UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2022

o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-35895

THRYV HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware						13-2740040
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2200 West Airfield Drive, P.O. Box 619810, D/FW Airport, TX						75261
(Address of principal executive offices)						(Zip Code)


(972)			453-7000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	THRY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o☐ No x

As of ~~May 3,~~November 1, 2022, there w~~ere 34,238,639~~ere 34,475,189 shares of the registrant's common stock outstanding.

THRYV HOLDINGS, INC.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended ~~March~~September 3 1 ~~, 202~~2 30, 2022 and ~~202~~1 2021 (unaudited)	3
	Consolidated Balance Sheets as of ~~Marc~~hSeptember 330, 2022 (unaudited 1 ~~, 202~~2 ~~(unaudited)~~) and December 31, 2021~~, 2021~~	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended ~~March~~Se ptember 3 1 ~~, 202~~2 30, 2022 and ~~202~~1 2021 (unaudited)	5
	Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March~~Se ptember 3 1 ~~, 202~~2 30, 2022 and 20 21 2021 (unaudited)	67
	Notes to Consolidated Financial Statements (unaudited)	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2326
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3544
Item 4.	Controls and Procedures	3645

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3645
Item 1A.	Risk Factors	3645
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3645
Item 3.	Defaults Upon Senior Securities	3745
Item 4.	Mine Safety Disclosures	3745
Item 5.	Other Information	3746
Item 6.	Exhibits	3846
	Signatures	3947

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements, that reflect our current views with respect to future events and financial performance. Such statements are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995 and include, without limitation, statements concerning the conditions of our industry and our operations, performance, and financial condition, including, in particular, statements relating to our business, growth strategies, product development efforts, and future expenses. Forward-looking statements include all statements that do not relate solely to historical or current facts and generally can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “could,,,” “estimates,” “expects,” “likely,” “may,” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Accordingly, we caution you against relying on forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following:

•significant competition for our Marketing Services solutions and SaaS offerings, including from companies that use components of our SaaS offerings provided by third parties;

•our ability to maintain profitability;

•our ability to manage our growth effectively;

•our ability to transition our Marketing Services clients to our Thryv platform, sell our platform into new markets or further penetrate existing markets;

•the effect of the coronavirus commonly referred to as COVID-19 (“COVID-19”) on our business, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;

•our ability to maintain our strategic relationships with third-party service providers;

•internet search engines and portals potentially terminating or materially altering their agreements with us;

•our ability to keep pace with rapid technological changes and evolving industry standards;

•our small to medium-sized businesses (“SMBs”) clients potentially opting not to renew their agreements with us or renewing at lower spend;

•potential system interruptions or failures, including cyber-security breaches, identity theft, data loss, unauthorized access to data or other disruptions that could compromise our information;

•our potential failure to identify suitable acquisition candidates and consummate such acquisitions;

•our ability to successfully integrate acquired businesses into our operations or recognize the benefits of acquisitions, including the failure of an acquired business to achieve its plans and objectives;

•the potential loss of one or more key employees or our inability to attract and to retain highly skilled employees;

•our ability to maintain the compatibility of our Thryv platform with third-party applications;

•our ability to successfully expand our operations and current offerings into new markets, including internationally, or further penetrate existing markets;

•our potential failure to provide new or enhanced functionality and features;

•our potential failure to comply with applicable privacy, security and data laws, regulations and standards;

•potential changes in regulations governing privacy concerns and laws or other domestic or foreign data protection regulations;

•our potential failure to meet service level commitments under our client contracts;

•our potential failure to offer high-quality or technical support services;

•our Thryv platform and add-ons potentially failing to perform properly;

•the potential impact of future labor negotiations;

•our ability to protect our intellectual property rights, proprietary technology, information, processes, and know-how;

•rising inflation and our ability to control costs, including operating expenses;

•general macro-economic conditions, including a recession or an economic slowdown in the U.S. or internationally;

•volatility and weakness in bank and capital markets; and

•costs, obligations and liabilities incurred as a result of and in connection with being a public company.

For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, see Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021 as well as our subsequent Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements contained in this report, which speak only as of the date of this report. Except as required by applicable law, the Company undertakes no obligation to update or revise any forward-looking statements publicly after the date they are made, whether as a result of new information, future events, or otherwise.

In this Quarterly Report on Form 10-Q, the terms ~~“our~~“our Company,” ~~“we,~~“we,” ~~“us,~~“us,” ~~“our,~~“our,” ~~“Company”~~“Company” and ~~“Thryv”~~“Thryv” refer to Thryv Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)


							Three Months Ended				Nine Months Ended
		Three Months Ended March 31,					September 30,				September 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2022		2021		(in thousands, except share and per share data)	2022		2021		2022		2021
Revenue	Revenue	$	308,375	$	280,606	Revenue	$	280,650	$	297,290	$	923,020	$	868,943
Cost of services	Cost of services	110,519		98,160		Cost of services	105,011		104,167		321,543		314,934
Gross profit	Gross profit	197,856		182,446		Gross profit	175,639		193,123		601,477		554,009

Operating expenses:	Operating expenses:					Operating expenses:
Sales and marketing	Sales and marketing	93,955		76,540		Sales and marketing	89,891		94,343		275,659		258,277
General and administrative	General and administrative	52,194		41,279		General and administrative	54,670		32,983		159,514		107,362

Impairment charges						Impairment charges	—		—		222		3,611
Total operating expenses	Total operating expenses	146,149		117,819		Total operating expenses	144,561		127,326		435,395		369,250

Operating income	Operating income	51,707		64,627		Operating income	31,078		65,797		166,082		184,759
Other income (expense):	Other income (expense):					Other income (expense):
Interest expense	Interest expense	(13,108)		(11,607)		Interest expense	(13,720)		(12,050)		(40,584)		(38,159)
Interest expense, related party	Interest expense, related party	(1,759)		(4,065)		Interest expense, related party	(850)		(4,496)		(3,505)		(13,229)
Other components of net periodic pension benefit (cost)		70		453
Other income (expense), net		6,222		(1,093)
Other components of net periodic pension (cost) benefit						Other components of net periodic pension (cost) benefit	(3,928)		273		5,295		998
Other income (expense)						Other income (expense)	6,941		(98)		15,567		(4,157)
Income before income tax expense	Income before income tax expense	43,132		48,315		Income before income tax expense	19,521		49,426		142,855		130,212
Income tax expense	Income tax expense	(9,621)		(11,809)		Income tax expense	(6,241)		(13,802)		(38,062)		(33,723)
Net income	Net income	$	33,511	$	36,506	Net income	$	13,280	$	35,624	$	104,793	$	96,489
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	5,448		(2,967)		Foreign currency translation adjustment	(7,920)		(4,100)		(12,611)		(8,545)
Comprehensive income	Comprehensive income	$	38,959	$	33,539	Comprehensive income	$	5,360	$	31,524	$	92,182	$	87,944

Net income per common share:	Net income per common share:					Net income per common share:
Basic	Basic	$	0.98	$	1.10	Basic	$	0.39	$	1.05	$	3.06	$	2.87
Diluted	Diluted	$	0.88	$	1.07	Diluted	$	0.37	$	0.95	$	2.86	$	2.67

Weighted-average shares used in computing basic and diluted net income per common share:	Weighted-average shares used in computing basic and diluted net income per common share:					Weighted-average shares used in computing basic and diluted net income per common share:
Basic	Basic	34,159,979		33,108,422		Basic	34,269,274		34,013,897		34,289,333		33,585,488
Diluted	Diluted	37,957,685		34,013,480		Diluted	35,811,473		37,620,116		36,698,395		36,110,702

The accompanying notes are an integral part of the consolidated financial statements.

Thryv Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets


(in thousands, except share data)	(in thousands, except share data)	March 31, 2022		December 31, 2021		(in thousands, except share data)	September 30, 2022		December 31, 2021
Assets	Assets	(unaudited)				Assets	(unaudited)
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	21,446	$	11,262	Cash and cash equivalents	$	14,312	$	11,262
Accounts receivable, net of allowance of $17,702 in 2022 and $17,387 in 2021		305,729		279,053
Contract assets, net of allowance of $59 in 2022 and $88 in 2021		4,062		5,259
Accounts receivable, net of allowance of $13,142 in 2022 and $17,387 in 2021						Accounts receivable, net of allowance of $13,142 in 2022 and $17,387 in 2021	290,103		279,053
Contract assets, net of allowance of $42 in 2022 and $88 in 2021						Contract assets, net of allowance of $42 in 2022 and $88 in 2021	3,121		5,259
Taxes receivable	Taxes receivable	15,248		14,711		Taxes receivable	12,860		14,711
Prepaid expenses	Prepaid expenses	43,112		22,418		Prepaid expenses	28,253		22,418
Indemnification asset	Indemnification asset	24,746		24,346		Indemnification asset	25,818		24,346
Other current assets	Other current assets	14,572		13,596		Other current assets	12,626		13,596
Total current assets	Total current assets	428,915		370,645		Total current assets	387,093		370,645
Fixed assets and capitalized software, net	Fixed assets and capitalized software, net	49,965		50,938		Fixed assets and capitalized software, net	42,144		50,938
Goodwill	Goodwill	673,713		671,886		Goodwill	664,619		671,886
Intangible assets, net	Intangible assets, net	77,457		82,577		Intangible assets, net	45,330		82,577
Deferred tax assets	Deferred tax assets	108,912		90,565		Deferred tax assets	126,721		90,565
Other assets	Other assets	30,753		33,891		Other assets	23,974		33,891
Total assets	Total assets	$	1,369,715	$	1,300,502	Total assets	$	1,289,881	$	1,300,502

