# Thryv Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2021

- Company: [Thryv Holdings, Inc.](/companies/thry.md) (CIK 1556739)
- Form: 10-Q
- Filed: 2021-11-12
- Accepted by EDGAR: Nov 12, 2021, 08:47 ET
- Period: 2021-09-30
- Accession: 0001628280-21-022994
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1556739/000162828021022994/thry-20210930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1556739/000162828021022994/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $297.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $868.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $104.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $314.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | $193.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $554.0m | us-gaap:GrossProfit |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | $65.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | $184.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-07-01 to 2021-09-30 | $16.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2021-01-01 to 2021-09-30 | $51.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $13.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-01-01 to 2021-09-30 | $33.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | $35.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-01-01 to 2021-09-30 | $96.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | $0.95 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-01-01 to 2021-09-30 | $2.67 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-07-01 to 2021-09-30 | $1.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-01-01 to 2021-09-30 | $2.87 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-07-01 to 2021-09-30 | 37,620,116 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-01-01 to 2021-09-30 | 36,110,702 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | $121.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $20.1m | us-gaap:PaymentsToAcquireProductiveAssets |
| Share repurchases | 9 months, 2021-01-01 to 2021-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-09-30 | $10.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $391.3m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $1.38bn | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $320.5m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2021-09-30 | $542.4m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-09-30 | $70.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-09-30 | $304.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 70,381 characters.

*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” 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 domestic 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.

We serve more than 400,000 SMB clients globally through three business segments: Marketing Services, SaaS, and Thryv International.

Our Marketing Services segment provides both print and digital solutions and generated $213.2 million and $208.5 million of consolidated revenues for the three months ended September 30, 2021 and 2020, respectively, and $643.9 million and $767.6 million of consolidated revenues for the nine months ended September 30, 2021 and 2020, respectively. Our Marketing Services offerings include our owned and operated Print Yellow Pages (“*PYP”*), which carry the “*The Real Yellow Pages”* tagline, our proprietary Internet Yellow Pages (“*IYP”*), known by the Yellowpages.com, Superpages.com, and Dexknows.com URLs, search engine marketing (“*SEM”*) solutions and other digital media solutions, which include online display and social advertising, online presence, and video and search engine optimization (“*SEO”*) tools.

Our SaaS segment generated $44.8 million and $31.8 million of consolidated revenues for the three months ended September 30, 2021 and 2020, respectively, and $123.4 million and $95.0 million of consolidated revenues for the nine months ended September 30, 2021 and 2020, respectively. Our primary SaaS offerings include Thryv®, our flagship SMB end-to-end customer experience platform, and Thryv Add-Ons. Thryv Add-Ons include an automated lead generation service that fully integrates with our Thryv platform, website development, SEO tools, Google My Business optimization, and Hub by ThryvSM. An additional add-on, ThryvPaySM, 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. 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.

Our Thryv International segment is comprised of Thryv Australia Pty Ltd (formerly Sensis Pty Ltd) (“*Thryv Australia”*), which the Company acquired on March 1, 2021 (the “*Thryv Australia Acquisition”*). Thryv Australia is Australia’s leading provider of marketing solutions serving SMBs. The Thryv Australia Acquisition brings under the Thryv banner more than 100,000 existing Thryv Australia clients, many of which we believe are ideal candidates for the Thryv platform. Our Thryv International segment generated $39.3 million and $101.6 million of consolidated revenues for the three and seven months ended September 30, 2021, respectively.

Our expertise in delivering solutions for our client base is rooted in our deep history of serving SMBs. In 2021, 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 have seen this trend accelerate following the outbreak of the COVID-19 pandemic.

### Recent Developments - COVID-19

In March 2020, the World Health Organization categorized COVID-19 as a pandemic. The outbreak of COVID-19 and public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have significantly disrupted the global economy, resulting in an adverse effect on the business operations of certain SMBs. However, many of our SMB clients operate service-based businesses that can easily operate remotely, or that have been designated as “essential” by state and local authorities administering shelter-in-place orders, and have continued to operate without significant interruption during the COVID-19 pandemic. Therefore, the impact of COVID-19 and the related regulatory and private sector response on our financial and operating results in the nine months ended September 30, 2021 and 2020 was somewhat mitigated as many of our clients continue to operate during this pandemic.

Marketing Services segment revenue increased by $4.7 million, or 2.3%, during the three months ended September 30, 2021 as compared to the corresponding period in 2020, and decreased by $123.6 million, or 16.1%, during the nine months ended September 30, 2021 as compared to the corresponding period in 2020, primarily due to the continued decline in demand for print and digital services and increased competition in all areas of Marketing Services. This declining revenue trend in Marketing Services predated the COVID-19 pandemic. In addition, in our Marketing Services segment, in March 2020, we began offering certain pandemic credit incentives to select clients, including free advertising or headings, and payment extensions of up to three months. While the ongoing impact of the COVID-19 pandemic on our revenue depends upon the rate of continued spread of the virus as well as regulatory and private sector response, we expect Marketing Services revenue will continue to be impacted primarily by trends predating the COVID-19 pandemic.

In our SaaS segment, we have continued to experience an increase in demand as SMBs seek cloud-based solutions to facilitate virtual interactions with their customers instead of in-person interactions. We have seen continued strength in demand during this period from many of our key categories such as home services and other professional services. Partially offsetting this growth is a decline in our legacy SaaS client base as we shift from lower-spend, less engaged clients that tend to have a higher churn rate, to higher spend, higher engaged clients. Additionally, in March 2020, we began offering certain pandemic credit incentives to select clients, including free digital and SaaS services for two to four months, and payment extensions of up to three months.

