THRYV HOLDINGS, INC.

(THRY)
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Delayed Nasdaq  -  04:00 2022-08-05 pm EDT
26.25 USD   -0.94%
08/04Thryv Holdings Q2 EPS, Revenue Rise; Offers Q3 Guidance; Shares Jump
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08/04TRANSCRIPT : Thryv Holdings, Inc., Q2 2022 Earnings Call, Aug 04, 2022
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08/04Earnings Flash (THRY) THRYV Reports Q2 Revenue $52.2M
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THRYV HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/04/2022 | 07:25am EDT
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 four business segments: Thryv U.S. Marketing Services, Thryv
U.S. SaaS, Thryv International Marketing Services and Thryv International SaaS.

Our Thryv U.S. Marketing Services segment provides both print and digital
solutions and generated $222.6 million and $202.8 million of consolidated
revenues for the three months ended June 30, 2022 and 2021, respectively, and
$435.1 million and $430.7 million of consolidated revenues for the six months
ended June 30, 2022 and 2021, respectively. Our Marketing Services offerings
include our owned and operated Print Yellow Pages ("PYP" or "Print"), which
carry the "The Real Yellow Pages" tagline, and other digital marketing services
("Digital"), which includes 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, consisting of
online display and social advertising, online presence, and video and search
engine optimization ("SEO") tools.

Our Thryv U.S. SaaS segment generated $51.2 million and $41.4 million of
consolidated revenues for the three months ended June 30, 2022 and 2021,
respectively, and $98.5 million and $78.6 million of consolidated revenues for
the six months ended June 30, 2021 and 2021, respectively. Our Thryv Small
Business Platform is a SaaS offering comprised of a multi-product, cloud-based
business solution that enables small businesses to deliver an exceptional
end-to-end client experience, while running an efficient and well-organized
business. The Thryv Small Business Platform enables customers to achieve faster
and more sustainable growth. SMB's have the ability to customize the platform
experience to match their individual business objectives and goals. At its core,
the Thryv SaaS solution is a robust and customizable customer relationship
management ("CRM") tool. Supporting the entire CRM is a suite of robust
functions including scheduling, document organization, social media management,
online reputation tools, online presence tools, estimating, invoicing and
payment solutions. Within the payment solution, Thryv integrates with a variety
of other popular name-brand payment providers in addition to its proprietary
processor - ThryvPay. ThryvPay is uniquely integrated within the Thryv Small
Business Platform. It also includes an optional multi-location utility, Hub by
Thryv, which enables multi-location businesses and emerging franchises the
ability to centrally command and control many individual Thryv Small Business
Platform licenses from a single admin panel.

Our Thryv International Marketing Services 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 Marketing Services segment
generated $59.2 million and $46.9 million of consolidated revenues for the three
months ended June 30, 2022 and 2021, respectively, and $106.9 million and
$62.3 million of consolidated revenues for the six months ended June 30, 2022
and the four months ended June 30, 2021, respectively.

Our Thryv International SaaS segment generated $1.0 million and $0.01 million of
consolidated revenues for the three months ended June 30, 2022 and 2021,
respectively, and $1.9 million and $0.01 million of consolidated revenues for
the six months ended June 30, 2022 and the four months ended June 30, 2021,
respectively.

Our expertise in delivering solutions for our client base is rooted in our deep
history of serving SMBs. In 2022, 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.
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On January 21, 2022 (the "Vivial Acquisition Date"), Thryv, Inc., the Company's
wholly-owned subsidiary, acquired Vivial Media Holdings, Inc. ("Vivial"), a
marketing and advertising company, for $22.8 million in cash, subject to certain
adjustments (the "Vivial Acquisition").

The expanding global scope of our business and the heightened volatility of
global markets, driven by factors, such as COVID-19 and inflation, expose us to
the risk of rising interest rates, increased operating costs and fluctuations in
foreign currency markets. Recently the United States Dollar has strengthened
significantly against certain foreign currencies in the markets in which we
operate, particularly against the Australian Dollar. We also expect further
interest rate changes in the future. To date, these factors have not had a
material impact on our operational performance, financial performance, or
liquidity. However, further changes in global economic conditions may adversely
impact our revenue, profit margins, cash flow and liquidity. See 'Impact of
Covid' and 'Item 3. Quantitative and Qualitative Disclosures About Market Risk'
for a description of interest rate and foreign exchange currency risk.