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	16,433	$	8,610	Accounts payable	$	18,203	$	8,610
Accrued liabilities	Accrued liabilities	146,350		131,813		Accrued liabilities	133,063		131,813
Current portion of unrecognized tax benefits	Current portion of unrecognized tax benefits	30,171		29,771		Current portion of unrecognized tax benefits	31,243		29,771
Contract liabilities	Contract liabilities	61,471		51,726		Contract liabilities	31,733		51,726
Current portion of long-term debt	Current portion of long-term debt	70,000		70,000		Current portion of long-term debt	70,000		70,000
Other current liabilities	Other current liabilities	18,114		15,214		Other current liabilities	11,644		15,214
Total current liabilities	Total current liabilities	342,539		307,134		Total current liabilities	295,886		307,134
Term Loan, net	Term Loan, net	375,422		309,672		Term Loan, net	349,044		309,672
Term Loan, related party	Term Loan, related party	60,902		142,875		Term Loan, related party	25,827		142,875
ABL Facility	ABL Facility	62,975		39,929		ABL Facility	58,856		39,929
Pension obligations, net	Pension obligations, net	132,456		140,167		Pension obligations, net	111,942		140,167
Deferred tax liabilities	Deferred tax liabilities	7,374		10,798		Deferred tax liabilities	832		10,798
Other liabilities	Other liabilities	31,606		35,212		Other liabilities	25,568		35,212
Total long-term liabilities	Total long-term liabilities	670,735		678,653		Total long-term liabilities	572,069		678,653
Commitments and contingencies (see Note 13)	Commitments and contingencies (see Note 13)	0		0		Commitments and contingencies (see Note 13)
Stockholders' equity	Stockholders' equity					Stockholders' equity
Common stock - $0.01 par value, 250,000,000 shares authorized; 60,913,663 shares issued and 34,228,121 shares outstanding at March 31, 2022; and 60,830,853 shares issued and 34,145,311 shares outstanding at December 31, 2021		609		608
Common stock - $0.01 par value, 250,000,000 shares authorized; 61,160,731 shares issued and 34,475,189 shares outstanding at September 30, 2022; and 60,830,853 shares issued and 34,145,311 shares outstanding at December 31, 2021						Common stock - $0.01 par value, 250,000,000 shares authorized; 61,160,731 shares issued and 34,475,189 shares outstanding at September 30, 2022; and 60,830,853 shares issued and 34,145,311 shares outstanding at December 31, 2021	612		608
Additional paid-in capital	Additional paid-in capital	1,087,054		1,084,288		Additional paid-in capital	1,099,313		1,084,288
Treasury stock - 26,685,542 shares at March 31, 2022 and December 31, 2021		(468,879)		(468,879)
Treasury stock - 26,685,542 shares at September 30, 2022 and December 31, 2021						Treasury stock - 26,685,542 shares at September 30, 2022 and December 31, 2021	(468,879)		(468,879)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(2,599)		(8,047)		Accumulated other comprehensive income (loss)	(20,658)		(8,047)
Accumulated deficit	Accumulated deficit	(259,744)		(293,255)		Accumulated deficit	(188,462)		(293,255)
Total stockholders' equity	Total stockholders' equity	356,441		314,715		Total stockholders' equity	421,926		314,715
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,369,715	$	1,300,502	Total liabilities and stockholders' equity	$	1,289,881	$	1,300,502

The accompanying notes are an integral part of the consolidated financial statements.

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(unaudited)


Three Months Ended March 31, 2022
Three Months Ended September 30, 2022																Three Months Ended September 30, 2022
		Common Stock					Treasury Stock										Common Stock					Treasury Stock
(in thousands, except share amounts)	(in thousands, except share amounts)	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Income (Loss)		Accumulated (Deficit)		Total Stockholders' Equity		(in thousands, except share amounts)	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated (Deficit)		Total Stockholders' Equity
Balance as of December 31, 2021		60,830,853	$	608	$	1,084,288	(26,685,542)	$	(468,879)	$	(8,047)	$	(293,255)	$	314,715
Exercise of stock options		82,810	1		838		—	—		—		—		839
Stock compensation expense		—	—		1,928		—	—		—		—		1,928
Cumulative translation adjustment		—	—		—		—	—		5,448		—		5,448
Net income		—	—		—		—	—		—		33,511		33,511
Balance as of March 31, 2022		60,913,663	$	609	$	1,087,054	(26,685,542)	$	(468,879)	$	(2,599)	$	(259,744)	$	356,441

Three Months Ended March 31, 2021
		Common Stock					Treasury Stock
(in thousands, except share amounts)		Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Income (Loss)		Accumulated (Deficit)		Total Stockholders' Equity
Balance as of December 31, 2020		59,590,422	$	596	$	1,059,624	(26,678,410)	$	(468,613)	$	—	$	(394,832)	$	196,775
Balance as of June 30, 2022																Balance as of June 30, 2022	61,121,058	$	611	$	1,094,362	(26,685,542)	$	(468,879)	$	(12,738)	$	(201,742)	$	411,614
Exercise of stock options	Exercise of stock options	215,544	2		(3,096)		—	—		—		—		(3,094)		Exercise of stock options	37,051	1		485		—	—		—		—		486
Exercise of stock warrants	Exercise of stock warrants	111	—		5		—	—		—		—		5		Exercise of stock warrants	2,622	—		64		—	—		—		—		64
Stock compensation expense	Stock compensation expense	—	—		1,971		—	—		—		—		1,971		Stock compensation expense	—	—		4,402		—	—		—		—		4,402
Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		—	—		(2,967)		—		(2,967)		Cumulative translation adjustment	—	—		—		—	—		(7,920)		—		(7,920)
Net income	Net income	—	—		—		—	—		—		36,506		36,506		Net income	—	—		—		—	—		—		13,280		13,280
Balance as of March 31, 2021		59,806,077	$	598	$	1,058,504	(26,678,410)	$	(468,613)	$	(2,967)	$	(358,326)	$	229,196
Balance as of September 30, 2022																Balance as of September 30, 2022	61,160,731	$	612	$	1,099,313	(26,685,542)	$	(468,879)	$	(20,658)	$	(188,462)	$	421,926

Three Months Ended September 30, 2021																Three Months Ended September 30, 2021
																	Common Stock					Treasury Stock
(in thousands, except share amounts)																(in thousands, except share amounts)	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated (Deficit)		Total Stockholders' Equity
Balance as of June 30, 2021																Balance as of June 30, 2021	60,391,597	$	604	$	1,076,124	(26,678,410)	$	(468,613)	$	(4,445)	$	(333,967)	$	269,703
Exercise of stock options																Exercise of stock options	243,615	2		667		—	—		—		—		669
Exercise of stock warrants																Exercise of stock warrants	8,569	—		209		—	—		—		—		209
Stock compensation expense																Stock compensation expense	—	—		2,340		—	—		—		—		2,340
Cumulative translation adjustment																Cumulative translation adjustment	—	—		—		—	—		(4,100)		—		(4,100)
Net income																Net income	—	—		—		—	—		—		35,624		35,624
Balance as of September 30, 2021																Balance as of September 30, 2021	60,643,781	$	606	$	1,079,340	(26,678,410)	$	(468,613)	$	(8,545)	$	(298,343)	$	304,445

The accompanying notes are an integral part of the consolidated financial statements.

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of ~~Cash Flows~~Changes in Stockholders' Equity

Three Months Ended March 31,
(in thousands) 2022 2021
Cash Flows from Operating Activities (unaudited) (unaudited)
Net income $ 33,511 $ 36,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 21,969 19,718
Amortization of debt issuance costs 1,441 433
Deferred income taxes (5,671) (13,249)
Provision for credit losses and service credits 5,467 6,546
Stock-based compensation expense 1,928 1,971
Other components of net periodic pension (benefit) (70) (453)
Loss on foreign currency exchange rates 1,077 835
Bargain purchase gain (7,297) —
Other 1,440 320
Changes in working capital items, excluding acquisitions:
Accounts receivable (12,361) 26,846
Contract assets 1,285 1,446
Prepaid expenses and other assets (6,920) (10,998)
Accounts payable and accrued liabilities (9,775) (57,861)
Other liabilities 3,303 2,144
Net cash provided by operating activities 29,327 14,204
Cash Flows from Investing Activities
Additions to fixed assets and capitalized software (3,999) (3,668)
Acquisition of a business, net of cash acquired (22,003) (174,190)
Net cash (used in) investing activities (26,002) (177,858)
Cash Flows from Financing Activities
Proceeds from Term Loan — 418,070
Proceeds from Term Loan, related party — 260,930
Payments of Term Loan (15,444) —
Payments of Term Loan, related party (2,056) —
Payments of Senior Term Loan — (335,821)
Payments of Senior Term Loan, related party — (113,789)
Proceeds from ABL Facility 302,374 249,936
Payments of ABL Facility (279,327) (285,492)
Proceeds from exercises of stock options and stock warrants 839 1,560
Other — (3,598)
Net cash provided by financing activities 6,386 191,796
Effect of exchange rate changes on cash and cash equivalents 541 (707)
Increase in cash and cash equivalents and restricted cash 10,252 27,435
Cash and cash equivalents and restricted cash, beginning of period 13,557 2,406
Cash and cash equivalents and restricted cash, end of period $ 23,809 $ 29,841
Supplemental Information
Cash paid for interest $ 11,966 $ 17,286
Cash paid for income taxes, net $ 15,421 $ 15,753
(unaudited)


