8-K: Thryv Holdings Reports Strong SaaS Growth and Achieves 'Rule of 40' in Q3 2024

Thryv Holdings announced a 29% year-over-year increase in SaaS revenue and achieved the 'Rule of 40' in the third quarter of 2024, alongside the acquisition of Keap.

Summary

• Thryv Holdings reported a 29% year-over-year increase in SaaS revenue for the third quarter of 2024, reaching $87.1 million.
• The company achieved the 'Rule of 40', a key milestone, which is defined as the sum of year-over-year revenue growth and Adjusted EBITDA margin.
• Total consolidated revenue was $179.9 million, a 2% decrease year-over-year, with a net loss of $96.1 million, including a non-cash goodwill impairment charge of $83.1 million.
• SaaS clients increased by 45% year-over-year to 96,000, and Seasoned Net Dollar Retention (NDR) improved to 101%, up 900 basis points year-over-year.
• The company closed the acquisition of Infusion Software, Inc., known as 'Keap', on October 31, 2024, which is expected to contribute $11.0 to $12.0 million in SaaS revenue in Q4 2024.
• Thryv has raised its full-year 2024 SaaS revenue guidance to $329.5 $331.5 million and SaaS Adjusted EBITDA guidance to $33.5 $34.5 million.
• Marketing Services revenue decreased by 20% year-over-year to $92.8 million, with an Adjusted EBITDA of $9.3 million.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong SaaS growth, achievement of the 'Rule of 40', and the acquisition of Keap. However, the significant net loss and decline in Marketing Services revenue temper the overall positive outlook.

Positives

• The company's SaaS business is experiencing strong growth, with a 29% increase in revenue year-over-year.
• The achievement of the 'Rule of 40' indicates a healthy balance between growth and profitability.
• The 45% increase in SaaS clients demonstrates the success of the company's transformation strategy.
• The improvement in Seasoned Net Dollar Retention to 101% shows strong customer loyalty and expansion.
• The acquisition of Keap is expected to provide an expanded set of solutions and a strong global partner channel.
• The company has raised its full-year SaaS revenue and Adjusted EBITDA guidance.
• SaaS Adjusted Gross Profit Margin increased significantly to 72.2%.

Negatives

• Total consolidated revenue decreased by 2% year-over-year.
• The company reported a significant net loss of $96.1 million, primarily due to a non-cash goodwill impairment charge of $83.1 million.
• Marketing Services revenue declined by 20% year-over-year.
• Marketing Services billings decreased by 35% year-over-year.
• Consolidated Adjusted EBITDA margin was 10.9%, which is relatively low.
• The company's net loss margin was -53.4%.

Risks

• The company's ability to maintain adequate liquidity to fund operations is a risk.
• The company's future operating and financial performance is subject to various uncertainties.
• The integration of acquired businesses, such as Keap, may pose challenges.
• The company's reliance on small and medium-sized businesses as clients exposes it to credit risk.
• Increased competition in the market could impact the company's growth.
• The company's ability to anticipate or respond effectively to changes in technology and consumer preferences is a risk.
• The decline in Marketing Services revenue and billings is a concern.

Future Outlook

Thryv is raising its full-year 2024 SaaS revenue guidance to $329.5 $331.5 million and SaaS Adjusted EBITDA guidance to $33.5 $34.5 million. The acquisition of Keap is expected to contribute $11.0 to $12.0 million in SaaS revenue in Q4 2024.

Management Comments

• Joe Walsh, Thryv Chairman and CEO, stated that they had a strong third quarter, delivering 29% year-over-year SaaS revenue growth and record SaaS margins.
• Joe Walsh also mentioned that they reported 45% year-over-year growth in SaaS clients as they are upgrading their marketing service clients to their SaaS platform.
• Paul Rouse, Chief Financial Officer, stated that they beat their SaaS Revenue and Adjusted EBITDA guidance and are raising their full year SaaS guidance.

Industry Context

The results indicate a shift in Thryv's business model towards SaaS, which is a growing trend in the software industry. The acquisition of Keap aligns with the industry's move towards integrated solutions and expanded market reach. The decline in Marketing Services revenue reflects the broader trend of businesses moving away from traditional marketing methods.

Comparison to Industry Standards

• Thryv's 29% SaaS revenue growth is strong compared to the industry average, which varies but is generally in the range of 15-25% for established SaaS companies.
• The achievement of the 'Rule of 40' is a positive indicator, as many SaaS companies strive to reach this benchmark, which is a combination of revenue growth and profitability.
• Companies like HubSpot and Salesforce, which are leaders in the CRM and marketing automation space, often have higher SaaS revenue growth rates but also higher operating costs.
• Thryv's Seasoned Net Dollar Retention of 101% is a good result, indicating strong customer loyalty and expansion, and is comparable to other successful SaaS businesses.
• The decline in Marketing Services revenue is consistent with the trend of traditional marketing services facing challenges from digital alternatives, which is a common issue for companies in this space.

Stakeholder Impact

• Shareholders will likely react positively to the strong SaaS growth and the Keap acquisition, but negatively to the net loss.
• Employees may experience changes due to the integration of Keap.
• Customers will benefit from the expanded set of solutions offered by the combined company.
• Suppliers may see changes in demand due to the shift in focus towards SaaS.
• Creditors will be monitoring the company's financial performance and liquidity.

Next Steps

• The company will focus on integrating the Keap acquisition.
• Thryv will continue to execute on its transformation strategy, upgrading marketing service clients to its SaaS platform.
• The company will work to increase paid centers per client, leveraging its land-and-expand strategy.

Key Dates

Keywords

SaaS, Software, Small Business, Revenue Growth, EBITDA, Acquisition, Keap, Net Dollar Retention, Marketing Services, ThryvPay