In our Thryv International segment, we continue to experience a limited negative impact to Australia in 2021 as a result of the COVID-19 pandemic. During the nine months ended September 30, 2021, there were a number of Australian cities that have experienced a slight increase in cases and subsequent restrictions, however the number of COVID-19 cases in Australia have remained relatively low since the initial outbreak and the impact to our clients has been minimal as most have continued to remain open for business throughout the COVID-19 pandemic.

We have taken steps to mitigate the overall potential impact of the COVID-19 pandemic on our operating results by enhancing the capabilities of our inside and outside sales force while also actively managing costs. We minimized business disruptions by quickly and proactively transitioning our sales and client support teams into a remote working environment and providing increased training, technical capabilities and resources to enable virtual interactions with our clients. Additionally, in March 2020, we began offering certain pandemic credit incentives to select clients. These pandemic credit incentives resulted in a $0.2 million and $3.2 million reduction in revenue for the three and nine months ended September 30, 2021, respectively, compared to a reduction in revenue of $7.8 million and $14.2 million for the three and nine months ended September 30, 2020, respectively. Requests for incentives continued to decline in the first half of 2021, and the majority of clients who accepted incentives in 2020 have resumed contractual terms and pricing. As of September 30, 2021, we have virtually discontinued providing pandemic credits and accepting client requests to pause search campaigns due to the COVID-19 pandemic. All client requests for adjustments effective April 1, 2021 are now being handled as part of normal business operations consistent with historical practices.

Depending upon future development and spread of the virus, including existing and new variants, we generally expect the business environment to improve as more people are vaccinated. During the three and nine months ended September 30, 2021, we incurred total severance expense of $1.9 million and $3.0 million, respectively, none of which was incurred as a result of the COVID-19 pandemic. During the three and nine months ended September 30, 2020, we recognized severance expense of $3.3 million and $10.6 million, respectively. Of the severance expense recognized in the nine months ended September 30, 2020, $5.0 million was related to employee separations as a result of the COVID-19 pandemic. During the three months ended September 30, 2020, none of the severance expense recorded was related to employee terminations as a result of COVID-19. The economic downturn caused by COVID-19 resulted in an incremental amount of $2.5 million recorded to allowance for credit losses for the nine months ended September 30, 2020. No incremental impact was recorded for the three and nine months ended September 30, 2021. In addition, we remain committed to our variable cost structure and to limiting our capital expenditures, which will allow us to continue operating with relatively low working capital needs.

While the effects of the COVID-19 pandemic have impacted our financial results for the three and nine months ended September 30, 2021, the overall impact was somewhat mitigated by the nature of our client base (SMBs offering services related to home, health and wellness, automotive, etc. and certain SMBs designated as “essential” by state and local authorities), the terms of our print agreements (typically 14 to 15 months), and the gradual increase in demand for our Thryv platform. The increase in demand for our Thryv platform and our decision to target higher spend and higher retention clients have also somewhat mitigated the impact of a reduction in the size of our salesforce on our ability to generate revenues.

During the three and nine months ended September 30, 2021, we have continued to see trends similar to those experienced during the year ended December 31, 2020, including an increase in demand for our SaaS solutions and a continuing decline in our Marketing Services business. The challenges we face in the future related to COVID-19 will depend largely, we believe, on the impact that the continuing spread of the virus, including existing and new variants, and regulatory and private sector response has on our current and prospective clients, including their ability and willingness to purchase our solutions. To date, the COVID-19 pandemic has not had a material impact on our operational performance, financial performance, or liquidity. Looking ahead, we do not expect any material financial impact related to COVID-19 without a significant increase in cases resulting in another shut down of local businesses. However, it is difficult to predict what the ongoing impact of the pandemic will be on the economy, our clients and our business.

### 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 and retain SMB clients. To do so, we must deliver solutions that address the challenges currently faced by SMBs at a value-based price point that an SMB can afford.

Our strategy is to expand the use of our solutions by introducing our SaaS solutions to new SMB clients, as well as our current Marketing Services and Thryv International clients. 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.

### Investment in Growth

We intend to continue to invest in the growth of our SaaS segment. We have selectively utilized a portion of the cash generated from our Marketing Services and Thryv International segments to support initiatives in our evolving SaaS segment, which has represented an increasing percentage of consolidated revenue since launch. 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 Acquisition

Our growth prospects depend upon our ability to successfully develop new markets. We currently serve the United States and Australian SMB markets and plan to leverage strategic acquisitions 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 August 2020, we launched our first international SaaS reseller pilot, a joint initiative with the leading yellow pages player in the Caribbean, and we also signed a SaaS multi-location franchise client, a home services company with operations in the U.S. and Canada. On March 1, 2021, we completed the acquisition of Thryv Australia, Australia’s leading provider of marketing solutions serving SMBs. We believe that acquisitions of marketing services companies will expand our client base and provide additional opportunities to offer our SaaS solutions. Our success largely depends on our ability to identify and execute acquisition opportunities and our ability to establish relationships with new SMBs.

### 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. Total clients does not include Thryv International clients, as we are in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the total clients of Thryv International in our future filings.

### Marketing Services Clients

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.

### SaaS Clients

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

*(in thousands)*

| Clients | September 30, 2021 | 2020 |
| --- | ---: | ---: |
| Marketing Services | 268 | 333 |
| SaaS | 45 | 44 |
| Total (1) | 286 | 349 |

(1) 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. Total clients does not include Thryv International clients, as we are still in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the total clients of Thryv International in our future filings.

Marketing Services clients decreased by 65 thousand, or 20%, as of September 30, 2021 as compared to September 30, 2020. The decrease in Marketing Services clients was related to a secular decline in the print media industry. The decline in the digital portion of our Marketing Services business was due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook.