Nine Months Ended September 30, 2022
	Common Stock					Treasury Stock
(in thousands, except share amounts)	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated (Deficit)		Total Stockholders' Equity
Balance as of December 31, 2021	60,830,853	$	608	$	1,084,288	(26,685,542)	$	(468,879)	$	(8,047)	$	(293,255)	$	314,715
Exercise of stock options	327,256	4		4,821		—	—		—		—		4,825
Exercise of stock warrants	2,622	—		64		—	—		—		—		64
Stock compensation expense	—	—		10,140		—	—		—		—		10,140
Cumulative translation adjustment	—	—		—		—	—		(12,611)		—		(12,611)
Net income	—	—		—		—	—		—		104,793		104,793
Balance as of September 30, 2022	61,160,731	$	612	$	1,099,313	(26,685,542)	$	(468,879)	$	(20,658)	$	(188,462)	$	421,926


Nine Months Ended September 30, 2021
	Common Stock					Treasury Stock
(in thousands, except share amounts)	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated (Deficit)		Total Stockholders' Equity
Balance as of December 31, 2020	59,590,422	$	596	$	1,059,624	(26,678,410)	$	(468,613)	$	—	$	(394,832)	$	196,775
Exercise of stock options	482,890	4		(405)		—	—		—		—		(401)
Exercise of stock warrants	570,469	6		13,889		—	—		—		—		13,895
Stock compensation expense	—	—		6,232		—	—		—		—		6,232
Cumulative translation adjustment	—	—		—		—	—		(8,545)		—		(8,545)
Net income	—	—		—		—	—		—		96,489		96,489
Balance as of September 30, 2021	60,643,781	$	606	$	1,079,340	(26,678,410)	$	(468,613)	$	(8,545)	$	(298,343)	$	304,445

The accompanying notes are an integral part of the consolidated financial statements.

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows


	Nine Months Ended September 30,
(in thousands)	2022		2021
Cash Flows from Operating Activities	(unaudited)		(unaudited)
Net income	$	104,793	$	96,489
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	65,954		80,675
Amortization of debt issuance costs	4,327		3,431
Deferred income taxes	(23,222)		(57,823)
Provision for credit losses and service credits	18,325		13,806
Stock-based compensation expense	10,140		6,232
Other components of net periodic pension (benefit)	(5,295)		(998)
Impairment charges	222		3,611
(Gain) loss on foreign currency exchange rates	(4,447)		748
Bargain purchase gain	(10,245)		—
Other	489		1,961
Changes in working capital items, excluding acquisitions:
Accounts receivable	(8,930)		48,791
Contract assets	2,226		3,837
Prepaid expenses and other assets	16,485		(3,184)
Accounts payable and accrued liabilities	(36,956)		(64,377)
Other liabilities	(29,645)		(11,660)
Net cash provided by operating activities	104,221		121,539

Cash Flows from Investing Activities
Additions to fixed assets and capitalized software	(19,345)		(20,053)
Proceeds from the sale of fixed assets	—		63
Acquisition of a business, net of cash acquired	(22,793)		(175,370)

Net cash (used in) investing activities	(42,138)		(195,360)

Cash Flows from Financing Activities
Proceeds from Term Loan	—		418,070
Proceeds from Term Loan, related party	—		260,930
Payments of Term Loan	(73,164)		(86,199)
Payments of Term Loan, related party	(8,347)		(36,801)
Payments of Senior Term Loan	—		(335,821)
Payments of Senior Term Loan, related party	—		(113,789)
Proceeds from ABL Facility	746,689		793,604
Payments of ABL Facility	(727,762)		(816,661)
Proceeds from exercises of stock options and stock warrants	4,888		18,144
Other	—		(13,960)
Net cash (used in) provided by financing activities	(57,696)		87,517

Effect of exchange rate changes on cash and cash equivalents	(1,610)		(3,446)
Increase in cash and cash equivalents and restricted cash	2,777		10,250
Cash and cash equivalents and restricted cash, beginning of period	13,557		2,406
Cash and cash equivalents and restricted cash, end of period	$	16,334	$	12,656

Supplemental Information
Cash paid for interest	$	42,435	$	52,491
Cash paid for income taxes, net	$	53,673	$	58,491

The accompanying notes are an integral part of the consolidated financial statements.

Thryv Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 Description of Business and Summary of Significant Accounting Policies

General

Thryv Holdings, Inc. (“Thryv” or the “Company”) provides small-to-medium sized businesses (“SMBs”) with print and digital marketing services and Software as a Service (“SaaS”) business management tools. The Company owns and operates Print Yellow Pages (“PYP” or ~~“Print”~~“Print”) and digital marketing services (“(“Digital”), which includes Internet Yellow Pages (“IYP”), search engine marketing (“SEM”), and other digital media services, including online display advertising, and search engine optimization (“SEO”) tools. In addition, through the Thryv® platform, the Company is a provider of SaaS business management tools designed for SMBs.

On January 21, 2022, Thryv, Inc., the ~~Company~~Company’s wholly-owned subsidiary, acquired Vivial Media Holdings, Inc. (“Vivial”), a marketing and advertising company with operations in the United States. Additionally, on March 1, 2021, the Company completed the acquisition of Sensis Holding Limited (“Thryv Australia”), a provider of marketing solutions serving SMBs in Australia.

During the second quarter of 2022, the Company reevaluated its segment reporting and determined that its Thryv International SaaS business should be reflected as a separate reportable segment. As such, beginning on April 1, 2022, the results of our international SaaS business are being presented separately from the results of our international marketing services business. Comparative prior periods have been recast to reflect the current presentation.

The Company reports its results based on 3four reportable segments (see Note 15, Segment Information):

•Thryv U.S. Marketing Services, which includes the Company's Print and Digital solutions ~~businesses;~~business in the United States;

•Thryv U.S. SaaS, which includes the Company's flagship SMB end-to-end customer experience ~~platform;~~platform in the United States;

•Thryv International Marketing Services, which is comprised of Thryv's Print and Digital solutions business in Australia; and

•Thryv International SaaS, which ~~is comprised of~~includes the ~~Thryv Australia business, Australia's leading provider of marketing solutions serving SMBs, and~~ SaaS business management tools for SMBs in Australia.

Basis of Presentation

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the ~~“SEC”~~“SEC”) regarding interim financial reporting. Accordingly, certain information and disclosures normally included in the complete financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The consolidated financial statements include the financial statements of Thryv Holdings, Inc. and its ~~wholly owned~~wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, consisting of only normal recurring items and accruals, necessary for the fair statement of the financial position, results of operations and cash flows of the Company for the periods presented. The consolidated financial statements as of and for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 have been prepared on the same basis as the audited annual financial statements. The consolidated balance sheet as of December 31, 2021 was derived from the audited annual financial statements. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with the Company’s audited financial statements and related footnotes for the year ended December 31, 2021.

Use of Estimates

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions about future events that affect the amounts reported and disclosed in the consolidated financial statements and

accompanying notes. Actual results could differ materially from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. The results of those estimates form the basis for making judgments about the carrying values of certain assets and liabilities.

Examples of reported amounts that rely on significant estimates include revenue recognition, allowance for credit losses, assets acquired and liabilities assumed in business combinations, capitalized costs to obtain a contract, certain amounts relating to the accounting for income taxes, including valuation allowance, indemnification asset, stock-based compensation expense, operating lease right-of-use assets and operating lease liabilities, accrued service credits, and pension obligations. Significant estimates are also used in determining the recoverability and fair value of fixed assets and capitalized software, operating lease right-of-use assets, goodwill and intangible assets.

Due to the novel strain of coronavirus, commonly referred to as COVID-19 (“COVID-19”) and the uncertainty of the extent of the impacts related thereto, certain estimates and assumptions may require increased judgment. As events continue to evolve and additional information becomes available, these estimates may change in future periods. It is difficult to predict what the ongoing impact of the pandemic will be on future periods.

Summary of Significant Accounting Policies

Except for the adoption of ASU 2021-08, ~~“Business~~“Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with ~~Customers”~~Customers” (“ASU ~~2021-08”~~2021-08”), as described below, there have been no changes to the Company’s significant accounting policies as of and for the three and nine months ended ~~March 31,~~September 30, 2022 as compared to the significant accounting policies included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).

Restricted Cash

The following table presents a reconciliation of Cash and cash equivalents and restricted cash reported within the Company's consolidated balance sheets to the amount shown in the Company's consolidated statements of cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021:


(in thousands)	(in thousands)	March 31, 2022		March 31, 2021		December 31, 2021		(in thousands)	September 30, 2022		September 30, 2021		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	21,446	$	29,841	$	11,262	Cash and cash equivalents	$	14,312	$	10,374	$	11,262
Restricted cash, included in Other current assets	Restricted cash, included in Other current assets	2,363		—		2,295		Restricted cash, included in Other current assets	2,022		2,282		2,295
Total Cash and cash equivalents and restricted cash	Total Cash and cash equivalents and restricted cash	$	23,809	$	29,841	$	13,557	Total Cash and cash equivalents and restricted cash	$	16,334	$	12,656	$	13,557

Foreign Currency

The functional currency of the Company’s foreign operating subsidiaries is the local currency. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates, with the resulting translation adjustments directly recorded to a separate component of ~~accumulated~~Accumulated other comprehensive income. Income and expense accounts are translated at the weighted-average exchange rates during the period.

Transaction gains or losses in currencies other than the functional currency are included as a component of Other income (expense), ~~net~~ in the Company's consolidated statements of operations and comprehensive income (loss).

