8-K: Thryv Holdings Reports 25% SaaS Revenue Growth in Q4 2023, Exceeds Full Year Guidance

Thryv Holdings announced a 25% year-over-year increase in SaaS revenue for the fourth quarter of 2023, surpassing its full-year SaaS guidance.

Summary

• Thryv Holdings reported a 25% year-over-year increase in SaaS revenue for the fourth quarter of 2023, reaching $74.0 million.
• The company's full-year SaaS revenue grew by 21.9% to $263.7 million.
• Thryv exceeded its SaaS Adjusted EBITDA guidance for both the fourth quarter and the full year.
• The company's Seasoned Net Dollar Retention (NDR) increased to 96% in Q4, a 400 bps sequential improvement.
• Thryv generated a strong operating cash flow of $148.2 million for the full year.
• The company paid down $120 million of its term loan in 2023.
• Consolidated total revenue for the fourth quarter was $236.2 million, a 15% decrease year-over-year, while full-year consolidated revenue was $917.0 million, a 24% decrease year-over-year.
• The company reported a consolidated net loss of $257.5 million for Q4 and $259.3 million for the full year, which includes a non-cash goodwill impairment charge of $268.8 million.
• ThryvPay total payment volume increased by 54% year-over-year to $60 million in Q4.
• The company is guiding for SaaS revenue between $325 and $328 million for the full year 2024.

Sentiment

Score: 7

Explanation: The document presents a mixed picture with strong SaaS growth and positive cash flow, but also significant net losses and declining marketing services revenue. The positive outlook for SaaS revenue in 2024 is encouraging, but the overall sentiment is cautiously optimistic.

Positives

• Thryv's SaaS business demonstrated strong growth with a 25% year-over-year revenue increase in Q4.
• The company exceeded its SaaS Adjusted EBITDA guidance for both Q4 and the full year.
• The increase in Seasoned Net Dollar Retention to 96% indicates strong customer loyalty and recurring revenue.
• The company's strong operating cash flow of $148.2 million for the full year provides financial flexibility.
• The $120 million term loan paydown demonstrates a commitment to strengthening the balance sheet.
• The 54% year-over-year growth in ThryvPay total payment volume shows increasing adoption of the platform's payment solutions.
• The company is projecting strong SaaS revenue growth for 2024.

Negatives

• Consolidated total revenue decreased by 15% year-over-year in Q4 and 24% for the full year.
• The company reported a significant net loss of $257.5 million in Q4 and $259.3 million for the full year, primarily due to a $268.8 million non-cash goodwill impairment charge.
• Marketing Services revenue decreased by 26% year-over-year in Q4 and 33.8% for the full year.
• SaaS monthly Average Revenue per Unit (ARPU) decreased to $370 in Q4 2023, compared to $387 in Q4 2022.
• SaaS Adjusted EBITDA margin was 8.8% in Q4 and 4.6% for the full year, which is relatively low.

Risks

• The company faces the risk of continued decline in Marketing Services revenue.
• The significant net losses, driven by the goodwill impairment, could impact investor confidence.
• The decrease in SaaS ARPU could indicate pricing pressures or a shift in customer mix.
• The relatively low SaaS Adjusted EBITDA margin may raise concerns about profitability.
• The company's forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially.

Future Outlook

Thryv expects SaaS revenue to be between $325 and $328 million for the full year 2024, with SaaS Adjusted EBITDA margins in the high-single digits. Marketing Services revenue is expected to be between $495 and $505 million for the full year 2024, with an Adjusted EBITDA margin of approximately 27%.

Management Comments

• Joe Walsh, Thryv Chairman and CEO, stated that the company surpassed guidance on SaaS revenue growth and SaaS Adjusted EBITDA.
• Paul Rouse, Chief Financial Officer, highlighted the record SaaS revenue growth of 25% year-over-year and the record SaaS Adjusted Gross profit margin of 70%.

Industry Context

The company's focus on SaaS growth aligns with the broader industry trend of businesses shifting towards cloud-based software solutions. The decline in Marketing Services revenue reflects the ongoing shift away from traditional print and digital advertising towards more modern digital platforms. The company's efforts to transition legacy clients to the Thryv SaaS platform are consistent with the industry's move towards integrated software solutions.

Comparison to Industry Standards

• Thryv's 25% SaaS revenue growth in Q4 is strong compared to some established SaaS companies, but it is important to note that Thryv is still in a growth phase.
• Companies like HubSpot and Shopify have demonstrated higher SaaS revenue growth rates in the past, but they also operate in different market segments.
• The company's SaaS Adjusted EBITDA margin of 8.8% in Q4 is lower than some mature SaaS companies, which often have margins above 20%.
• The decline in Marketing Services revenue is consistent with the challenges faced by traditional media companies, such as Gannett and News Corp, which are also experiencing declines in print advertising revenue.
• Thryv's Seasoned Net Dollar Retention of 96% is a positive indicator of customer loyalty and is comparable to some other SaaS companies in the SMB space.

Stakeholder Impact

• Shareholders may be concerned about the net losses but encouraged by the SaaS growth and positive outlook.
• Employees may be affected by the company's restructuring and integration efforts.
• Customers will benefit from the company's focus on improving its SaaS platform.
• Suppliers may be impacted by the company's changing revenue mix.
• Creditors will be pleased with the company's debt reduction efforts.

Next Steps

• The company plans to accelerate SaaS revenue growth in 2024.
• Thryv will focus on driving margin expansion by transitioning legacy digital clients to the Thryv SaaS platform.
• The company will host a conference call on February 22, 2024, to discuss the results.

Key Dates

Keywords

SaaS, revenue, EBITDA, marketing services, net loss, ThryvPay, NDR, ARPU, cash flow, goodwill impairment