SaaS clients increased by 1 thousand, or 2%, as of September 30, 2021 as compared to September 30, 2020. This was the result of an increase in new clients and decreasing churn, and is consistent with our continuing strategy to target higher spend, higher retention clients in lieu of lower-spend, higher churn clients.

Total clients decreased by 63 thousand, or 18%, as of September 30, 2021 as compared to September 30, 2020. The primary driver of the decrease in total clients was the secular decline in the print media business combined with increasing competition in the digital media space.

### Monthly ARPU

We define monthly average revenue per unit (“*ARPU”*) as our total client billings for a particular month divided by the number of revenue-generating units during the same month. For each reporting period, the weighted-average monthly ARPU from all the months in the period are reported. We define units as SMB accounts with one or more revenue-generating solutions in a particular month. Units are synonymous with clients. As monthly ARPU varies based on the amounts we charge for our services, we believe it can serve as a measure by which investors can evaluate trends in the types and levels of services across our client base. Our measurement of ARPU helps us understand the rate at which we are monetizing our client base.

| ARPU (Monthly) | Three Months Ended September 30, 2021 | 2020 | Nine Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Marketing Services | $212 | $222 | $213 | $223 |
| SaaS | 340 | 260 | 323 | 244 |
| Total (1) | $251 | $244 | $248 | $243 |

(1) During the three and nine months ended September 30, 2020, the Total monthly ARPU is higher than the monthly ARPU for Marketing Services due to clients that purchase both Marketing Services and SaaS solutions. During the three and nine months ended September 30, 2021, SaaS ARPU is higher than the Total monthly ARPU as we shift to selling to more higher spend SaaS-only clients. The Total monthly ARPU does not include Thryv International, as we are in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the monthly ARPU of Thryv International in our future filings.

Monthly ARPU for the Marketing Services segment decreased by $10, or 5%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and $10, or 4%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. 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 less expensive digital media. This decrease in ARPU was further driven by a reduction of our resale of high-spend, low margin third-party local search and display services that were not hosted on our owned and operated platforms.

Monthly ARPU for the SaaS segment increased by $80, or 31%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and increased by $79, or 32%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in ARPU for these periods was driven by our strategic shift to selling to higher spend clients and, at the same time, discontinuing our sale of the lower-priced tiers of our Thryv platform. In addition, the sale of add-on features to our Thryv platform such as Thryv Leads and Thryv Pay contributed to ARPU growth.

### Monthly Active Users - SaaS

We define a monthly active user for SaaS offerings as a client with one or more users who log into our SaaS solutions at least once during the calendar month. It should be noted that the inherent challenge is that one individual may register for, and use, multiple accounts across computer and mobile devices which may overstate the number of unique users who actively use our Thryv platform within a month. Additionally, some of our original SaaS clients exclusively use the website features of their Thryv platform which does not require a login and those users are not included in our active users count. For each reporting period, active users from the last month in the period are reported. We believe that monthly active users best reflects our ability to engage, retain, and monetize our users, and thereby drive increases in revenue. We view monthly active users as a key measure of user engagement for our Thryv platform.

*(in thousands)*

|  | As of September 30, 2021 | 2020 |
| --- | ---: | ---: |
| **Monthly Active Users - SaaS** | 31 | 27 |

Monthly active users increased by 4 thousand, or 15%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The number of monthly active users increased period-over-period as we undertook efforts such as enhancing the sales process, the client onboarding experience, and lifecycle management in order to increase engagement among our SaaS clients. The increase was also driven by the focus by our sales team on obtaining higher retention, higher spend clients as these clients are more engaged with our platform. Additionally, we experienced an increase in engagement from existing clients as SMBs increased virtual interactions with their customers in lieu of in-person interactions as a result of the COVID-19 pandemic.

### Key Components of Our Results of Operations

### Revenue

We generate revenue from our three business segments, Marketing Services, SaaS and Thryv International. Our primary sources of revenue in our Marketing Services and Thryv International segments are print and digital services. Our primary source of revenue in our SaaS segment is our Thryv platform.

### 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, non-capitalizable software and hardware purchases, and allocated overhead costs which includes information technology expenses, 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, and allocated overhead costs which includes information technology expenses, 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 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 information technology expenses, 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 benefit (cost), and other 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 $)*

|  | Three Months Ended September 30, 2021(1) Amount | % of Revenue | 2020 (2) Amount | % of Revenue |
| --- | ---: | ---: | ---: | ---: |
| **Revenue** | $297,290 | 100% | $240,325 | 100% |
| Cost of services | 104,167 | 35.0% | 105,444 | 43.9% |
| **Gross profit** | 193,123 | 65.0% | 134,881 | 56.1% |
| **Operating expenses:** |  |  |  |  |
| Sales and marketing | 94,343 | 31.7% | 73,306 | 30.5% |
| General and administrative | 32,983 | 11.1% | 39,002 | 16.2% |
| Impairment charges | — | —% | 1,184 | 0.5% |
| **Total operating expenses** | 127,326 | 42.8% | 113,492 | 47.2% |
| **Operating income** | 65,797 | 22.1% | 21,389 | 8.9% |
| **Other income (expense):** |  |  |  |  |
| Interest expense | (16,546) | (5.6)% | (15,609) | (6.5)% |
| Other components of net periodic pension benefit (cost) | 273 | 0.1% | (30,175) | (12.6)% |
| Other expense | (98) | —% | — | —% |
| **Income (loss) before income tax (expense) benefit** | 49,426 | 16.6% | (24,395) | (10.2)% |
| Income tax (expense) benefit | (13,802) | (4.6)% | 24,250 | 10.1% |
| **Net income (loss)** | $35,624 | 12.0% | $(145) | (0.1)% |
| **Other financial data:** |  |  |  |  |
| Adjusted EBITDA(3) | $102,359 | 34.4% | $69,294 | 28.8% |
| Adjusted Gross Profit(4) | $208,209 |  | $153,048 |  |
| Adjusted Gross Margin(5) | 70.0% |  | 63.7% |  |

(1) Consolidated results of operations includes Thryv Australia's results of operations subsequent to the March 1, 2021 acquisition date.

