more likely to subscribe for additional features of the Thryv Platform in the future, the conversion of these clients outside of the sales process could result in these clients cancelling their services with us (known as “churn”) at a materially higher rate than the other clients in our SaaS segment. During 2024 and 2025, the churn of clients converted from our digital Marketing Services solutions was in line with the churn from the other clients in our SaaS segment. The conversion of clients to our Thryv Platform at no additional base cost resulted in a decrease to our SaaS monthly ARPU.

Macroeconomic Factors

Macroeconomic factors in the U.S. and the global economy, such as recently proposed tariffs, retaliatory tariffs, concerns regarding a trade war or recession and inflation could negatively impact the businesses of our SMB customers and could reduce their demand for our offerings. To date, we do not believe that demand for our offerings has been negatively impacted by these factors.

Investment in Growth

We intend to continue to develop and grow a profitable SaaS segment to better help SMBs manage their businesses, while maintaining strong profitability within our Marketing Services segment, which we expect to continue to serve as an efficient customer acquisition channel for our SaaS platform until its termination in 2028. As a result, SaaS has been able to achieve profitable growth. We will continue to improve our SaaS solutions by analyzing user behavior, expanding features, improving usability, enhancing our onboarding services and customer support and making version updates available to

SMBs. We believe these initiatives will ultimately drive revenue growth; however, such improvements will also increase our operating expenses.

Ability to Grow Through Expansion and Acquisition

Our growth prospects depend upon our ability to successfully develop new markets. We currently primarily serve the United States, Australia, New Zealand, Canada, and Europe SMB markets and plan to leverage strategic acquisitions or initiatives to expand our client base domestically and enter new markets internationally. Identifying proper targets and executing strategic acquisitions may take substantial time and capital. In July 2022, we began operations in Canada through our own sales force and a re-seller agreement. On April 3, 2023, we completed the acquisition of Yellow, a New Zealand marketing services company. Additionally, on October 31, 2024, we completed the acquisition of Keap, a prominent player in customer relationship management and marketing automation for SMBs. Keap primarily serves SMBs in North America, Australia, New Zealand and Europe. We believe that strategic acquisitions of SaaS and marketing services companies globally will expand our client base and provide additional opportunities to offer our SaaS solutions.

Print Publication Cycle

We recognize revenue for print services at a point in time upon delivery of the published PYP directories containing customer advertisements to the intended market. Our PYP directories typically have 12-month publication cycles in Australia, 18-month publication cycles in New Zealand, and 18 to 24-month publication cycles in the U.S. As a result, we typically record revenue for each publication only once every 12 to 24 months, depending on the publication cycle of the directory. The amount of revenue we recognize each quarter from our PYP directories is therefore directly related to the number of PYP directories we deliver to the intended market each quarter, which can vary based on the timing of the publication cycles.

Key Business Metrics

We review several operating metrics, including the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be used by investors to help analyze the health of our business.

Total Clients

We define total clients as the number of SMB accounts with one or more revenue-generating solutions in a particular period. For quarter- and year-ending periods, total clients from the last month in the period are reported. A single client may have separate revenue-generating accounts for multiple Marketing Services solutions or SaaS offerings, but we count these as one client when the accounts are managed by the same business entity or individual. Although infrequent, where a single organization has multiple subsidiaries, divisions, or segments, each business entity that is invoiced by us is treated as a separate client. We believe that the number of total clients is an indicator of our market penetration and potential future business opportunities. We view the mix between Marketing Services clients and SaaS clients as an indicator of potential future opportunities to offer our SaaS solutions to our Marketing Services clients.

(in thousands)

(1) Clients that purchase one or more of our Marketing Services solutions are included in this metric. These clients may or may not also purchase subscriptions to our SaaS offerings.

(2) Clients that purchase subscriptions to our SaaS offerings are included in this metric, as well as clients converted from our digital Marketing Services solutions to our SaaS offerings. These clients may or may not also purchase one or more of our Marketing Services solutions.

(3) Total clients is less than the sum of the Marketing Services and SaaS, since clients that purchase both Marketing Services and SaaS products are counted in each category, but only counted once in the Total.

