10-Q: Thryv Holdings Reports Mixed Q2 Results Amidst Strategic SaaS Transition and Legacy Business Decline

Thryv Holdings, Inc. reported a 6.1% revenue decrease in Q2 2025, driven by a significant decline in its Marketing Services segment, partially offset by robust 47.8% growth in its SaaS business.

Summary

• Total revenue for the three months ended June 30, 2025, decreased by $13.6 million, or 6.1%, to $210.47 million compared to $224.08 million in the prior year period.
• SaaS revenue increased by $37.2 million, or 47.8%, to $115.01 million for the three months ended June 30, 2025, primarily due to the Keap acquisition ($17.7 million contribution) and strategic client conversions from Marketing Services.
• Marketing Services revenue decreased by $50.8 million, or 34.7%, to $95.47 million for the three months ended June 30, 2025, reflecting a secular decline in print media and accelerated client conversions to SaaS.
• Net income for the three months ended June 30, 2025, significantly increased to $13.93 million from $5.55 million in the prior year, a 151.1% improvement.
• Adjusted EBITDA decreased by $8.1 million, or 13.6%, to $51.23 million for the three months ended June 30, 2025, compared to $59.31 million in the prior year.
• Gross margin improved to 69.7% for the three months ended June 30, 2025, up from 66.3% in the prior year, driven by increased SaaS gross margin (72.1% from 67.2%).
• Total clients decreased by 15% to 261,000 as of June 30, 2025, from 307,000 in the prior year, primarily due to the decline in Marketing Services clients.
• SaaS clients increased by 25% to 106,000 as of June 30, 2025, from 85,000 in the prior year, with 15,000 clients added from the Keap acquisition.
• Monthly ARPU for SaaS increased by 6% to $352 for the three months ended June 30, 2025, while Marketing Services ARPU decreased by 20% to $111.
• Seasoned Net Revenue Retention for SaaS improved by 900 basis points to 103% as of June 30, 2025, indicating strong retention and expansion from established SaaS clients.
• The company made $39.4 million in prepayments on its Term Loan through June 30, 2025, reducing mandatory amortization payments for the next 12 months to $8.8 million.
• A share repurchase program authorized up to $40 million through April 30, 2029, with $39.5 million remaining available as of June 30, 2025.

Sentiment

Score: 6

Explanation: The sentiment is cautiously optimistic. While the overall revenue and EBITDA declined due to the legacy Marketing Services segment, the strong growth and improved margins in the strategic SaaS segment are positive indicators of the company's successful transition. The SEC subpoena introduces a notable uncertainty, but the company's debt management and share repurchase program are favorable. The mixed financial results reflect a company in a challenging but necessary strategic pivot.

Positives

• SaaS revenue demonstrated strong growth, increasing by 47.8% for the three months and 48.7% for the six months ended June 30, 2025, driven by the Keap acquisition and successful client conversions.
• Net income for the three months ended June 30, 2025, significantly increased by 151.1% to $13.93 million, indicating improved profitability in the recent quarter.
• Overall gross margin improved to 69.7% for the three months and 67.9% for the six months ended June 30, 2025, reflecting strategic cost savings and the shift to higher-margin SaaS solutions.
• SaaS gross margin increased to 72.1% for the three months and 71.5% for the six months ended June 30, 2025, demonstrating the segment's efficiency.
• Seasoned Net Revenue Retention for SaaS improved by 900 basis points to 103%, indicating successful retention and expansion of revenue from existing SaaS clients.
• Interest expense decreased by 26.5% for the three months and 29.4% for the six months ended June 30, 2025, due to lower outstanding debt balances.
• The company is in compliance with all covenants under its Term Loan and ABL Facility as of June 30, 2025, indicating sound financial management.
• The company recognized a foreign-currency related gain of $2.9 million for the six months ended June 30, 2025, compared to a loss in the prior year.

Negatives

• Total revenue decreased by 6.1% for the three months and 14.4% for the six months ended June 30, 2025, primarily due to the significant decline in the Marketing Services segment.
• Marketing Services revenue decreased substantially by 34.7% for the three months and 45.8% for the six months ended June 30, 2025, reflecting secular decline and strategic conversions.
• Total clients decreased by 15% year-over-year, driven by a 46% reduction in Marketing Services clients.
• Adjusted EBITDA decreased by 13.6% for the three months and 36.4% for the six months ended June 30, 2025, primarily due to the decline in the Marketing Services segment.
• Net income for the six months ended June 30, 2025, decreased by 69.1% to $4.31 million, compared to $13.97 million in the prior year.
• Operating income decreased by 5.7% for the three months and 57.6% for the six months ended June 30, 2025.
• Monthly ARPU for Marketing Services decreased by 20% for the three months and 22% for the six months ended June 30, 2025, reflecting reduced client spend and conversions.
• The average revenue per published print directory, when adjusted on a monthly basis, declined by 33% compared to the last publication, indicating a significant secular decline in demand.