(2) The three months ended September 30, 2020 has been updated to include a Gross profit subtotal line item and the reclassification of depreciation and amortization from a single line item in the consolidated statements of operations to a component of Gross profit, Sales and marketing expense, and General and administrative expense. See Note 1 to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

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

(4) 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.

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

### Comparison of the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

### Revenue

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

*(in thousands of $)*

*(unaudited)*

|  | Three Months Ended September 30, 2021 | 2020 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Marketing Services | $213,210 | $208,504 | $4,706 | 2.3% |
| SaaS | 44,800 | 31,821 | 12,979 | 40.8% |
| Thryv International (1) | 39,280 | — | 39,280 | NM |
| Total revenue | $297,290 | $240,325 | $56,965 | 23.7% |

(1) Thryv International includes Thryv Australia revenue subsequent to the March 1, 2021 acquisition date.

Total revenue increased by $57.0 million, or 23.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in total revenues was driven by an increase in Marketing Services revenue of $4.7 million, SaaS revenue of $13.0 million and Thryv International revenue of $39.3 million.

### Marketing Services Revenue

Marketing Services revenue increased by $4.7 million, or 2.3%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Print revenue increased by $27.5 million, or 34.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was primarily driven by publication timing differences caused by our print agreements having greater than 12 month terms and partially offset by the secular decline in industry demand for print services that would have resulted in a 25% decline in revenue compared to the three months ended September 30, 2020. Print revenue is recognized upon delivery of the published directories. Individual directory titles have different lifecycles, with a typical lifecycle of 15 months. The titles published during the three months ended September 30, 2021 are therefore different than the titles published during the three months ended September 30, 2020 and represented more revenue than the titles published during the three months ended September 30, 2020.

Digital services revenue decreased by $22.8 million, or 17.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. IYP revenue decreased by $9.3 million, or 13.6%, driven by a continued trending decline in the Company’s Marketing Services client base. SEM revenue decreased by $8.4 million, or 20.8%, due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. Other digital media solutions revenue decreased by $5.2 million, or 25.2%, as we shifted to selling these services only to existing customers.

### SaaS Revenue

SaaS revenue increased by $13.0 million, or 40.8%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was driven by increased demand for our Thryv platform and Thryv add-ons as SMBs have increased their contact less customer interactions and remote working capabilities due to the COVID-19 pandemic, and by our success in re-focusing our go-to-market and onboarding strategy to target higher spend and higher engaged clients. This increase was partially offset by a decline in our lower-spend and less engaged legacy SaaS clients that tend to have a higher churn rate.

### Thryv International Revenue

Thryv International revenue was $39.3 million for the three months ended September 30, 2021. Given that the Thryv Australia Acquisition was completed on March 1, 2021, no revenue was recognized for Thryv International during the three months ended September 30, 2020. Thryv International revenue included print revenue of $10.2 million, IYP revenue of $16.1 million, SEM revenue of $5.6 million, other digital media solutions revenue of $7.2 million, and SaaS revenue of $0.1 million for the three months ended September 30, 2021.

### Cost of Services

Cost of services decreased by $1.3 million, or 1.2%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Cost of services as a percentage of revenue decreased to 35.0% for the three months ended September 30, 2021 from 43.9% for the three months ended September 30, 2020. This decrease was primarily driven by strategic cost saving initiatives. Specifically, we reduced employee-related costs by $4.2 million and printing, distribution and digital fulfillment support costs by $4.1 million. Additionally, depreciation and amortization expense decreased by $12.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by Cost of services of $23.2 million related to Thryv International, which was acquired on March 1, 2021.

### Gross Profit

Gross profit increased by $58.2 million, or 43.2%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in Gross profit was primarily due to the increase in domestic revenue and the decreases in printing, distribution, and digital and fulfillment support costs, employee-related costs, depreciation and amortization expense and Gross profit related to Thryv International, which was acquired on March 1, 2021.

Our gross margin increased by 8.9 percentage points, to 65.0%, for the three months ended September 30, 2021 compared to 56.1% for the three months ended September 30, 2020. The increase in gross margin was primarily driven by the increase in domestic revenue and decreases in printing, distribution, and digital and fulfillment support costs, employee-related costs and depreciation and amortization expense.

### Operating Expenses

### Sales and Marketing

Sales and marketing expense increased by $21.0 million, or 28.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Sales and marketing expense as a percentage of revenue increased to 31.7% for the three months ended September 30, 2021 from 30.5% for the three months ended September 30, 2020. The increase was primarily attributable to $17.5 million of Thryv International Sales and marketing expense that was included in the three months ended September 30, 2021, while none was included in the three months ended September 30, 2020. Additionally, advertising and sales promotion expense increased $9.2 million, primarily driven by costs incurred to promote the Thryv platform. This was partially offset by a $7.4 million decrease in depreciation and amortization expense, due to the accelerated amortization method used by the Company.

### General and Administrative

General and administrative expense decreased by $6.0 million, or 15.4%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. This decrease was primarily driven by lower severance and legal expenses of $10.0 million and lower bad debt expense of $2.6 million. Additionally, depreciation and amortization expense decreased by $3.6 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by $9.6 million in General and administrative expense incurred in the three months ended September 30, 2021 related to Thryv International, which was acquired on March 1, 2021.