Marketing Services clients decreased by 76 thousand, or 26%, as of March 31, 2025 as compared to March 31, 2024. This decrease was related to the secular decline in the print media industry and significant competition in the digital media space, from focusing on offering our SaaS solutions to our current Marketing Services clients, and from our strategic decision to accelerate the conversion of clients from digital Marketing Services solutions to SaaS offerings.

SaaS clients increased by 41 thousand, or 59%, as of March 31, 2025 as compared to March 31, 2024, primarily due to the conversion of clients from digital Marketing Services solutions to the Thryv Platform during 2024 and continued into 2025. In addition, during the fourth quarter of 2024, we added 15 thousand clients from the Keap Acquisition.

Total clients decreased by 47 thousand, or 14%, as of March 31, 2025 as compared to March 31, 2024. The primary driver of this decrease was the secular decline in the print media business combined with increasing competition in the digital media and SaaS space, partially offset by an increase in SaaS clients.

Monthly ARPU

We define monthly average revenue per unit (“ARPU”) as our total client billings for a particular month divided by the number of clients that have one or more revenue-generating solutions in that same month. For each reporting period, the weighted-average monthly ARPU from all the months in the period are reported. ARPU varies based on product mix, product volumes, and the amounts we charge for our services. We believe that ARPU is an important measure of client spend and growth in ARPU is an indicator of client satisfaction with our services.

26

Monthly ARPU for Marketing Services decreased by $34, or 23%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in ARPU for these periods was related to reduced spend by clients on our print media offerings due to the secular decline of the industry, caused by the continuing shift of advertising spend to larger digital media audiences, and our strategic decision to accelerate the conversion of clients from digital Marketing Services solutions to SaaS offerings.

Monthly ARPU for SaaS decreased by $34, or 9%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in SaaS ARPU during the three months ended March 31, 2025 primarily resulted from our strategic decision to accelerate the conversion of clients from digital Marketing Services solutions to our SaaS offerings at no additional base cost to the client at the time of upgrade. The sale of our other SaaS offerings to new and existing SaaS clients offset a portion of the SaaS decline.

Seasoned Net Revenue Retention for SaaS

We believe that Seasoned Net Revenue Retention (“Seasoned NRR”) is an indicator of our ability to retain and expand revenue for established clients that have had one or more SaaS offerings for at least a year. Seasoned NRR is calculated by dividing the revenue of all SaaS clients as of the last month of the year or quarter, as applicable, by the same clients' revenue one year ago (the “beginning period”), excluding clients acquired over the 12 months subsequent to the beginning period, including clients acquired in the Keap Acquisition.

Seasoned NRR increased by 900 basis points from 94% for the three months ended March 31, 2024 to 103% for the three months ended March 31, 2025. The increase in Seasoned NRR during the three months ended March 31, 2025 resulted from selling additional SaaS products to existing SaaS clients, a price increase for SaaS clients in the third quarter of 2024, and our strategic decision to accelerate the conversion of clients from digital Marketing Services solutions to our SaaS offerings that included instances where Marketing Services clients already had at least one of our SaaS offerings and SaaS revenue increased for those clients.

Key Components of Our Results of Operations

Revenue

We generate revenue from our two business segments: Thryv SaaS and Thryv Marketing Services. Our primary source of revenue in our Thryv SaaS segment is our SaaS solutions. Our primary sources of revenue in our Thryv Marketing Services segment are Print and Digital services.

Cost of Services

Cost of services consists of expenses related to delivering our solutions, such as publishing, printing, and distribution of our Print directories and fulfillment of our Digital and SaaS offerings, including traffic acquisition, managed hosting, and other third-party service providers. Additionally, Cost of services includes personnel-related expenses such as salaries, benefits, and stock-based compensation for our operations team, information technology expenses, non-capitalizable software and hardware purchases, and allocated overhead costs, which includes depreciation of fixed assets, and amortization associated with capitalized software and intangible assets.

Operating Expenses

Sales and Marketing

Sales and marketing expense consists primarily of base salaries, stock-based compensation, sales commissions paid to our inside and outside sales force and other expenses incurred by personnel within the sales, marketing, sales training, and client care departments. Additionally, Sales and marketing expense includes advertising costs such as media, promotional material, branding, online advertising, information technology expenses and allocated overhead costs which includes depreciation of fixed assets, and amortization associated with capitalized software and intangible assets.