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination, in accordance with the revenue recognition guidance, as if the acquirer had entered into the original contract at the same time, and on the same terms, as the acquiree. Generally, this will result in the acquirer recognizing contract assets and liabilities at the same amounts recorded by the acquiree as of the acquisition date. Under the current standard, an acquirer generally recognizes such items at fair value on the acquisition date. The Company adopted ASU 2021-08 on January 1, 2022 and applied it to the contract assets and liabilities acquired from Vivial.

Note 2 Acquisitions

Vivial Acquisition

On January 21, 2022 (the “Vivial Acquisition Date”), Thryv, Inc., the ~~Company~~Company’s wholly-owned subsidiary, acquired Vivial, a marketing and advertising company, for ~~$22.0~~$22.8 million in cash (net of $8.5 million of cash acquired), subject to certain adjustments (the “Vivial Acquisition”). The assets acquired as part of these transactions consisted primarily of ~~$26.4~~$27.7 million in current assets and $9.8 million in fixed and intangible assets, consisting primarily of customer relationships and technology assets, ~~$15.3~~$13.9 million in deferred tax assets, along with a ~~$7.3~~$10.2 million bargain purchase gain. The ~~acquisition is expected to result~~Vivial Acquisition resulted in a bargain purchase gain in part because the seller was motivated to divest its marketing services business that iswas in secular decline. The Company also assumed liabilities of ~~$24.2~~$20.4 million, consisting primarily of accounts payable and accrued liabilities. The assessment of fair value of assets acquired and liabilities assumed is preliminary and is based on information that was available to management at the time these consolidated financial statements were prepared. The finalization of the Company’s acquisition accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material.

The Company accounted for the Vivial Acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). This requires that the assets acquired and liabilities assumed are measured at fair value. With the assistance of a third-party valuation firm, the Company determined, using Level 3 inputs (see Note 4, Fair Value Measurements), the fair value of certain assets and liabilities, including fixed assets and intangible assets by applying the income approach and the cost approach. Specific to intangible assets, client relationships were valued using a combination of the income and excess earnings approach, whereas trade names were valued using a relief of royalty method and assumptions related to Vivial’s assets acquired and liabilities assumed. The preliminary purchase price allocation is expected to be finalized within 12 months after the Vivial Acquisition Date.

The fair values of fixed assets, intangible assets and other assets acquired and liabilities assumed have been prepared on a preliminary basis with information currently available and are subject to change. Management is still reviewing the characteristics and assumptions related to Vivial’s assets acquired and liabilities assumed.

The following table summarizes the assets acquired and liabilities assumed at the Vivial Acquisition Date:


(in thousands)
Current assets	$	~~26,388~~27,705
Fixed and intangible assets	9,759
Deferred tax assets	~~15,314~~13,892
Other assets	~~2,052~~2,103
Current liabilities	~~(22,948)~~(18,775)
Other liabilities	~~(1,264)~~(1,646)
Bargain purchase gain	~~(7,297)~~(10,245)
Fair value allocated to net assets acquired, net of bargain purchase gain	$	~~22,004~~22,793

The deferred tax asset primarily relates to excess carryover tax basis over book basis in intangibles as a result of the assessment of the fair value of the assets and liabilities assumed using the acquisition method of accounting.

The Vivial Acquisition has contributed ~~$23.3~~$72.8 million in revenue ~~and $0.8 million~~ ~~in net income~~ since the Vivial Acquisition Date.

As of September 30, 2022, the Company increased the purchase price by $0.8 million as a result of customary working capital adjustments, decreased the sales tax reserve by $3.2 million and reclassified the presentation of certain assets and liabilities. The effect of these measurement period adjustments resulted in a $2.9 million increase in the bargain purchase gain for the nine months ended September 30, 2022.

Thryv Australia Acquisition

On March 1, 2021 (the “Thryv Australia Acquisition Date”), Thryv Australia Holdings Pty Ltd (formerly Thryv Australia Pty Ltd) (“Buyer”), an Australian proprietary limited company and a direct wholly-owned subsidiary of Thryv International Holding LLC, a direct and ~~wholly owned~~wholly-owned subsidiary of the Company, acquired all of the issued and outstanding equity interests of (i) Sunshine NewCo Pty Ltd, an Australian proprietary limited company, and its subsidiaries, and (ii) ~~Thryv Australia,~~Sensis Holding Limited, a private limited company incorporated under the laws of England and Wales, and its subsidiaries (collectively, the “Thryv Australia Acquisition”). The Thryv Australia Acquisition expanded the Company's market share with a broader

geographical footprint. Additionally, the Thryv Australia Acquisition provided the Company with a significant increase in clients. Thryv Australia is a provider of marketing solutions serving SMBs in Australia. Control was obtained by means of acquiring all the voting interests.

In connection with the Thryv Australia Acquisition, the Company paid consideration of approximately $216.2 million in cash, subject to customary closing adjustments, financed by the Term Loan (as defined in Note 8, Debt Obligations) that was entered into on the Thryv Australia Acquisition Date. All acquisition-related costs, amounting to $8.7 million, were expensed as incurred by the Company and no portion of these costs are included in consideration transferred. These costs were presented within General and administrative expense in the Company's consolidated statement of operations and comprehensive income (loss). Additionally, as part of the effort to fund the Thryv Australia Acquisition, the Company incurred debt issuance costs of $4.2 million related to the Term Loan, of which $2.5 million was capitalized and is being amortized using the effective interest method. See Note 8, Debt Obligations.

The Company accounted for the Thryv Australia Acquisition using the acquisition method of accounting in accordance with ASC 805. This requires that the assets acquired and liabilities assumed are measured at fair value. With the assistance of a third-party valuation firm, the Company determined, using Level 3 inputs (see Note 4, Fair Value Measurements), the fair value of certain assets and liabilities, including fixed assets, intangible assets, and contract liabilities, by applying a combination of the income approach and the cost approach. Specific to intangible assets, client relationships were valued using a combination of the income and excess earnings approach, whereas trade names were valued using a relief of royalty method.

The following table summarizes the consideration transferred and the purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Thryv Australia Acquisition Date:


(in thousands)
Total cash consideration	$	216,164
Total purchase consideration, as allocated below:	$	216,164

Cash and cash equivalents	$	40,794
Accounts receivable and other current assets	72,404
Other assets	34,962
Fixed assets and capitalized software	18,856
Intangible assets:
Client relationships (estimated useful life of 3.5 years)	101,839
Trademarks (estimated useful life of 3.5 years)	24,877
Accounts payable	(15,038)
Accrued liabilities	(41,724)
Contract liabilities	(27,075)
Other current liabilities	(6,733)
Deferred tax liabilities	(35,884)
Other liabilities	(15,506)
Total identifiable net assets	$	151,772
Goodwill	64,392
Total net assets acquired	$	216,164

The excess of the purchase price over the fair value of the identifiable net assets acquired and the liabilities assumed was allocated to goodwill. The recognized goodwill of $64.4 million was primarily related to the benefits expected from the Thryv Australia Acquisition and was allocated to the Thryv International Marketing Services segment. The goodwill recognized is not deductible for income tax purposes.

Pro Forma Results

The pro forma combined financial information presented below was derived from the historical financial records of Thryv and Thryv Australia and presents the operating results of the combined Company, as if the Thryv Australia Acquisition had occurred on January 1, 2020. The pro forma data gives effect to historical operating results with adjustments to interest expense, amortization and depreciation expense and related tax effects.

The pro forma financial information is not necessarily indicative of the consolidated results of operations that would have been realized had the Thryv Australia Acquisition been completed as of January 1, 2020, nor is it meant to be indicative of future results of operations that the combined entity will achieve:


	~~Three Months Ended March 31,~~
~~(in thousands) (unaudited)~~	~~2021~~
~~Revenue~~	$	~~318,752~~
~~Net income~~	~~52,415~~


	Three Months Ended September 30,		Nine Months Ended September 30,
(in thousands)	2021		2021
Revenue	$	297,290	$	937,204
Net income	37,440		135,671

Note 3 Revenue Recognition

The Company has determined that each of its Print and Digital marketing services and SaaS business management tools services is distinct and represents a separate performance obligation. The client can benefit from each service on its own or together with other resources that are readily available to the client. Services are separately identifiable from other promises in the contract. Control over the Company’s Print services transfers to the client upon delivery of the published directories containing their advertisements to the intended market(s). Therefore, revenue associated with Print services is recognized at a point in time upon delivery to the intended market(s). The Company bills customers for Print advertising services monthly over the relative contract term. The difference between the timing of recognition of Print advertising revenue and monthly billing generates the Company’s unbilled receivables balance. The unbilled receivables balance is reclassified as billed accounts receivable through the passage of time as the customers are invoiced each month. SaaS and Digital marketing services are recognized using the series guidance. Under the series guidance, the Company's obligation to provide services is the same for each day under the contract, and therefore represents a single performance obligation. Revenue associated with SaaS and Digital marketing services is recognized over time using an output method to measure the progress toward satisfying a performance obligation.

Disaggregation of Revenue

The Company presents disaggregated revenue based on the type of service within its segment footnote. During the ~~three months ended March 31,~~first quarter of 2022, the Company adjusted the disaggregated service revenue methodology it uses to manage the business. The ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 reflect the current methodology. See Note 15, Segment Information.