General and administrative expense as a percentage of revenue decreased to 11.1% for the three months ended September 30, 2021 from 16.2% for the three months ended September 30, 2020. This decrease was primarily attributable to lower severance and legal expenses, bad debt expense and depreciation and amortization.

### Impairment Charges

Impairment charges decreased by $1.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. There were no Impairment charges incurred during the three months ended September 30, 2021, while $1.2 million of operating lease right-of-use asset impairment charges related to consolidating operations at certain locations were recognized during the three months ended September 30, 2020.

### Other Income (Expense)

### Interest Expense

Interest expense increased by $0.9 million, or 6.0%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to overall higher levels of indebtedness, which was partially offset by lower weighted average interest rates.

### Other Components of Net Periodic Pension Cost

Other components of net periodic pension cost decreased by $30.4 million from an expense of $30.2 million for the three months ended September 30, 2020 to a benefit of $0.3 million for the three months ended September 30, 2021. This change was primarily due to a remeasurement loss of $29.5 million recognized during the three months ended September 30, 2020, and lower interest expense of $1.1 million, partially offset by lower expected return on assets of $1.1 million.

### Other Expense

During the three months ended September 30, 2021, the Company incurred other expense of $0.1 million, which represents foreign currency-related expense.

### Income Tax (Expense) Benefit

Income tax (expense) increased by $38.1 million, or 156.9%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The ETR was 27.9% and 99.4% for the three months ended September 30, 2021 and 2020, respectively. The ETR differs from the 21.0% U.S. Federal statutory rate primarily due to our geographic mix of taxable income in various tax jurisdictions and permanent tax differences attributable to the net impact of non-U.S. taxing jurisdictions.

### Adjusted EBITDA

Adjusted EBITDA increased by $33.1 million, or 47.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in Adjusted EBITDA was primarily driven by the increase in domestic revenue, declining costs as we continue to focus on cost reductions, and the results of Thryv International, which was acquired on March 1, 2021. See “*Non-GAAP Financial Measures”* for a definition of Adjusted EBITDA and a reconciliation to Net income, the most directly comparable measure presented in accordance with GAAP.

### 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 $)*

|  | Nine Months Ended September 30, 2021 (1) Amount | % of Revenue | 2020 (2) Amount | % of Revenue |
| --- | ---: | ---: | ---: | ---: |
| **Revenue** | $868,943 | 100% | $862,507 | 100% |
| Cost of services | 314,934 | 36.2% | 334,025 | 38.7% |
| **Gross profit** | 554,009 | 63.8% | 528,482 | 61.3% |
| **Operating expenses:** |  |  |  |  |
| Sales and marketing | 258,277 | 29.7% | 241,703 | 28.0% |
| General and administrative | 107,362 | 12.4% | 132,758 | 15.4% |
| Impairment charges | 3,611 | 0.4% | 19,414 | 2.3% |
| **Total operating expenses** | 369,250 | 42.5% | 393,875 | 45.7% |
| **Operating income** | 184,759 | 21.3% | 134,607 | 15.6% |
| **Other income (expense):** |  |  |  |  |
| Interest expense | (51,388) | (5.9)% | (53,551) | (6.2)% |
| Other components of net periodic pension benefit (cost) | 998 | 0.1% | (31,312) | (3.6)% |
| Other expense | (4,157) | (0.5)% | — | —% |
| **Income before income tax (expense)** | 130,212 | 15.0% | 49,744 | 5.8% |
| Income tax (expense) | (33,723) | (3.9)% | (10,323) | (1.2)% |
| **Net income** | $96,489 | 11.1% | $39,421 | 4.6% |
| **Other financial data:** |  |  |  |  |
| Adjusted EBITDA(3) | $304,045 | 35.0% | $300,208 | 34.8% |
| Adjusted Gross Profit(4) | $597,320 |  | $583,390 |  |
| Adjusted Gross Margin(5) | 68.7% |  | 67.6% |  |

(1) Consolidated results of operations includes Thryv Australia's results of operations subsequent to the March 1, 2021 acquisition date.

(2) The nine months ended September 30, 2020 has been updated to include a Gross profit subtotal line item and the reclassification of depreciation and amortization from a single line item in the consolidated statements of operations to a component of Gross profit, Sales and marketing expense, and General and administrative expense. See Note 1 to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

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

(4) 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.

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

### Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

### Revenue

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

*(in thousands of $)*

*(unaudited)*

|  | Nine Months Ended September 30, 2021 | 2020 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Marketing Services | $643,938 | $767,553 | $(123,615) | (16.1)% |
| SaaS | 123,437 | 94,954 | 28,483 | 30.0% |
| Thryv International(1) | 101,568 | — | 101,568 | NM |
| Total revenue | $868,943 | $862,507 | $6,436 | 0.7% |

(1) Thryv International includes Thryv Australia revenue subsequent to the March 1, 2021 acquisition date.

Total revenue increased by $6.4 million, or 0.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in total revenue was driven by an increase in SaaS revenue of $28.5 million, and Thryv International revenue of $101.6 million, offset by a decrease in Marketing Services revenue of $123.6 million.

### Marketing Services Revenue

Marketing Services revenue decreased by $123.6 million, or 16.1%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Print revenue decreased by $42.3 million, or 11.9%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Secular decline in industry demand for print services resulted in a 25% decline in revenue compared to the nine months ended September 30, 2020, partially offset by publication timing differences caused by our print agreements having greater than 12 month terms. Print revenue is recognized upon delivery of the published directories. Individual directory titles have different lifecycles, with a typical lifecycle of 15 months. The titles published during the nine months ended September 30, 2021 are therefore different than the titles published during the nine months ended September 30, 2020. This lifecycle difference should be considered when comparing results period-over-period.

