8-K: Thryv Holdings Announces Acquisition of Keap, $75 Million Equity Offering, and Preliminary Q3 Results

Thryv Holdings has agreed to acquire Keap for $80 million, launched a $75 million equity offering to help fund the deal, and released preliminary unaudited Q3 2024 results showing strong SaaS growth.

Summary

• Thryv Holdings has entered into a definitive agreement to acquire Keap for $80 million in cash, subject to customary adjustments.
• The company plans to finance part of the acquisition with proceeds from a $75 million public offering of common stock.
• Thryv's preliminary unaudited Q3 2024 results show SaaS revenue is expected to be between $86 million and $88 million, up from $67 million in the prior year.
• SaaS gross margin is expected to be between 69% and 70%, compared to 64% in the prior year.
• SaaS adjusted EBITDA is expected to be between $10 million and $11 million, a significant improvement from a loss of $1 million in the prior year.
• The company recorded a non-cash impairment charge of $83.1 million related to its Marketing Services segment, resulting in a net loss between $95 million and $97 million.
• Excluding the impairment, the net loss would have been approximately $12 million to $14 million.
• Seasoned net dollar retention is expected to be approximately 100%, compared to 92% in the prior year.
• The company is terminating its Marketing Services solutions by the end of 2028, leading to the impairment charge.
• Thryv received a subpoena from the SEC related to its strategic conversion of clients from digital marketing services to SaaS solutions.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. The strong SaaS growth and improved profitability are positive, but the large impairment charge, SEC subpoena, and capital raise introduce uncertainty. The acquisition of Keap is a strategic move that could be beneficial, but it also adds risk.

Positives

• SaaS revenue is showing strong growth, with a 28% to 31% increase year-over-year.
• SaaS gross margin is improving, expected to be between 69% and 70%.
• SaaS adjusted EBITDA has turned positive, expected to be between $10 million and $11 million.
• Seasoned net dollar retention is strong at approximately 100%.
• The acquisition of Keap is expected to enhance Thryv's offerings.
• The company is focusing on its high-growth SaaS business.

Negatives

• The company recorded a significant non-cash impairment charge of $83.1 million.
• The net loss for the quarter is expected to be between $95 million and $97 million.
• The company is terminating its Marketing Services solutions by the end of 2028.
• Thryv received an SEC subpoena related to its client conversion strategy.

Risks

• The acquisition of Keap is subject to customary closing conditions and may not be completed.
• The company's ability to successfully integrate Keap is uncertain.
• The company's financial results are preliminary and subject to change.
• The company is facing an SEC investigation related to its client conversion strategy.
• The termination of Marketing Services solutions may impact future revenue.
• The company's ability to maintain adequate liquidity to fund operations is a risk.
• The company's ability to obtain future financing is a risk.

Future Outlook

The company expects to complete the acquisition of Keap and integrate it into its operations. Thryv will continue to focus on its SaaS business and expects to release full Q3 results on November 7, 2024.

Management Comments

• Thryv's Chairman and CEO Joe Walsh commented, 'We are pleased to share our preliminary, unaudited third quarter results and look forward to providing more details about our strong third quarter results on November 7th.'

Industry Context

The acquisition of Keap and the focus on SaaS solutions align with the broader industry trend of businesses moving towards cloud-based software platforms. The company is shifting away from traditional marketing services, which is a declining market.

Comparison to Industry Standards

• Thryv's SaaS revenue growth of 28% to 31% year-over-year is strong compared to many established SaaS companies, although specific benchmarks vary widely depending on the sector.
• The seasoned net dollar retention of 100% is a positive indicator of customer loyalty and is generally considered a good result for SaaS businesses.
• The adjusted EBITDA margin for the SaaS business is expected to be between 11.6% and 12.5%, which is a significant improvement from the prior year and is within the range of profitability for many SaaS companies.
• The non-cash impairment charge of $83.1 million is a significant negative event, but it is a one-time charge and reflects the company's strategic shift away from marketing services.
• Companies like HubSpot and Salesforce are often used as benchmarks in the SaaS industry, but they are much larger and more mature than Thryv. Thryv's growth rate is more comparable to smaller, rapidly growing SaaS companies.

Legal Proceedings

• Thryv received a subpoena from the Division of Enforcement of the SEC requesting documents and information related to the Companys previously publicly announced strategic conversion of its clients from its digital marketing services solutions platform to its SaaS solutions platform.

Stakeholder Impact

• Shareholders will be impacted by the equity offering and the potential dilution of their ownership.
• Employees may be affected by the integration of Keap and the termination of the Marketing Services solutions.
• Customers will see changes in the company's offerings as it focuses on SaaS solutions.
• Suppliers may be impacted by the company's strategic shift.

Next Steps

• Thryv will complete the acquisition of Keap.
• The company will finalize its Q3 2024 financial results and release them on November 7, 2024.
• Thryv will continue to cooperate with the SEC investigation.
• The company will integrate Keap into its operations.

Key Dates

Keywords

SaaS, Acquisition, Equity Offering, Keap, Financial Results, Impairment, SEC Subpoena, Marketing Services, Net Dollar Retention, Adjusted EBITDA