Contract Assets and Liabilities

The timing of revenue recognition may differ from the timing of billing to the Company’s clients. These timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) as disclosed on the Company's consolidated balance sheets. Contract assets represent the Company's right to consideration when revenue recognized exceeds the receivable from the client because the consideration allocated to fulfilled performance obligations exceeds the Company’s right to payment, and the right to payment is subject to more than the passage of time. Contract liabilities consist of advance payments and revenue deferrals resulting from the allocation of the consideration to performance obligations. For the three and nine months ended ~~March 31,~~September 30, 2022, the Company recognized Revenue of $12.9 million and $38.8 million, respectively, that was recorded in Contract liabilities as of December 31, 2021. For the three and nine months ended ~~March 31,~~September 30, 2021, the Company recognized Revenue of $4.7 million and $14.2 million, respectively, that was recorded in Contract liabilities as of December 31, 2020.

Pandemic Credits

During the three and nine months ended ~~March 31,~~September 30, 2021, the Company recognized pandemic credits of $0.2 million and $~~2.2~~3.2 million, respectively, provided to customers most impacted by COVID-19. The Company ~~has~~ reflected these price concessions as a reduction to ~~revenue~~Revenue in the consolidated statements of operations and comprehensive ~~income.~~income (loss). During the three and nine months ended ~~March 31,~~September 30, 2022, the Company did not recognize any pandemic credits.

Note 4 Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Unobservable inputs that reflect the Company's own assumptions incorporated into valuation techniques.

These valuations require significant judgment.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or

liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have a significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach.

The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels at the end of each reporting period. Other than the value of the indemnification asset described below, during the three months ended March 31, 2022 and 2021, there were no transfers between levels in the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company’s non-financial assets such as goodwill, intangible assets, fixed assets, capitalized software and operating lease right-of-use assets are adjusted to fair value when the net book values of the assets exceed their respective fair values, resulting in an impairment charge. Such fair value measurements are predominantly based on Level 3 inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Indemnification Asset

On June 30, 2017, the Company completed the acquisition of YP Holdings, Inc. (the “YP Acquisition”). As further discussed in Note 13, Contingent Liabilities, as part of the YP Acquisition agreement, the Company is indemnified for an uncertain tax position for up to the fair value of 1,804,715 shares held in escrow, subject to certain contract limitations (the “indemnification asset”). Due to an increase in the Company’s common stock share price as of ~~March 31,~~September 30, 2022, the number of shares expected to be returned to seller is ~~880,032,~~1,130,892, which represents the number of shares required to satisfy the uncertain tax position less $8.0 million.

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the fair value of the Company's Level 1 indemnification asset was ~~$24.7~~$25.8 million and $24.3 million, respectively. A gain of ~~$0.4~~$0.6 million and $1.5 million from the change in fair value of the Company’s Level 1 indemnification asset during the three and nine months ended ~~March 31,~~September 30, 2022, respectively, was recorded in General and administrative expense on the Company's ~~consolidated statements~~Consolidated Statements of ~~operations~~Operations and ~~comprehensive income.~~Comprehensive Income.

Benefit Plan Assets

The fair value of benefit plan assets is measured and recorded on the Company's consolidated balance sheets using Level 2 inputs. See Note 9, Pensions.

Fair Value of Financial Instruments

The Company considers the carrying amounts of cash, trade receivables, and accounts payable to approximate fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment.

Additionally, the Company considers the carrying amounts of its ABL Facility (as defined in Note 8, Debt Obligations) and financing obligations to approximate their respective fair values due to their short-term nature and approximation of interest rates to market rates. These fair value measurements are considered Level 2. See Note 8, Debt Obligations.

The Term Loan (as defined in Note 8, Debt Obligations) is carried at amortized cost; however, the Company estimates the fair value of the Term Loan for disclosure purposes. The fair value of the Term Loan is determined based on quoted prices that are observable in the ~~market place~~marketplace and are classified as Level 2 measurements. See Note 8, Debt Obligations.

The following table sets forth the carrying amount and fair value of the Term Loan:


		March 31, 2022				December 31, 2021					September 30, 2022				December 31, 2021
(in thousands)	(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan, net	Term Loan, net	$	506,324	$	513,919	$	522,547	$	533,651	Term Loan, net	$	444,871	$	443,759	$	522,547	$	533,651

Note 5 Goodwill and Intangible Assets

Goodwill

The following tables set forth the changes in the carrying amount of goodwill for the Company for ~~three~~nine months ended ~~March 31,~~September 30, 2022 and the year ended December 31, 2021:


											Thryv U.S.				Thryv International
(in thousands)	(in thousands)	Marketing Services		SaaS		Thryv International		Total		(in thousands)	Marketing Services		SaaS		Marketing Services		SaaS		Total
Balance as of December 31, 2020	Balance as of December 31, 2020	$	390,573	$	218,884	$	—	$	609,457	Balance as of December 31, 2020	$	390,573	$	218,884	$	—	$	—	$	609,457
Thryv Australia Acquisition	Thryv Australia Acquisition	—		—		64,392		64,392		Thryv Australia Acquisition	—		—		64,392		—		64,392
Effects of foreign currency translation	Effects of foreign currency translation	—		—		(1,963)		(1,963)		Effects of foreign currency translation	—		—		(1,963)		—		(1,963)
Balance as of December 31, 2021	Balance as of December 31, 2021	$	390,573	$	218,884	$	62,429	$	671,886	Balance as of December 31, 2021	$	390,573	$	218,884	$	62,429	$	—	$	671,886
Effects of foreign currency translation	Effects of foreign currency translation	—		—		1,827		1,827		Effects of foreign currency translation	—		—		(7,267)		—		(7,267)
Balance as of March 31, 2022		$	390,573	$	218,884	$	64,256	$	673,713
Balance as of September 30, 2022										Balance as of September 30, 2022	$	390,573	$	218,884	$	55,162	$	—	$	664,619

Intangible Assets

The following tables set forth the details of the Company's intangible assets as of ~~March 31,~~September 30, 2022 and December 31, 2021:


		As of March 31, 2022										As of September 30, 2022
(in thousands)	(in thousands)	Gross		Accumulated Amortization		Effects of Foreign Currency Translation		Net		Weighted Average Remaining Amortization Period in Years	(in thousands)	Gross		Accumulated Amortization		Net		Weighted Average Remaining Amortization Period in Years
Client relationships	Client relationships	$	805,095	$	(757,153)	$	1,259	$	49,201	2.5	Client relationships	$	790,947	$	(761,033)	$	29,914	2.0
Trademarks and domain names	Trademarks and domain names	225,377		(200,118)		403		25,662		1.7	Trademarks and domain names	221,919		(209,241)		12,678		1.4
Patented technologies	Patented technologies	19,600		(19,600)		—		—		0.0	Patented technologies	19,600		(19,600)		—		0.0
Covenants not to compete	Covenants not to compete	4,436		(1,842)		—		2,594		2.3	Covenants not to compete	5,240		(2,502)		2,738		2.2
Total intangible assets	Total intangible assets	$	1,054,508	$	(978,713)	$	1,662	$	77,457	2.2	Total intangible assets	$	1,037,706	$	(992,376)	$	45,330	2.1


		As of December 31, 2021										As of December 31, 2021
(in thousands)	(in thousands)	Gross		Accumulated Amortization		Effects of Foreign Currency Translation		Net		Weighted Average Remaining Amortization Period in Years	(in thousands)	Gross		Accumulated Amortization		Net		Weighted Average Remaining Amortization Period in Years
Client relationships	Client relationships	$	803,642	$	(748,460)	$	(5,326)	$	49,856	2.7	Client relationships	$	797,053	$	(747,197)	$	49,856	2.7
Trademarks and domain names	Trademarks and domain names	225,177		(193,978)		(1,389)		29,810		1.9	Trademarks and domain names	223,582		(193,772)		29,810		1.9
Patented technologies	Patented technologies	19,600		(19,600)		—		—		0.0	Patented technologies	19,600		(19,600)		—		0.0
Covenants not to compete	Covenants not to compete	4,373		(1,462)		—		2,911		2.6	Covenants not to compete	4,373		(1,462)		2,911		2.6
Total intangible assets	Total intangible assets	$	1,052,792	$	(963,500)	$	(6,715)	$	82,577	2.4	Total intangible assets	$	1,044,608	$	(962,031)	$	82,577	2.4

Amortization expense for intangible assets for the three and nine months ended ~~March 31,~~September 30, 2022 was $14.1 million and $39.0 million, respectively. Amortization expense for the three and nine months ended September 30, 2021 was~~$13.1~~ $21.3 million and ~~$9.9~~$52.5 million, respectively.

Estimated aggregate future amortization expense by fiscal year for the Company's intangible assets is as follows:


(in thousands)	(in thousands)	Estimated Future Amortization Expense		(in thousands)	Estimated Future Amortization Expense
2022	2022	$	40,097	2022	$	12,324
2023	2023	23,923		2023	20,674
2024	2024	12,714		2024	11,452
2025	2025	723		2025	880
Total	Total	$	77,457	Total	$	45,330

Note 6 Allowance for Credit Losses

The following table sets forth the Company's allowance for credit losses:


(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021
Balance as of January 1	Balance as of January 1	$	17,475	$	33,368	Balance as of January 1	$	17,475	$	33,368
Acquisitions	Acquisitions	—		2,733		Acquisitions	—		2,733
Additions (1)	Additions (1)	3,239		2,018		Additions (1)	10,669		3,211
Deductions (2)	Deductions (2)	(2,953)		(3,318)		Deductions (2)	(14,960)		(19,833)
Balance as of March 31 (3)		$	17,761	$	34,801
Balance as of September 30 (3)						Balance as of September 30 (3)	$	13,184	$	19,479

(1) For the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, represents provision for bad debt expense of $10.7 million and $3.2 million, respectively, which is included in General and ~~$2.0~~administrative expense. For the three months ended September 30, 2022 and 2021, the Company recorded a provision for bad debt expense of $2.8 million and $2.9 million, respectively, which is included in General and administrative expense.