Digital services revenue decreased by $81.3 million, or 19.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. IYP revenue decreased by $28.4 million, or 13.4%, driven by a continued trending decline in the Company’s Marketing Services client base. SEM revenue decreased by $32.4 million, or 24.7%, which was consistent with expectations due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. Other digital media solutions revenue decreased by $20.5 million, or 30.0%, as we shifted to selling these services only to existing customers.

### SaaS Revenue

SaaS revenue increased by $28.5 million, or 30.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase was driven by increased demand for our Thryv platform and Thryv add-ons as SMBs have increased their contact less customer interactions and remote working capabilities due to the COVID-19 pandemic, and by our success in re-focusing our go-to-market and onboarding strategy to target higher spend and higher engaged clients. This increase was partially offset by a decline in our lower-spend and less-engaged legacy SaaS clients that tend to have a higher churn rate.

### Thryv International Revenue

Thryv International revenue was $101.6 million for the seven months ended September 30, 2021. Given that the Thryv Australia Acquisition was completed on March 1, 2021, no revenue was recognized for Thryv International during the two months ended February 28, 2021 or the nine months ended September 30, 2020. Thryv International revenue included print revenue of $31.1 million, IYP revenue of $39.7 million, SEM revenue of $13.7 million, other digital media solutions revenue of $16.9 million, and SaaS revenue of $0.1 million recognized subsequent to the completion of the Thryv Australia Acquisition.

### Cost of Services

Cost of services decreased by $19.1 million, or 5.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease was primarily driven by strategic cost saving initiatives. The cost savings were primarily due to lower printing, distribution and digital and fulfillment support costs of $24.5 million and employee-related costs of $10.9 million. Additionally, depreciation and amortization expense decreased by $39.0 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by $66.0 million of Thryv International Cost of services that was included in the seven months ended September 30, 2021, while none was included in the nine months ended September 30, 2020.

Cost of services as a percentage of revenue decreased to 36.2% for the nine months ended September 30, 2021 from 38.7% for the nine months ended September 30, 2020. This decrease was primarily driven by decreases in printing, distribution, and digital and fulfillment support costs, and depreciation and amortization expense and partially offset by declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021.

### Gross Profit

Gross profit increased by $25.5 million, or 4.8%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in gross profit was primarily due to the decreases in printing, distribution, and digital and fulfillment support costs, and depreciation and amortization expense and the results of Thryv International, which was acquired on March 1, 2021, and our SaaS segment partially offset by the decline in Marketing Services revenue. Our gross margin increased by 2.5 percentage points to 63.8% for the nine months ended September 30, 2021 compared to 61.3% for the nine months ended September 30, 2020.

### Operating Expenses

### Sales and Marketing

Sales and marketing expense increased by $16.6 million, or 6.9%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase was primarily driven by $36.9 million of Thryv International Sales and marketing expenses included in the seven months ended September 30, 2021, while none was included in the nine months ended September 30, 2020, and an increase in advertising and sales promotion expense of $16.9 million, primarily driven by costs incurred to promote the Thryv platform. These increases were partially offset by strategic cost-saving initiatives. Specifically, due to lower employee-related costs of $5.3 million, contract services of $3.9 million, and sales commissions of $3.9 million. Additionally, depreciation and amortization expense decreased by $25.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to the accelerated amortization method used by the Company.

Sales and marketing expense as a percentage of revenue increased to 29.7% for the nine months ended September 30, 2021 from 28.0% for the nine months ended September 30, 2020. This increase was primarily due to declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021, partially offset by decreases in employee related costs, contract services and depreciation and amortization expense.

### General and Administrative

General and administrative expense decreased by $25.4 million, or 19.1%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This decrease was primarily driven by lower bad debt expense of $24.0 million, a $9.3 million decrease in severance expenses, a $5.1 million decrease in the loss on the remeasurement of our indemnification asset, and a $3.3 million loss on the sale of property recognized in the nine months ended September 30, 2021. Additionally, depreciation and amortization expense decreased by $12.2 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by higher stock-based compensation expense of $7.3 million and General and administrative expenses of $18.5 million related to Thryv International, which was acquired on March 1, 2021.

General and administrative expense as a percentage of revenue decreased to 12.4% for the nine months ended September 30, 2021 from 15.4% for the nine months ended September 30, 2020. This decrease was primarily attributable to lower bad debt expense and a decrease in depreciation and amortization expense, partially offset by declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021.

### Impairment Charges

Impairment charges decreased by $15.8 million, or 81.4% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Impairment charges of $3.6 million were incurred during the nine months ended September 30, 2021, while $19.4 million of impairment charges were recognized during the nine months ended September 30, 2020. Impairment charges in both periods were primarily related to operating lease right-of-use asset impairments, due to the Company's decision to operate in a "Remote First" working environment and consolidate operations at certain locations.

### Other Income (Expense)

### Interest Expense

Interest expense decreased by $2.2 million, or 4.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to lower weighted average interest rates.

### Other Components of Net Periodic Pension Cost

Other components of net periodic pension cost decreased by $32.3 million, from an expense of $31.3 million during the nine months ended September 30, 2020 to a benefit of $1.0 million during for the nine months ended September 30, 2021. This change was primarily due to a remeasurement gain of $0.2 million recognized during the nine months ended September 30, 2021 compared to a remeasurement loss of $30.2 million recognized during the nine months ended September 30, 2020, and lower interest expense of $4.3 million, partially offset by a lower expected return on assets of $3.4 million.

### Other Expense

During the nine months ended September 30, 2021, the Company incurred other expense of $4.2 million, which included a loss of $3.4 million primarily resulting from the termination of leaseback obligations associated with land and a building in Tucker, Georgia, and foreign currency-related expense of $0.7 million.