Impact of 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, significantly disrupted the
global economy, resulting in an adverse effect on the business operations of
certain SMBs, especially during 2020 and to a lesser extent during 2021.
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 three and six months
ended June 30, 2022 and 2021 was somewhat mitigated as many of our clients
continued to operate.

In March 2020, we began offering certain pandemic credit incentives to select
clients. These pandemic credit incentives resulted in a $0.8 million and
$3.0 million reduction in revenue for the three and six months ended June 30,
2021, respectively. Requests for incentives continued to decline in 2021 as
clients resumed normal contractual terms and pricing. As of April 1, 2021, we
virtually discontinued providing pandemic credits and accepting client requests
to pause search campaigns due to the COVID-19 pandemic. Effective April 1, 2021,
all client requests for adjustments are now handled as part of normal business
operations consistent with historical practices.

During the three and six months ended June 30, 2022, we have continued to see
trends similar to those experienced during the year ended December 31, 2021,
including an increase in demand for our SaaS solutions and a continuing decline
in our Marketing Services business. The challenges we will 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.

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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 Thryv Australia Acquisition.
On January 21, 2022, we completed the Vivial Acquisition. 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.

                                As of June 30,
(in thousands)               2022             2021
Clients (1)
Marketing Services (2)      395               422
SaaS (3)                     50                45
Total (4)                   417               440

(1) Clients include total clients from all four of our business segments: Thryv U.S. Marketing Services, Thryv U.S. SaaS, Thryv International Marketing Services and Thryv International SaaS.

(2) 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.

(3) 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.

(4) 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 27 thousand as of June 30, 2022 as
compared to June 30, 2021. 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 spaces, particularly from large,
well-capitalized businesses such as Google, Yelp and Facebook.
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SaaS clients increased by five thousand as of June 30, 2022 as compared to
June 30, 2021. 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 23 thousand as of June 30, 2022 as compared to June 30, 2021. 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.

                                               Three Months Ended June 30,                   Six Months Ended June 30,
                                                2022                   2021                  2022                  2021
ARPU (Monthly)
Marketing Services (1)                    $          183          $       187          $         184          $       194
SaaS (1)                                             358                  323                    355                  314

(1) Marketing Services and SaaS ARPU include combined results from both our U.S. and Thryv International Marketing Services and SaaS businesses, respectively.



Monthly Marketing Services ARPU decreased by $4, or 2.1%, for the three months
ended June 30, 2022 compared to the three months ended June 30, 2021, and
decreased by $10, or 5%, for the six months ended June 30, 2022 compared to the
six months ended June 30, 2021. The overall trend has been a decrease in ARPU
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.
Periodic increases in quarterly ARPU are temporary and caused by timing of
publishing our directories, which have variable lengths (usually 12 to 18
months).

Monthly SaaS ARPU increased by $35, or 10.8%, during the three months ended June
30, 2022 compared to the three months ended June 30, 2021, and increased by $41,
or 13.1%, during the six months ended June 30, 2022 compared to the six months
ended June 30, 2021. The increase in ARPU 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.
Individuals who register for, and use, multiple accounts across computer and
mobile devices may be counted more than once and, as a result, 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.

                                   As of June 30,
(in thousands)                  2022             2021
Monthly Active Users - SaaS     38                30



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Monthly active users increased by 8 thousand, or 27%, during the six months
ended June 30, 2022 compared to the six months ended June 30, 2021. 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 four business segments: Thryv U.S. Marketing
Services, Thryv U.S. SaaS, Thryv International Marketing Services and Thryv
International SaaS. Our primary sources of Revenue in our Thryv U.S. Marketing
Services and Thryv International Marketing Services segments are Print and
Digital services. Our primary source of Revenue in our Thryv U.S. SaaS and Thryv
International SaaS segments 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, 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 benefit, and other income (expense), which includes a bargain
purchase gain as a result of the Vivial Acquisition, a (loss) resulting from the
termination of leaseback obligations associated with land and a building in
Tucker, Georgia, and foreign currency-related income and expense.
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