General and Administrative

General and administrative expense primarily consists of salaries, benefits and stock-based compensation incurred by corporate management and administrative functions such as information technology, finance and accounting, legal, internal audit, human resources, billing and receivables, and management personnel. In addition, General and administrative expense includes bad debt expense, non-recurring charges, and other corporate expenses such as professional fees, operating taxes, and insurance. General and administrative expense also includes allocated overhead costs which includes depreciation of fixed assets, and amortization associated with capitalized software and intangible assets.

Other Income (Expense)

Other income (expense) consists of interest expense, other components of net periodic pension cost, and other expense, which primarily includes foreign currency-related income and expense.

Results of Operations

Consolidated Results of Operations

The following table sets forth certain consolidated financial data for each of the periods indicated:

(unaudited)

(in thousands of $)

(1) Consolidated results of operations includes Keap's results of operations subsequent to the October 31, 2024 acquisition date.

(2) See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income (loss), the most directly comparable measure presented in accordance with GAAP.

(3) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Profit and a reconciliation to Gross profit, the most directly comparable measure presented in accordance with GAAP.

(4) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Margin.

Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

Revenue

The following table summarizes Revenue by business segment for the periods indicated:

(in thousands of $)

(unaudited)

Revenue decreased by $52.3 million, or 22.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was driven by a decrease in Thryv Marketing Services revenue of $89.1 million, partially offset by an increase in Thryv SaaS revenue of $36.8 million.

Thryv SaaS Revenue

Thryv SaaS revenue increased by $36.8 million, or 49.5%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily attributable to the Company’s strategic decision during the fourth quarter of 2023 to accelerate the conversion of clients from its digital Marketing Services solutions to its SaaS offerings. Clients converted from digital Marketing Services solutions during the trailing twelve months resulted in an $11.3 million increase in SaaS revenue for the three months ended March 31, 2025. SaaS revenue also increased $6.6 million as a result of increased demand for our Thryv SaaS solutions as SMBs accelerate their move away from manual processes and towards cloud platforms to more efficiently manage and grow their businesses, and by our success in re-focusing our go-to-market and onboarding strategy to target higher value clients. Finally, Keap contributed $18.9 million of SaaS revenue during the three months ended March 31, 2025.

Thryv Marketing Services Revenue

Thryv Marketing Services revenue decreased by $89.1 million, or 55.9%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Print revenue decreased by $46.9 million, or 55.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease in Print revenue was primarily driven by the impact of publication timing differences of our U.S. directories, as a result of our Print agreements having greater than 12-month terms, as well as the continued secular decline in U.S. and international industry demand for Print services.

Print revenue is recognized upon delivery of the published directories. Individual published directories have different publication cycles, with a typical lifecycle of 24 months for U.S. directories in 2025. During the fourth quarter of 2024, we began to transition from 18-month publication cycles to 24-month publication cycles for U.S. directories. As a result of recognizing revenue upon delivery, we typically record revenue for each published U.S. directory only once every 24 months, which does not make comparing revenue year-over-year fully representative of actual demand trends due to timing of publication cycles. Due to publication timing differences, the Company recognized revenue for fewer published directories during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

On a publication-by-publication basis, the increase in average publication cycles from 18 months to 24 months results in an average revenue increase of 18% per published directory compared to the last time the directory was published. However, when adjusting the published directory’s revenue on a monthly basis, that is the published directory’s revenue divided by the number of months of the published lifecycle, the average revenue per published directory decreased by 37% compared to the last time the directory was published. The net impact on revenue per published directory was a 19% decline for the directories published during the three months ended March 31, 2025. This net decline per directory was the result of the secular decline in industry demand for Print services.

Digital revenue decreased by $42.1 million, or 56.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was primarily driven by the Company’s strategic decision during the fourth quarter of 2023 to accelerate the conversion of clients from its digital Marketing Services solutions to its SaaS offerings. For the three months ended March 31, 2025, clients converted to SaaS offerings during the trailing twelve months reduced Marketing Services revenue by $11.3 million. However, this resulted in the growth of SaaS revenue as highlighted above in the Thryv SaaS Revenue section. Digital revenue has further decreased due to a continued trending decline in the Company’s Marketing Services client base and significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. For the year ended March 31, 2025, the continued trending decline and significant competition resulted in a $30.8 million decrease in digital revenue.