Risks

• Significant competition exists for Marketing Services solutions and SaaS offerings, including from companies using third-party SaaS components.
• Ability to maintain profitability is a key challenge.
• Effective management of growth is crucial.
• The company's ability to transition Marketing Services clients to the Thryv Platform, retain them, and sell additional products is critical, with a risk of higher churn rates for converted clients.
• Reliance on strategic relationships with third-party service providers poses a risk if these relationships are not maintained.
• Internet search engines and portals could terminate or materially alter agreements with the company.
• The company must keep pace with rapid technological changes and evolving industry standards.
• Small to medium-sized business (SMB) clients may opt not to renew agreements or renew at lower spend.
• Potential system interruptions or failures, including cybersecurity breaches, identity theft, data loss, or unauthorized access to data, could compromise information.
• Failure to identify suitable acquisition candidates and consummate such acquisitions, or failure of acquired businesses (like Keap) to achieve plans and objectives, are risks.
• The potential loss of one or more key employees or inability to attract and retain highly skilled employees could impact operations.
• Maintaining compatibility of the Thryv Platform with third-party applications is essential.
• Failure to successfully expand operations and offerings into new markets, including internationally, or further penetrate existing markets, could limit growth.
• Potential failure to provide new or enhanced functionality and features could impact competitiveness.
• Non-compliance with applicable privacy, security, and data laws, regulations, and standards, or changes in these regulations, pose legal and reputational risks.
• Failure to meet service level commitments under client contracts or offer high-quality technical support services could lead to client dissatisfaction.
• The Thryv Platform and add-ons potentially failing to perform properly could harm reputation and client retention.
• The use of artificial intelligence (AI) in the business, and challenges with properly managing its use, could result in reputational harm, competitive harm, and legal liability.
• Future labor negotiations could impact costs and operations.
• Ability to protect intellectual property rights, proprietary technology, information, processes, and know-how is vital.
• Rising inflation and the ability to control costs, including operating expenses, pose financial risks.
• General macro-economic conditions, including a recession or economic slowdown in the U.S. or internationally, could negatively impact demand.
• Adverse tax laws or regulations or potential changes to existing tax laws or regulations could affect financial results.
• Costs, liabilities, and reputational harm could result from regulatory investigations, including the subpoena from the SEC's Division of Enforcement.
• Volatility and weakness in bank and capital markets could impact liquidity and financing.
• Costs, obligations, and liabilities incurred as a result of and in connection with being a public company are ongoing risks.

Future Outlook

The company intends to continue developing and growing a profitable SaaS segment to better help SMBs manage their businesses, while maintaining strong profitability within its Marketing Services segment, which is expected to serve as an efficient customer acquisition channel until its termination in 2028. The company will continue to improve its SaaS solutions by analyzing user behavior, expanding features, improving usability, enhancing onboarding services and customer support, and making version updates available to SMBs. The company expects to be in compliance with its Term Loan and ABL Facility covenants for the next twelve months. The company is currently evaluating the provisions of the One Big Beautiful Bill Act (OBBBA) and its potential impact on its financial position, results of operations, and cash flows.

Management Comments

• Our strategy is to expand the use of our SaaS solutions by introducing our SaaS solutions to new SMB clients, as well as converting our current Marketing Services clients to our Thryv Platform and offering our SaaS client base additional SaaS solutions.
• We believe the conversions initiated for clients by Thryv provides valuable upgrades from digital Marketing Services to our Thryv Platform and that converted clients will be more likely to subscribe for additional features of the Thryv Platform in the future.
• We are dedicated to supporting local, independent businesses and franchises by providing innovative marketing solutions and cloud-based tools to the entrepreneurs who run them.
• We are one of the largest providers of SaaS end-to-end customer experience tools and digital marketing solutions to small-to-medium sized businesses (SMBs).
• Our expertise in delivering solutions for our client base is rooted in our deep history of serving SMBs.
• In 2025, SMB demand for integrated technology solutions continues to grow as SMBs adapt their business and service model to facilitate remote working and virtual interactions.
• We 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 for the following 12 months.

Industry Context

The company operates within the evolving small-to-medium sized business (SMB) services market, characterized by a significant shift from traditional print and digital marketing services towards integrated Software as a Service (SaaS) solutions. The decline in the company's Marketing Services segment, particularly print media, aligns with broader industry trends of decreasing demand for traditional advertising channels as advertising spend shifts to larger digital platforms. The strong growth in the SaaS segment reflects the increasing SMB demand for cloud-based business management, communication, and marketing tools, especially those facilitating remote work and virtual interactions. The company's strategic decision to terminate Marketing Services by 2028 and accelerate SaaS conversions positions it to capitalize on this digital transformation, though it faces intense competition from large, well-capitalized businesses like Google, Yelp, and Facebook in the digital media and SaaS space.