(2) For the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, represents amounts written off as uncollectible, net of recoveries.

(3) As of ~~March 31,~~September 30, 2022, ~~$17.7~~$13.1 million of the allowance is attributable to Accounts receivable and less than $0.1 million is attributable to Contract assets. As of ~~March 31,~~September 30, 2021, ~~$34.6~~$19.4 million of the allowance is attributable to Accounts receivable and ~~$0.2~~$0.1 million is attributable to Contract assets.

The Company’s exposure to expected credit losses depends on the financial condition of its clients and other macroeconomic factors. The Company maintains an allowance for credit losses based upon its estimate of potential credit losses. This allowance is based upon historical and current client collection trends, any identified client-specific collection issues, and current as well as expected future economic conditions and market trends.

Note 7 Accrued Liabilities

The following table sets forth additional financial information related to the Company's accrued liabilities:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
Accrued salaries and related expenses	Accrued salaries and related expenses	$	63,231	$	58,440	Accrued salaries and related expenses	$	57,988	$	58,440
Accrued severance	Accrued severance	470		1,720		Accrued severance	300		1,720
Accrued taxes	Accrued taxes	24,416		17,660		Accrued taxes	18,586		17,660
Accrued expenses	Accrued expenses	55,424		51,224		Accrued expenses	53,484		51,224
Accrued service credits	Accrued service credits	2,809		2,769		Accrued service credits	2,705		2,769
Accrued liabilities	Accrued liabilities	$	146,350	$	131,813	Accrued liabilities	$	133,063	$	131,813

Note 8 Debt Obligations

The following table sets forth the Company's outstanding debt obligations as of ~~March 31,~~September 30, 2022 and December 31, 2021:


(in thousands)	(in thousands)	Maturity	Interest Rate		March 31, 2022		December 31, 2021		(in thousands)	Maturity	Interest Rate		September 30, 2022		December 31, 2021
Term Loan	Term Loan	March 1, 2026	LIBOR +	8.5%	$	524,500	$	542,000	Term Loan	March 1, 2026	LIBOR +	8.5%	$	460,489	$	542,000
ABL Facility (Fifth Amendment)	ABL Facility (Fifth Amendment)	March 1, 2026	3-month LIBOR +	3.0%	62,975		39,929		ABL Facility (Fifth Amendment)	March 1, 2026	3-month LIBOR +	3.0%	58,856		39,929
Unamortized original issue discount and debt issuance costs	Unamortized original issue discount and debt issuance costs				(18,176)		(19,453)		Unamortized original issue discount and debt issuance costs				(15,618)		(19,453)
Total debt obligations	Total debt obligations				$	569,299	$	562,476	Total debt obligations				$	503,727	$	562,476
Current portion of Term Loan	Current portion of Term Loan				(70,000)		(70,000)		Current portion of Term Loan				(70,000)		(70,000)
Total long-term debt obligations	Total long-term debt obligations				$	499,299	$	492,476	Total long-term debt obligations				$	433,727	$	492,476

Term Loan

On March 1, 2021, the Company entered into a Term Loan credit agreement (the “Term Loan”). The proceeds of the Term Loan were used to finance the Thryv Australia Acquisition, refinance in full the Company's existing term loan facility (the “Senior Term Loan”), and pay fees and expenses related to the Thryv Australia Acquisition and related financing.

The Term Loan established a senior secured term loan facility (the “Term Loan Facility”) in an aggregate principal amount equal to $700.0 million, of which 38.4% was held by related parties who ~~are~~were equity holders of the Company, as of March 1, 2021. The Company defines a related party as any shareholder owning more than 5% of the Company's voting securities. As of ~~March 31,~~September 30, 2022, ~~13.9%~~6.9% of the Term Loan was held by related parties who ~~are~~were equity holders of the ~~Company.~~Company, as of that date.

The Term Loan Facility matures on March 1, 2026 and borrowings under the Term Loan Facility bear interest at a fluctuating rate per annum equal to, at the Company’s option, LIBOR or a base rate, in each case, plus an applicable margin per annum equal to (i) 8.50% (for LIBOR loans) and (ii) 7.50% (for base rate loans). The Term Loan Facility requires mandatory amortization payments equal to $17.5 million per fiscal quarter.

The net proceeds from the Term Loan of $674.9 million (net of original issue discount costs of $21.0 million and third-party fees of $4.1 million) were used to repay the remaining $449.6 million outstanding principal balance of the Senior Term Loan, accrued interest of $0.4 million, and third-party fees of $0.1 million. The Company accounted for this transaction with existing lenders as a modification. The transaction with other lenders party to only the Senior Term Loan was accounted for as an extinguishment.

Accordingly, total third-party fees paid were $4.2 million, of which $1.7 million was immediately charged to General and administrative expense on the Company's consolidated statement of operations and comprehensive ~~income.~~income (loss). The remaining third-party fees of $2.5 million were deferred as debt issuance costs and will be amortized to interest expense, over the term of the loan, using the effective interest method. Additionally, there were unamortized debt issuance costs of $0.4 million on the existing Senior Term Loan, of which $0.3 million was written off and recorded as a loss on early extinguishment of debt on the Company's consolidated statement of operations and comprehensive ~~income.~~income (loss). The remaining unamortized debt issuance costs of $0.1 million ~~will be~~were deferred as debt issuance costs and are being amortized to interest expense, over the term of the Term Loan, using the effective interest method. The Term Loan, which was incurred by Thryv, Inc., the Company’s operating subsidiary, is secured by all the assets of Thryv, Inc., certain of its subsidiaries and the Company, and is guaranteed by the Company and certain of its subsidiaries.

In accordance with the Term Loan and the Senior Term Loan, the Company recorded interest expense with related parties for the three months ended ~~March 31,~~September 30, 2022 and 2021 of ~~$1.8~~$0.9 million and ~~$4.1~~$4.5 million, respectively, and for the nine months ended September 30, 2022 and 2021 of $3.5 million and $13.2 million, respectively.

The Company has recorded accrued interest of ~~$4.9~~$0.8 million and $3.4 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. Accrued interest is included in Other current liabilities on the Company's consolidated balance sheets.

Term Loan Covenants

The Term Loan contains certain covenants that, subject to exceptions, limit or restrict the borrower's incurrence of additional indebtedness, liens, investments, loans, advances, guarantees, acquisitions, sales of assets, sale-leaseback transactions, swap agreements, payments of dividends or distributions, payments in respect of certain indebtedness, certain affiliate transactions, restrictive amendments to agreements, changes in business, amendments of certain material documents, capital expenditures, mergers, consolidations and liquidations, and use of the proceeds. Additionally, the Company is required to maintain compliance with a Total Net Leverage Ratio, calculated as Net Debt to Consolidated EBITDA, which shall not be greater than 3.0 to 1.0 as of the last day of each fiscal quarter. As of ~~March 31,~~September 30, 2022, the Company was in compliance with its Term Loan covenants. The Company also expects to be in compliance with these covenants for the next twelve months.

ABL Facility

On March 1, 2021, the Company entered into an agreement to amend (the “ABL Amendment”) the June 30, 2017 ABL Facility (the “ABL Facility”). The ABL Amendment was entered into in order to permit the Senior Term Loan refinancing, the Thryv Australia Acquisition and make certain other changes to the ABL credit agreement, including, among others:

•revise the maximum revolver amount to $175.0 million;

•reduce the interest rate per annum to (i) 3-month LIBOR plus 3.00% for LIBOR loans and (ii) base rate plus 2.00% for base rate loans;

•reduce the commitment fee on undrawn amounts under the ABL Facility to 0.375%;

•extend the maturity date of the ABL Facility to the earlier of March 1, 2026 and 91 days prior to the stated maturity

date of the Term Loan Facility;

•add the Australian subsidiaries acquired pursuant to the Thryv Australia Acquisition as borrowers and guarantors, and establish an Australian borrowing base; and

•make certain other conforming changes consistent with the Term Loan agreement.

The Company accounted for this transaction as a modification of the ABL Facility. Accordingly, the existing unamortized debt issuance costs of $2.4 million, as well as additional third-party fees and lender fees of $0.9 million associated with the latest ABL Amendment, ~~will be~~were deferred and are being amortized over the new term of the ABL Facility.

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had debt issuance costs with a remaining balance of ~~$2.6~~$2.2 million and $2.7 million, respectively. These debt issuance costs are included in Other assets on the Company's consolidated balance sheets.

As of ~~March 31,~~September 30, 2022, the Company had borrowing capacity of ~~$68.9~~$72.3 million under the ABL Facility.