Cost of Services

Cost of services decreased by $17.9 million, or 22.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily driven by the corresponding decline in revenue and strategic cost saving initiatives. Specifically, we reduced printing, distribution, digital and fulfillment costs by $14.5 million, contract services expense by $1.1 million and employee-related expenses by $0.9 million. Additionally, depreciation and amortization expense decreased by $1.6 million due to the accelerated amortization method used by the Company.

Gross Profit

Gross profit decreased by $34.4 million, or 22.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in Gross profit was primarily due to a decrease in Marketing Services revenue, partially offset by an increase in SaaS revenue and a decrease in cost of services as a result of decline in revenue and strategic cost saving initiatives.

Our gross margin remained flat at 65.8% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Gross margin from our SaaS segment increased to 70.9% for the three months ended March 31, 2025, compared to 66.1% for the three months ended March 31, 2024. This increase was offset by a decrease in gross margin from our Marketing Services segment. Gross margin from our Marketing Services segment decreased to 57.7% for the three months ended March 31, 2025, compared to 65.6% for the three months ended March 31, 2024. SaaS gross margin increased as a result of an increase in revenue and strategic cost savings initiatives. Marketing Services gross margin decreased as a result of a decrease in revenue. Further, the decrease in Marketing Services cost of services did not proportionately decrease with the decline in revenue.

Operating Expenses

Sales and Marketing

Sales and marketing expense decreased by less than $0.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This decrease was primarily driven by a decrease in sales commissions of $2.8 million and a decrease in depreciation and amortization expense of $0.7 million due to the accelerated amortization method used by the Company. These decreases were offset by an increase in stock-based compensation expense of $1.2 million, an increase in marketing and advertising expenses of $0.9 million, an increase in employee-related expenses of $0.5 million, and an increase in software expense of $0.5 million.

General and Administrative

General and administrative expense decreased by $0.1 million, or 0.3%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was primarily attributable to a decrease in bad debt expense of $2.2 million, a decrease in severance expense of $1.2 million, and a decrease in depreciation and amortization expense of $0.8 million due to the accelerated amortization method used by the Company. These decreases were offset by the absence of a $3.2 million gain on disposal of certain intangible assets recorded during the three months ended March 31, 2024, and an increase in stock-based compensation expense of $1.2 million.

Other Income (Expense)

Interest Expense

Interest expense decreased by $4.3 million, or 32.1%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, driven primarily by lower outstanding debt balances.

Other Components of Net Periodic Pension Cost

Other components of net periodic pension cost decreased by $0.8 million for the three months ended March 31, 2025. This decrease was primarily due to an increase in expected return on assets of $0.7 million.

Other Income (Expense)

Other income (expense) increased by $2.8 million for the three months ended March 31, 2025. This increase was primarily due to an increase in foreign-currency related gain of $0.4 million during the three months ended March 31, 2025 compared to a foreign-currency related loss of $2.4 million during the three months ended March 31, 2024.

Income Tax Benefit (Expense)

The Company's effective tax rate (“ETR”) was 23.0% and 39.0% for the three months ended March 31, 2025 and 2024, respectively. The Company's ETR differs from the U.S. Federal statutory rate of 21% primarily due to permanent differences, including state taxes, non-deductible executive compensation, non-U.S. taxing jurisdictions, tax credits, minimum taxes, change in valuation allowance due to expiring net operating losses, and the discrete impact of interest accrual on uncertain tax positions.

Adjusted EBITDA

Adjusted EBITDA decreased by $33.2 million, or 61.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in Adjusted EBITDA was primarily driven by the decrease in sales of our Marketing Services products. This was partially offset by increased sales of our higher margin SaaS solutions in our Thryv SaaS segment. See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income (loss), the most directly comparable measure presented in accordance with GAAP.

Non-GAAP Financial Measures

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. We also present Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin, as defined below, as non-GAAP financial measures in this Quarterly Report.