Comparison to Industry Standards

• The company's strategic shift from traditional Marketing Services to SaaS aligns with broader industry trends where digital transformation and cloud-based solutions are becoming paramount for SMBs. While specific comparable companies' detailed financial results are not provided for direct comparison, the general trend of declining print and legacy digital advertising revenue is consistent across the industry, as seen with other traditional directory publishers or local advertising providers.
• The growth in SaaS revenue (47.8% for the quarter) and the improvement in SaaS gross margin (72.1%) suggest a competitive offering and efficient operations within the SaaS segment, potentially outperforming some smaller, less established SaaS providers focused on SMBs.
• The Seasoned Net Revenue Retention of 103% for SaaS indicates strong customer loyalty and successful upselling/cross-selling within the existing SaaS client base, which is a positive metric often seen in successful SaaS companies, suggesting the company is effectively expanding its relationship with its established customers.
• The significant decline in Marketing Services revenue (34.7% for the quarter) and client base (46% decrease in Marketing Services clients) is a stark reflection of the challenges faced by legacy media businesses, comparable to the struggles of other print-based advertising companies globally.

Corporate Governance

Legal Proceedings

• In October 2024, the company received a subpoena from the SEC's Division of Enforcement requesting documents and information related to the company's previously publicly announced strategic conversion of clients from its digital Marketing Services solutions platform to its SaaS solutions platform. The company is cooperating fully, and the SEC noted the investigation is a fact-finding inquiry.
• The company is involved in an IRS tax case concerning Section 199 deductions and research and development tax credits for tax years 2012 through June 2015 (YP LLC partnership) and July to December 2015 (Print Media LLC partnership).
• The YP LLC partnership case was settled on favorable terms, with the court entering its final decision on October 22, 2024.
• For the Print Media LLC partnership case, the company successfully applied the terms of the YP LLC settlement, and a Proposed Stipulated Decision was filed on March 10, 2025, awaiting the court's final decision.
• As of June 30, 2025, the company reserved $29.3 million for the Section 199 disallowance and less than $0.1 million for the R&D tax credit disallowance.
• The company believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to $15.6 million within the next 12 months, which would impact the effective tax rate.

Related Party Transactions

• As of June 30, 2025, 40.0% of the Term Loan was held by a related party who was an equity holder of the company as of that date. Interest expense, related party, was $2.971 million for the three months ended June 30, 2025, and $5.977 million for the six months ended June 30, 2025.

Stakeholder Impact

• Shareholders: Experience mixed financial results with strong SaaS growth offset by legacy business decline, but improved net income for the quarter and increased SaaS NRR are positive. The share repurchase program could provide some support. The SEC subpoena introduces regulatory uncertainty.
• Employees: The company's strategic shift to a 'Remote First' working environment and ongoing reduction in force actions (severance charges related to legacy Marketing Services employees) indicate potential job impacts in the Marketing Services segment, while the SaaS segment may see continued investment and growth opportunities.
• Customers (SMBs): Marketing Services clients are being strategically converted to the Thryv Platform, potentially offering upgraded services but also risking higher churn rates if not fully embraced. SaaS clients benefit from continued investment in new features, usability, and support.
• Creditors: The company is in compliance with all debt covenants and has made significant prepayments on its Term Loan, indicating a healthy debt management approach and reduced risk for creditors.

Next Steps

• Continue to develop and grow the profitable SaaS segment.
• Improve SaaS solutions by analyzing user behavior, expanding features, improving usability, enhancing onboarding services and customer support, and making version updates available to SMBs.
• Monitor and manage the strategic termination of Marketing Services solutions by the end of 2028.
• Cooperate fully with the SEC's Division of Enforcement regarding the subpoena related to client conversion practices.
• Await the court's final decision in the IRS tax case regarding the Print Media LLC partnership.
• Evaluate the provisions and potential impact of the One Big Beautiful Bill Act (OBBBA) on financial position, results of operations, and cash flows.
• Continue to monitor capital requirements and potentially undertake further share repurchases under the authorized program.

Key Dates

Recommendation

The company is undergoing a significant strategic transformation, shifting from a declining legacy Marketing Services business to a growing SaaS model. While the SaaS segment shows impressive growth and improved margins, the overall financial performance is currently hampered by the rapid decline of the Marketing Services segment. The increase in quarterly net income is positive, but the six-month net income and Adjusted EBITDA declines indicate the scale of the transition challenge. The SEC subpoena adds a layer of regulatory uncertainty. Given the strong performance of the core SaaS business and effective debt management, but also the ongoing headwinds from the legacy business and regulatory scrutiny, a 'hold' recommendation is appropriate. Investors should monitor the pace of SaaS growth, the successful integration of acquired businesses like Keap, the management of the Marketing Services wind-down, and the outcome of the SEC inquiry.

Keywords

SaaS, Small Business Software, Digital Marketing, Print Yellow Pages, SMB Solutions, Customer Relationship Management, Marketing Automation, Thryv Platform, Keap, SEC Filing, Quarterly Report, Financial Results, Corporate Transition, Debt Management, Share Repurchase