ABL Facility Covenants

The ABL Facility contains certain covenants that, subject to exceptions, limit or restrict the borrower's incurrence of additional indebtedness, liens, investments, loans, advances, guarantees, acquisitions, disposals of assets, payments of certain indebtedness, certain affiliate transactions, changes in fiscal year or accounting methods, issuance or sale of equity instruments, mergers, liquidations and consolidations, use of proceeds, maintenance of certain deposit accounts, compliance with certain ERISA requirements and compliance with certain Australian tax requirements. The Company is required to maintain compliance with a fixed charge coverage ratio that must exceed a ratio of 1.00. The fixed charge coverage ratio is defined as, with respect to any fiscal period determined on a consolidated basis in accordance with GAAP, the ratio of (a) Consolidated EBITDA as defined in the ABL credit agreement for such period minus capital expenditures incurred during such period, to (b) fixed charges. Fixed charges is defined as, with respect to any fiscal period determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) consolidated interest expense accrued (other than amortization of debt issuance costs, and other non-cash interest expense) during such period, (b) scheduled principal payments in respect of indebtedness paid during such period, (c) all federal, state, and local income taxes accrued during such period, (d) all management, consulting, monitoring, and advisory fees paid to certain individuals or their affiliates during such period, and (e) all restricted payments paid during such period (whether in cash or other property, other than common equity interest). The Company is also required to maintain excess availability of at least $14.0 million, and U.S. excess availability of $10.0 million, in each case, at all times. As of ~~March 31,~~September 30, 2022, the Company was in compliance with its ABL Facility covenants. The Company also expects to be in compliance with these covenants for the next twelve months.

Note 9 Pensions

The Company maintains pension obligations associated with non-contributory defined benefit pension plans that are currently frozen and incur no additional service costs.

The Company immediately recognizes actuarial gains and losses in its operating results in the ~~year~~period in which the gains and losses occur. The Company estimates the interest cost component of net periodic pension cost by utilizing a full yield curve approach and applying the specific spot rates along the yield curve used in the determination of the benefit obligations of the relevant projected cash flows. This method provides a more precise measurement of interest costs by improving the correlation between projected cash flows to the corresponding spot yield curve rates.

Net Periodic Pension Cost

The following table details the other components of net periodic pension cost for the Company's pension plans:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021		2022		2021
Interest cost	Interest cost	$	3,418	$	2,616	Interest cost	$	3,624	$	2,617	$	10,460	$	7,851
Expected return on assets	Expected return on assets	(3,488)		(2,890)		Expected return on assets	(3,224)		(2,890)		(10,201)		(8,670)
Settlement (gain)		—		(15)
Remeasurement (gain)		—		(164)
Net periodic pension (benefit)		$	(70)	$	(453)
Settlement loss (gain)						Settlement loss (gain)	62		—		(328)		(15)
Remeasurement loss (gain)						Remeasurement loss (gain)	3,466		—		(5,226)		(164)
Net periodic pension cost (benefit)						Net periodic pension cost (benefit)	$	3,928	$	(273)	$	(5,295)	$	(998)

Since all pension plans are frozen and no employees accrue future pension benefits under any of the pension plans, the rate of compensation increase assumption is no longer needed. The Company determines the weighted-average discount rate by applying a yield curve comprised of the yields on several hundred high-quality, fixed income corporate bonds available on the measurement date to expected future benefit cash flows.

During the three months ended ~~March 31,~~September 30, 2022, the Company recognized a settlement loss of $0.1 million, and as a result of an interim actuarial valuation due to a settlement in one of the Company's pension plans, the Company recognized a remeasurement loss of $3.5 million. During the nine months ended September 30, 2022, the Company recognized a settlement gain of $0.3 million, andas a result of an interim actuarial valuation due to settlements in one of the Company's pension plans, the Company recognized a remeasurement gain of $5.2 million. During the nine months ended September 30, 2021, the Company recognized a settlement loss of less than $0.1 million and a remeasurement gain of $0.2 million. During the three months ended September 30, 2021, the Company did not recognize a settlement gain or a remeasurement gain.

During the three and nine months ended September 30, 2022, the Company made cash contributions of ~~$7.5~~$7.5 million and $22.5 million, respectively, to the qualified plans and contributions and associated payments of $0.1 million and $~~0.1~~0.4 million, respectively, to the non-qualified plans. During the three and nine months ended ~~March 31,~~September 30, 2021, the Company made cash contributions of $5.0 million and $20.0 million, respectively, to the qualified plans, and contributions and associated payments of ~~$0.7~~$0.2 million and $1.0 million, respectively, to the non-qualified plans.

For the fiscal year 2022, the Company expects to contribute approximately ~~$25.0~~$30.0 million to the qualified plans and approximately ~~$1.1~~$0.8 million to the non-qualified plans.

1719

Note 10 Stock-Based Compensation and Stockholders' Equity

~~Stock Options~~

During the three months ended March 31, 2022, the Company issued an aggregate of 82,810 shares of common stock to employees upon the exercise of options previously granted under the 2016 and 2020 Stock Incentive Plan(s) at exercise prices ranging from $3.68 to $13.82 per share.

During the three months ended March 31, 2021, the Company issued an aggregate of 215,544 shares of common stock to employees upon the exercise of options previously granted under the 2016 Stock Incentive Plan at exercise prices ranging from $3.68 to $13.82 per share.

~~Stock-based compensation expense recognized for stock option awards was $1.6 million and $1.7 million during thethree months ended March 31, 2022 and 2021, respectively.~~

~~Employee Stock Purchase Plan~~

~~The 2021 Employee Stock Purchase Plan (“ESPP”~~) was approved by the Company's board of directors on September 10, 2020 and became effective on September 23, 2020. Under the ESPP, eligible employees may purchase a limited number of shares of our common stock at the lesser of 85% of the market value at the beginning of the offering period or 85% of the market value at the end of the offering period. The ESPP is intended to enable eligible employees to use payroll deductions to purchase shares of stock in offerings under the plan, and thereby acquire an interest in the Company. The maximum aggregate number of shares of stock available for purchase under the plan by eligible employees is 2,000,000 shares. ~~NaN~~ shares were issued through the ESPP during the three months ended March 31, 2022 or 2021. Stock-based compensation expense recognized for the ESPP was $0.4 million and $0.3 million during the three months ended March 31, 2022 and 2021, respectively.

Stock-Based Compensation Expense

The following table sets forth stock-based compensation expense recognized by the Company in the following line items in the Company's consolidated statements of operations and comprehensive income during the periods presented:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021		2022		2021
Cost of services	Cost of services	$	76	$	81	Cost of services	$	107	$	156	$	314	$	320
Sales and marketing	Sales and marketing	769		832		Sales and marketing	1,967		1,060		4,569		2,686
General and administrative	General and administrative	1,083		1,058		General and administrative	2,328		1,124		5,257		3,226
Stock-based compensation expense	Stock-based compensation expense	$	1,928	$	1,971	Stock-based compensation expense	$	4,402	$	2,340	$	10,140	$	6,232

The following table sets forth stock-based compensation expense by award type during the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Stock options	$	1,561	$	1,572	$	4,621	$	4,813
ESPP	243		768		1,376		1,419
RSUs	1,404		—		2,196		—
PSUs	1,194		—		1,947		—
Stock-based compensation expense	$	4,402	$	2,340	$	10,140	$	6,232

Restricted Stock Units

On May 3, 2022, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) approved a form of award agreement (the “RSU Award Agreement”) for grants of restricted stock units (“RSUs”) to the Company’s named executive officers under the Company’s 2020 Incentive Award Plan (the “2020 Plan”). Additionally, on June 17, 2022, the Compensation Committee approved a form of award agreement for grants of RSUs to the Company’s non-employee directors (the “Non-Employee Director RSU Award Agreement”) under the 2020 Plan. Pursuant to the RSU Award Agreement and the Non-Employee Director RSU Award Agreement, each RSU entitles the recipient to one share of the Company’s common stock, subject to time-based vesting conditions set forth in individual agreements.

The fair value of each RSU grant is determined based upon the market closing price of the Company’s common stock on the date of grant. The RSUs vest over the requisite service period, which ranges between eight months and three years from the date of grant, subject to the continued employment of the employees and services of the non-employee board members.

As of September 30, 2022, the unrecognized stock-based compensation expense related to the unvested portion of the Company's RSU awards was approximately $11.4 million and is expected to be recognized over a weighted average period of 2.17 years. As of September 30, 2022, there were 525,735 RSUs expected to vest with a weighted average grant-date fair value of $25.93 per unit.

Performance-Based Restricted Stock Units

On May 3, 2022, the Compensation Committee approved a form of award agreement (the “PSU Award Agreement”) for grants of performance-based restricted stock units (“PSUs”), under the Company’s 2020 Plan. Pursuant to the PSU Award Agreement, each PSU entitles the recipient to one share of the Company’s common stock, subject to performance-based vesting conditions set forth in individual agreements.

The PSUs will vest, if at all, following the achievement of certain performance measures over a three year performance period, relative to certain performance and market conditions. Grant date fair value of PSUs, that vest relative to a performance condition, is measured based upon the market closing price of the Company’s common stock on the date of grant and expensed on a straight-line basis when it becomes probable that the performance conditions will be satisfied, net of forfeitures, over the service period of the awards, which is generally the vesting term of three years. Grant date fair value of PSUs, that vest relative to a market condition, is measured using a Monte Carlo simulation model and expensed on a straight-line basis, net of forfeitures, over the service period of the awards, which is generally the vesting term of three years.

As of September 30, 2022, the unrecognized stock-based compensation expense related to the unvested portion of the Company's PSU awards was approximately $10.7 million and is expected to be recognized over a weighted average period of 2.26 years. As of September 30, 2022, there were 473,371 PSUs expected to vest with a weighted average grant-date fair value of $26.76 per unit.

Stock Options

During the nine months ended September 30, 2022, the Company issued an aggregate of 170,006 shares of common stock to employees upon the exercise of options previously granted under the 2016 and 2020 Stock Incentive Plan(s) at exercise prices ranging from $3.68 to $13.82 per share.