We have included Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin in this report because management believes they provide useful information to investors in gaining an overall understanding of our current financial performance and provide consistency and comparability with past financial performance. Specifically, we believe Adjusted EBITDA provides useful information to management and investors by excluding certain non-operating items that we believe are not indicative of our core operating results. In addition, Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin are used by management for budgeting and forecasting as well as measuring the Company’s performance. We believe Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin provide investors with the financial measures that closely align with our internal processes.

We define Adjusted EBITDA (“Adjusted EBITDA”) as Net (loss) income plus Interest expense, Income tax expense, Depreciation and amortization expense, Restructuring and integration expenses, Stock-based compensation expense, and non-operating expenses, such as, Other components of net periodic pension cost, and certain unusual and non-recurring charges that might have been incurred. Adjusted EBITDA should not be considered as an alternative to Net (loss) income as a performance measure. We define Adjusted Gross Profit (“Adjusted Gross Profit”) and Adjusted Gross Margin (“Adjusted Gross Margin”) as Gross profit and Gross margin, respectively, adjusted to exclude the impact of Depreciation and amortization expense and Stock-based compensation expense.

Non-GAAP financial information has limitations as an analytical tool and is presented for supplemental informational purposes only. Such information should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP measures used by other companies.

The following is a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, Net (loss) income:

(in thousands)

(1) The Company records Stock-based compensation expense related to the amortization of grant date fair value of the Company’s stock-based compensation awards. See Note 10*, Stock-Based Compensation and Stockholders' Equity*, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

(2) See the table below for detail of Restructuring and integration expenses for the three months ended March 31, 2025 and 2024.

(3) Other components of net periodic pension cost is from our non-contributory defined benefit pension plans that are currently frozen and incur no additional service costs. The most significant component of Other components of net periodic pension cost relates to periodic mark-to-market pension remeasurement.

(4) Other primarily includes foreign exchange-related (income) expense.

The following is a reconciliation of Restructuring and integration expenses that are included in the Adjusted EBITDA to Net (loss) income reconciliation above:

(in thousands)

(a) Represents expenses related to maintenance, utilities, and general upkeep at the Company’s leased buildings. During the COVID-19 pandemic, the Company decided to operate in a Remote First working environment. Because we did not terminate existing lease agreements at any of our facilities, we continue to incur these costs until the lease agreements end. The most significant lease agreements are for our Corporate headquarters, which ends on December 31, 2025 and will not be renewed, and the Keap headquarters, which ends on December 31, 2026 and will not be renewed.

(b) We incur severance charges related to certain reduction in force actions taken by our management. These reduction in force actions are designed to streamline the Company’s operations and drive lower operating expenses as we continue to shift from our Marketing Services activities and drive continued focus on our SaaS business. All of the severance charges incurred during the three months ended March 31, 2025 and 2024 related to our legacy Marketing Services employees and our shift from Marketing Services activities.

(c) We incur professional services, system integration costs and other fees related to each of our acquisitions. Such costs vary in nature and amount due to factors specific to each acquisition and create a lack of comparability between periods.

(d) These costs consist of legal expenses related to legal cases inherited from acquisitions and accounting fees related to acquisitions.

The following tables set forth reconciliations of Adjusted Gross Profit and Adjusted Gross Margin, to their most directly comparable GAAP measures, Gross profit and Gross Margin:

(in thousands)

(in thousands)

Liquidity and Capital Resources

Thryv Holdings, Inc. is a holding company that does not conduct any business operations of its own. We derive cash flows from cash transfers and other distributions from our operating subsidiary, Thryv, Inc., who in turn generates cash flow from its own operations and operations of its subsidiaries, and has cash and cash equivalents on hand, funds provided under the Term Loan and funds available under the ABL Facility. The agreements governing our debt may restrict the ability of our subsidiaries to make loans or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of our senior credit facilities and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions or the making of loans by such subsidiaries to us. Our and our subsidiaries’ ability to meet our debt service requirements is dependent on our ability to generate sufficient cash flows from operations.