### Income Tax Expense

Income tax expense increased by $23.4 million, or 226.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The ETR was 25.9% and 20.8% for the nine months ended September 30, 2021 and 2020, respectively. The ETR differs from the 21.0% U.S. Federal statutory rate primarily due to our geographic mix of taxable income in various tax jurisdictions and permanent tax differences attributable to the net impact of non-U.S. taxing jurisdictions.

### Adjusted EBITDA

Adjusted EBITDA increased by $3.8 million, or 1.3%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in Adjusted EBITDA was primarily driven by the increase in domestic revenue, declining costs as we continue to focus on cost reductions, and the results of Thryv International, which was acquired on March 1, 2021. See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income, 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 provides 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 income (loss) plus Interest expense, Income tax expense (benefit), Depreciation and amortization expense, Loss on termination of leaseback obligations, Restructuring and integration expenses, Transaction costs, Stock-based compensation expense (benefit), Impairment charges and non-operating expenses, such as, Other components of net periodic pension (benefit) cost, Non-cash (gain) loss from remeasurement of indemnification asset, and certain unusual and non-recurring charges that might have been incurred. Adjusted EBITDA should not be considered as an alternative to Net income (loss) 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 (benefit).

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 U.S. 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 income:

*(in thousands)*

| Reconciliation of Adjusted EBITDA | Three Months Ended September 30, 2021 | 2020 | Nine Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $35,624 | $(145) | $96,489 | $39,421 |
| Interest expense | 16,546 | 15,609 | 51,388 | 53,551 |
| Income tax expense (benefit) | 13,802 | (24,250) | 33,723 | 10,323 |
| Depreciation and amortization expense | 31,049 | 35,454 | 80,675 | 110,883 |
| Loss on termination of leaseback obligations | — | — | 3,409 | — |
| Restructuring and integration expenses (1) | 2,312 | 6,710 | 15,036 | 23,902 |
| Transaction costs (2) | 3,987 | 4,913 | 19,973 | 14,679 |
| Stock-based compensation expense (benefit) (3) | 2,340 | 1,289 | 6,232 | (4,195) |
| Other components of net periodic pension (benefit) cost (4) | (273) | 30,175 | (998) | 31,312 |
| Non-cash (gain) loss from remeasurement of indemnification asset (5) | (404) | (540) | (1,248) | 3,878 |
| Impairment charges | — | 1,184 | 3,611 | 19,414 |
| Other (6) | (2,624) | (1,105) | (4,245) | (2,960) |
| **Adjusted EBITDA** | $102,359 | $69,294 | $304,045 | $300,208 |

(1) For the three and nine months ended September 30, 2021 and 2020, expenses relate to periodic efforts to enhance efficiencies and reduce costs, and include severance benefits, loss on disposal of fixed assets and capitalized software, and costs associated with abandoned facilities and system consolidation.

(2) Expenses related to the Company's direct listing, Thryv Australia Acquisition and other transaction costs.

(3) The Company records stock-based compensation expense related to the amortization of grant date fair value of the Company’s stock-based compensation awards. Additionally, stock-based compensation expense includes the remeasurement of these awards at each period end, prior to October 1, 2020. See Note 4*, Fair Value Measurements*, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

(4) Other components of net periodic pension (benefit) 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 the mark-to-market pension remeasurement.

(5) In connection with the YP Acquisition, the seller indemnified the Company for future potential losses associated with certain federal and state tax positions taken in tax returns filed by the seller prior to the acquisition date.

(6) Other primarily includes expenses related to potential non-income based tax liabilities. Additionally, during the three and nine months ended September 30, 2021, Other includes foreign exchange-related expense.

The following is a reconciliation of Adjusted Gross Profit and Adjusted Gross Margin, to their most directly comparable GAAP measures, Gross profit and Gross margin:

*(in thousands)*

| Reconciliation of Adjusted Gross Profit | Three Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: |
| Gross profit | $193,123 | $134,881 |
| Plus: |  |  |
| Depreciation and amortization expense | 14,930 | 18,097 |
| Stock-based compensation expense | 156 | 70 |
| **Adjusted Gross Profit** | $208,209 | $153,048 |
| Gross Margin | 65.0% | 56.1% |
| Adjusted Gross Margin | 70.0% | 63.7% |

*(in thousands)*

| Reconciliation of Adjusted Gross Profit | Nine Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: |
| Gross profit | $554,009 | $528,482 |
| Plus: |  |  |
| Depreciation and amortization expense | 42,991 | 55,084 |
| Stock-based compensation expense (benefit) | 320 | (176) |
| **Adjusted Gross Profit** | $597,320 | $583,390 |
| Gross Margin | 63.8% | 61.3% |
| Adjusted Gross Margin | 68.7% | 67.6% |

### 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 New 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 payments for our debt 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. As a result of COVID-19, many SMBs may continue to experience a reduction in revenues and cash flows and may not have the ability to pay amounts owed to us. While COVID-19 has not had a material impact on our liquidity to date, we continue to assess our business operations and the impact that COVID-19 may have on our financial results and liquidity. 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 I 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 provided by (used in): | Nine Months Ended September 30, 2021 | 2020 | $ Change |
| --- | ---: | ---: | ---: |
| Operating activities | $121,539 | $174,590 | $(53,051) |
| Investing activities | (195,360) | (15,484) | (179,876) |
| Financing activities | 87,517 | (159,247) | 246,764 |

### Cash Flows from Operating Activities

Net cash provided by operating activities decreased by $53.1 million, or 30.4%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease in net cash provided by operating activities of $53.1 million was primarily due to higher income tax payments of $42.7 million and transaction cost payments related to the Thryv Australia Acquisition.