We believe that expected cash flows from operations, available cash and cash equivalents, and funds available under our ABL Facility will be sufficient to meet our liquidity requirements, such as working capital requirements for our operations, business development and investment activities, and debt payment obligations, for the following 12 months. Any projections of future earnings and cash flows are subject to substantial uncertainty. Our future success and capital adequacy will depend on, among other things, our ability to achieve anticipated levels of revenues and cash flows from operations and our ability to address our annual cash obligations and reduce our outstanding debt, all of which are subject to general economic, financial, competitive, and other factors beyond our control. We continue to monitor our capital requirements to ensure our needs are in line with available capital resources.

In addition, our Board of Directors authorizes us to undertake share repurchases from time to time. The amount and timing of any share repurchases that we make will depend on a variety of factors, including available liquidity, cash flows, our capacity to make repurchases under our debt agreements and market conditions.

For a discussion on contingent obligations, see Note 13, Contingent Liabilities, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report.

Sources and Uses of Cash

The following table sets forth a summary of our cash flows from operating, investing and financing activities for the periods indicated:

(in thousands)

(unaudited)

Cash Flows from Operating Activities

Net cash used in operating activities increased by $15.9 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase was primarily due to an overall decline in our sales as well as changes in working capital, particularly accounts payable and accrued liabilities, and accounts receivable, which were primarily impacted by the timing of payments and collections. These decreases were partially offset by a $3.7 million decrease in interest payments and a $0.7 million decrease in income tax payments.

Cash Flows from Investing Activities

Net cash used in investing activities was largely unchanged for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Cash Flows from Financing Activities

Net cash from financing activities increased by $13.8 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was related to a $7.0 million increase in net proceeds on the Company's ABL Facility and a $9.4 million decrease in payments made on the Company's Term Loan. The Company made no payments on the Company's Term Loan during the three months ended March 31, 2025 as a result of prepayments made during the prior year. During the three months ended March 31, 2024, the Company made $9.4 million of payments on the Company's prior Term Loan.

Debt

Term Loan

On May 1, 2024, the Company entered into a new Term Loan Credit Agreement (the “Term Loan”), the proceeds of which were used to refinance and pay off in full the Company’s previous term loan facility (the “Prior Term Loan”) and to pay fees and expenses related to the refinancing.

The Term Loan established a senior secured term loan facility (the “Term Loan Facility”) in an aggregate principal amount equal to $350.0 million, of which 40.0% was held by a related party who was an equity holder of the Company as of May 1, 2024. The Company defines a related party as any shareholder owning more than 5% of the Company's voting securities. As of March 31, 2025, 40.0% of the Term Loan was held by a related party who was an equity holder of the Company as of that date.

The Term Loan Facility matures on May 1, 2029 and borrowings under the Term Loan Facility bear interest at a fluctuating rate per annum equal to, at the Company’s option, SOFR or base rate, in each case, plus an applicable margin per annum equal to (i) 6.75% (for SOFR loans) and (ii) 5.75% (for base rate loans). The Term Loan Facility requires mandatory amortization payments, paid quarterly commencing June 30, 2024, equal to (i) $52.5 million per year for the first two years following the closing date of the Term Loan, and (ii) $35.0 million per year thereafter. As a result of $26.2 million of prepayments made through March 31, 2025, the Company's mandatory amortization payments for the next 12 months total $26.3 million.

ABL Facility

On May 1, 2024, the Company entered into a new Credit Agreement (the “ABL Credit Agreement”), which established a new $85.0 million asset-based revolving loan facility (the “ABL Facility”). The ABL Facility refinanced the Company’s previous asset-based revolving loan facility (the “Prior ABL Facility”). Proceeds of the ABL Facility may be used by the Company for ongoing general corporate purposes and working capital.

The ABL Facility matures on May 1, 2028 and borrowings under the ABL Facility bear interest at a fluctuating rate per annum equal to, at the Company’s option, SOFR or base rate, in each case, plus an applicable margin per annum, depending on the average excess availability under the ABL Facility, equal to (i) 2.50% to 2.75% (for SOFR loans) and (ii) 1.50% to 1.75% (for base rate loans). The fee for undrawn commitments under the ABL Facility is equal to 0.375% per annum.

As of March 31, 2025, the Company had borrowing base availability of $26.4 million. As a result of certain restrictions in the Company's debt agreements, as of March 31, 2025, approximately $18.1 million was available to be drawn upon under the ABL Facility.

We maintain debt levels that we consider appropriate after evaluating a number of factors, including cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities), and overall cost of capital. Per the terms of the Term Loan Facility, payments of the Term Loan balance are determined by the Company's Excess Cash Flow (as defined in the Term Loan Facility). We are in compliance with all covenants under the Term Loan and ABL Facility as of March 31, 2025. We had total recorded debt outstanding of $299.0 million (net of $10.1 million of unamortized original issue discount (“OID”) and debt issuance cost) at March 31, 2025, which was comprised of amounts outstanding under the Term Loan of $271.3 million and ABL Facility of $37.8 million.

Share Repurchase Program

On April 30, 2024, the Board authorized a new share repurchase program (the “Share Repurchase Program”), under which the Company may repurchase up to $40 million in shares of common stock through April 30, 2029. The repurchase program is subject to market conditions, the periodic capital needs of the Company’s operating activities, and the continued satisfaction of all covenants under the Company’s Term Loan and ABL Credit Agreement. The Share Repurchase Program does not obligate the Company to repurchase shares and may be suspended, terminated, or modified at any time.

As of March 31, 2025, the Company had repurchased approximately $0.5 million, or 26,495 shares, of the Company's outstanding common stock under the Share Repurchase Program and $39.5 million remains available for share repurchases. The acquired shares were recorded as Treasury stock upon repurchase.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates have not changed from those described in our 2024 Form 10-K, under “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates.”

Interest Rate Risk

As of March 31, 2025, we had total recorded debt outstanding of $299.0 million (net of $10.1 million of unamortized OID and debt issuance costs), which was comprised of amounts outstanding under our Term Loan of $271.3 million and ABL Facility of $37.8 million. Substantially all this debt bears interest at floating rates. Changes in interest rates affect the interest expense we pay on our floating rate debt. A hypothetical 100 basis point increase in interest rates would increase our interest expense by approximately $3.1 million annually, based on the debt outstanding at March 31, 2025.

Foreign Exchange Currency Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Australian dollar and New Zealand dollar. Since we translate foreign currencies into U.S. dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results.

We have experienced and will continue to experience fluctuations in our Net income as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We recognized immaterial amounts of foreign currency gains and losses in each of the periods presented. We have not hedged our foreign currency transactions to date. We are evaluating the costs and benefits of initiating a hedging program and may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operations and our risk grows.

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.

Changes in Internal Control over Financial Reporting

We have completed one acquisition in the past 12 months. As part of our ongoing integration activities, we continue to implement our controls and procedures over the business we acquired and to augment our company-wide controls to reflect the risks inherent in our acquisition. Throughout the integration process, we monitor these efforts and take corrective action as needed to reinforce the application of our controls and procedures. Other than the foregoing, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Adverse economic conditions may have a material adverse effect on our business, financial condition and results of operations.

Our business depends on the overall demand for marketing solutions, especially business management software by SMBs, and on the economic health of our current and prospective clients. Past financial recessions have resulted in a significant weakening of the economy in North America and globally, a reduction in employment levels, a reduction in prevailing interest rates, more limited availability of credit, a reduction in business confidence and activity and other difficulties. Such difficulties have affected, and any current or future adverse economic conditions may continue to affect, one or more of the industries to which we sell our offerings. In addition, there has been pressure to reduce government spending in the United States, and any tax increases and spending cuts at the federal level might reduce demand for our offerings from organizations that receive funding from the U.S. government and could negatively affect the U.S. economy, which could further reduce demand for our offerings.

Recently, the U.S. government has also imposed tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other countries and types of foreign goods. In addition, in response to these tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Any such current and future tariff increases, expanding the scope of tariffs to capture other countries and types of foreign goods, other changes in U.S. trade policy or the imposition of retaliatory tariffs may adversely affect the businesses of our current and prospective clients, which could reduce demand for our offerings. Furthermore, political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, which could also reduce demand for our offerings.

Any of these events could have a material adverse effect on our business, financial condition and results of operations, and spending levels for our offerings may not increase following any recovery.