### Cash Flows from Investing Activities

Net cash used in investing activities increased by $179.9 million, or 1,161.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in net cash used in investing activities of $179.9 million was primarily due to cash paid of $175.4 million in connection with the Thryv Australia Acquisition on March 1, 2021. The increase in net cash used was also driven by an increase of $3.0 million in capitalized expenditures and a decrease in proceeds from the sales of buildings and other fixed assets of $1.5 million compared to the nine months ended September 30, 2020.

### Cash Flows from Financing Activities

Net cash from financing activities increased by $246.8 million, or 155.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in net cash from financing activities of $246.8 million was primarily driven by net proceeds received from the New Term Loan of $679.0 million, partially offset by cash used to repay the remaining outstanding principal balance of the Senior Term Loan of $449.6 million, and payments made on the New Term Loan of $123.0 million, compared to payments made on the Senior Term Loan of $105.4 million during the nine months ended September 30, 2020. The increase in net cash from financing activities was further driven by lower payments of $75.5 million on the ABL Facility and $30.6 million for the repurchase of shares of our outstanding common stock. These increases in net cash from financing activities were partially offset by lower proceeds from the ABL Facility of $75.2 million.

### Debt

### Term Loan

On March 1, 2021, the Company entered into a new term loan credit agreement (the “*New Term Loan”*). The proceeds of the New Term Loan were used to finance the Thryv Australia Acquisition, refinance in full the Company's existing term loan facility (the “*Senior Term Loan”*) and pay fees and expenses related to the Thryv Australia Acquisition and related financing.

The New Term Loan established a senior secured term loan facility (the “*Term Loan Facility”*) in an aggregate principal amount equal to $700.0 million, of which 38.4 was held by related parties who were equity holders of the Company, as of March 1, 2021. The Term Loan Facility matures on March 1, 2026 and borrowings under the Term Loan Facility bear interest at a fluctuating rate per annum equal to, at the Company’s option, LIBOR or a base rate, in each case, plus an applicable margin per annum equal to (i) 8.50% (for LIBOR loans) and (ii) 7.50% (for base rate loans). The Term Loan Facility requires mandatory amortization payments equal to $17.5 million per fiscal quarter commencing June 30, 2021.

As of September 30, 2021, 31.2% of the New Term Loan was held by related parties who are equity holders of the Company.

### ABL Facility

On March 1, 2021, the Company entered into an agreement to amend (the “*ABL Amendment”*) the June 30, 2017 ABL Facility (the “*ABL Facility”*). The ABL Amendment was entered into in order to permit the term loan refinancing, the Thryv Australia Acquisition and make certain other changes to the ABL credit agreement, including, among others:

- revise the maximum revolver amount to $175.0 million;
- reduce the interest rate per annum to (i) 3-month LIBOR plus 3.00% for LIBOR loans and (ii) base rate plus 2.00% for base rate loans;
- reduce the commitment fee on undrawn amounts under the ABL Facility to 0.375%;
- extend the maturity date of the ABL Facility to the earlier of March 1, 2026 and 91 days prior to the stated maturity

date of the Term Loan Facility;

- add the Australian subsidiaries acquired pursuant to the Thryv Australia Acquisition as borrowers and guarantors, and establish an Australian borrowing base; and
- make certain other conforming changes consistent with the Term Loan Agreement.

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 New Term Loan balance are determined by the Company's Excess Cash Flow (as defined within the Term Loan Facility). We are in compliance with all covenants under the New Term Loan and ABL Facility as of September 30, 2021. We had total recorded debt outstanding of $612.4 million (net of $20.8 million of unamortized original issue discount (“*OID”*) and debt issuance cost) at September 30, 2021, which was comprised of amounts outstanding under our New Term Loan of $577.0 million and ABL Facility of $56.2 million.

As of September 30, 2021, the Company had borrowing capacity of $92.1 million under the ABL Facility.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are material to our results of operations, financial condition or liquidity.

### Critical Accounting Policies and Estimates

### Foreign Currency

The functional currency of the Company’s foreign operating subsidiaries is the local currency. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss.

Income and expense accounts are translated at the weighted-average exchange rates during the period. Foreign currency transaction gains and losses are recorded in other expense.

Other than the foreign currency accounting policy referenced above, our critical accounting policies and estimates have not changed from those described in our 2020 Form 10-K, under “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates.”

### Recent Accounting Pronouncements

For a description of accounting pronouncements recently adopted and issued, see “Part I, Item 1. Note 1, Description of Business and Summary of Significant Accounting Policies.”

## Market risk

As filed, 2,182 characters.

### Interest Rate Risk

As of September 30, 2021, we had total recorded debt outstanding of $612.4 million (net of $20.8 million of unamortized OID and debt issuance costs), which was comprised of amounts outstanding under our New Term Loan of $577.0 million and ABL Facility of $56.2 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 $6.3 million annually, based on the debt outstanding at September 30, 2021.

### Inflation Risk

We currently operate in the United States and internationally in Australia. We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.

### 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. 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.

## Controls and procedures

As filed, 2,125 characters.

### Acquisition

We are in the process of integrating Thryv Australia that we acquired on March 1, 2021. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2021 excludes an assessment of the internal control over financial reporting related to the Thryv Australia Acquisition. The Thryv Australia Acquisition represented 20% of our consolidated total assets at September 30, 2021, and 13% and 12% of our consolidated revenue included in our consolidated financial statements for the three and nine months ended September 30, 2021, respectively.

### Evaluation of 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 September 30, 2021.

### 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 September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 203 characters.

There have been no material changes to our risk factors disclosed in our 2020 Form 10-K, except as disclosed in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2021 and March 31, 2021.

Filed Nov 12, 2021.
Source: SEC EDGAR, the filing index for accession 0001628280-21-022994. Last ingested by Listed: Nov 10, 2026, 07:25 ET. No prices; not investment advice.