During the nine months ended September 30, 2021, the Company issued an aggregate of 333,025 shares of common stock to employees upon the exercise of options previously granted under the 2016 Stock Incentive Plan at exercise prices ranging from $3.68 to $13.82 per share.

Employee Stock Purchase Plan

During the nine months ended September 30, 2022 and 2021, the Company issued 157,250 and 149,865 shares of common stock, respectively, through the Employee Stock Purchase Plan.

Stock Warrants

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had 9,427,343 and 9,432,064 fully vested outstanding ~~warrants.~~warrants, respectively. As of ~~March 31,~~September 30, 2022 and December 31, 2021, the holders of such warrants ~~are~~were entitled to purchase, in the aggregate, up to 5,237,413 and 5,240,035 shares of common ~~stock.~~stock, respectively. Warrants can be exercised at a strike price of $24.39 per common share. The warrants were issued in 2016 upon the Company's emergence from its pre-packaged bankruptcy. These warrants expire on August 15, 2023.

~~NaN~~During the three and nine months ended September 30, 2022, 4,721 warrants were exercised ~~during the three months ended March 31, 2022~~. During the three and nine months ended ~~March 31,~~September 30, 2021, ~~200~~15,425 and 1,026,649 warrants, respectively, were exercised.

~~On May 3, 2022, the Compensation Committee of the Company’s Board of Directors approved a form of award agreement (the “RSU Award Agreement”) for grants of restricted stock units (“RSUs”) and a form of award agreement (the “PSU Award Agreement”) for grants of performance-based restricted stock units (“PSUs”), each under the Company’s 2020 Incentive Award Plan (the “2020 Plan~~”). Pursuant to the RSU Award Agreement, each RSU will entitle the recipient to one share of the Company’s common stock, subject to time-based vesting conditions that will be set forth in individual agreements. Pursuant to the PSU Award Agreement, each PSU will entitle the recipient to one share of the Company’s common stock, subject to performance-based vesting conditions that will be set forth in individual agreements.

Note 11 Earnings per Share

The following table sets forth the calculation of basic and diluted earnings per share for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)	2022		2021		(in thousands, except share and per share amounts)	2022		2021		2022		2021
Basic net income per share:	Basic net income per share:					Basic net income per share:
Net income	Net income	$	33,511	$	36,506	Net income	$	13,280	$	35,624	$	104,793	$	96,489
Weighted-average common shares outstanding during the period	Weighted-average common shares outstanding during the period	34,159,979		33,108,422		Weighted-average common shares outstanding during the period	34,269,274		34,013,897		34,289,333		33,585,488
Basic net income per share	Basic net income per share	$	0.98	$	1.10	Basic net income per share	$	0.39	$	1.05	$	3.06	$	2.87

Three Months Ended March 31,
(in thousands, except share and per share amounts) 2022 2021
Diluted net income per share:
Net income $ 33,511 $ 36,506
Basic shares outstanding during the period 34,159,979 33,108,422
Plus: Common stock equivalents associated with stock option awards 3,797,706 905,058
Diluted shares outstanding 37,957,685 34,013,480
Diluted net income per share $ 0.88 $ 1.07


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Diluted net income per share:
Net income	$	13,280	$	35,624	$	104,793	$	96,489
Basic shares outstanding during the period	34,269,274		34,013,897		34,289,333		33,585,488
Plus: Common stock equivalents associated with stock-based compensation	1,542,199		3,606,219		2,409,062		2,525,214
Diluted shares outstanding	35,811,473		37,620,116		36,698,395		36,110,702
Diluted net income per share	$	0.37	$	0.95	$	2.86	$	2.67

The computation of diluted shares outstanding for the three months ended ~~March 31,~~September 30, 2022 excluded 26,391 outstanding ESPP shares, 331,358 outstanding PSUs and 5,237,415 outstanding stock warrants, as their effect would have been anti-dilutive, while the computation of diluted shares outstanding for the nine months ended September 30, 2022 excluded ~~33,092~~19,828 ESPP shares,175,245 outstanding RSUs, 394,474 outstanding PSUs and 1,745,805 outstanding stock warrants, as their effect would have been ~~anti-dilutive. NaN outstanding stock options or stock warrants~~anti-dilutive. During the three months ended September 30, 2021 there were ~~excluded from~~no shares whose effect would have been anti-dilutive, while the computation of diluted shares outstanding for the ~~three~~nine months ended ~~March 31, 2022.~~ ~~The computation of diluted shares outstanding for the three months ended March 31,~~September 30, 2021 excluded ~~388,892 shares under~~129,631 outstanding stock options, ~~36,940~~20,201 ESPP shares, and ~~10,458,655 shares under~~3,486,218 outstanding stock warrants, as their effect would have been anti-dilutive.

Note 12 Income Taxes

The Company’s effective tax rate (“ETR”) was ~~22.3%~~32.0% and 26.6% for the three and nine months ended ~~March 31,~~September 30, 2022, and 27.9% and ~~24.4%~~25.9% for thethree and nine months ended ~~March 31,~~September 30, 2021. The Company's ETR differs from the 21.0% U.S. Federal statutory rate primarily due to our geographic mix of taxable income in various tax jurisdictions and permanent tax differences attributable to the net impact of non-U.S. taxing jurisdictions.

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had $20.7 million and $20.8 million, respectively, of unrecognized tax benefits, excluding interest and penalties, that if recognized, would impact the effective tax rate. As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had ~~$10.0~~$11.0 million and $9.6 million, respectively, recorded for interest inon the consolidated balance sheets. The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company expects to complete resolution of certain tax years with various tax authorities within the next 12 months. The Company believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to $20.2 million within the next 12 months, affecting the Company’s effective tax rate if realized.

Note 13 Contingent Liabilities

Litigation

The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates.

The Company establishes reserves for the estimated losses on specific contingent liabilities for regulatory and legal actions where the Company deems a loss to be probable and the amount of the loss can be reasonably estimated. In other instances, losses are considered probable, but the Company is not able to make a reasonable estimate of the liability because of the uncertainties related to the outcome or the amount or range of potential loss. For these matters, disclosure is made when material, but no amount is reserved. The Company does not expect that the ultimate resolution of pending regulatory and legal matters in future periods will have a material adverse effect on the Company's consolidated statements of operations and comprehensive income, balance sheets or cash flows.

Section 199 and Research and Development Tax Case

Section 199 of the Internal Revenue Code of 1986, as amended (the “Tax Code”) provides for deductions for manufacturing performed in the U.S. The Internal Revenue Service (“IRS”) has taken the position that directory providers are

not entitled to take advantage of the deductions because printing vendors are already taking deductions and only one taxpayer can claim the deduction. The Tax Code also grants tax credits related to research and development expenditures. The IRS also takes the position that the expenditures have not been sufficiently documented to be eligible for the tax credit. The Company disagrees with these positions.

The IRS has challenged the Company's positions. With respect to the tax years 2012 through June 2015 for the YP LLC partnership, the IRS sent 90-day notices to DexYP on August 29, 2018. In response, the Company filed three petitions (in the names of various related partners) in U.S. Tax Court, and the IRS filed answers to those petitions. The three cases were consolidated by the court and were referred back to IRS Administrative Appeals for settlement negotiations, during which time the litigation was suspended. The appeals ~~conference~~conference for YP occurred on May 9, 2022. The Company is ~~scheduled for May 9-10, 2022~~.working with the Appeals Officer to schedule settlement negotiations. In advance of the IRS Appeals conference, the parties reached an agreement regarding additional research and development tax credits for the tax years at issue whereby the IRS will allow more tax credits than were originally claimed on the tax returns. With respect to the tax year from July to December 2015 for the Print Media LLC partnership, the Company was recently unsuccessful in its attempt to negotiate a settlement with IRS Administrative Appeals, and the IRS issued a 90-day notice to the Company. The Company filed a petition in the U.S. Tax Court to challenge the IRS denial.

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company has reserved approximately ~~$32.3~~$33.3 million and $31.9 million, respectively, in connection with the Section 199 disallowance and less than $0.1 million related to the research and development tax credit disallowance. Pursuant to the YP Acquisition agreement, the Company is entitled to (i) a dollar-for-dollar indemnification for the research and development tax liability, and (ii) a dollar-for-dollar indemnification for the Section 199-tax liability after the Company pays the first $8.0 million in liability. The indemnification asset, however, is subject to a provision in the YP Acquisition agreement that limits the seller’s liability. The balance of the indemnification asset is ~~$24.7~~$25.8 million and $24.3 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

Other

New York Sales, Excise, and Use Tax Audit

On August 19, 2020, the New York State Department of Taxation and Finance issued a notice to the Company assigning a routine audit of the Company's sales, excise, and use tax account for the audit period covering March 1, 2017 through ~~May~~August 31, ~~2020.~~2022. On September 30, 2022, the Company received the final Statement of Proposed Audit Changed for Sales and Use Tax for $0.5 million, including interest. The Company ~~has reserved $3.3~~reversed the $3.2 million ~~for the total combined exposure for the period, which is accrued~~reserve existing on the Company's consolidated balance sheet as of ~~March 31,~~June 30, 2022.

Ohio Use Tax Audit

In November 2021, the Company received a notice from the Ohio Department of Taxation Audit Division requesting to schedule an audit of the Ohio use tax records for the period of October 1, 2015 through September 30, 2021. The Company has reserved $1.3 million for this period, which is accrued on the Company’s consolidated balance ~~sheets~~sheet as of ~~March 31,~~September 30, 2022.

Note 14 Changes in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss), which is reported as a component of stockholders' equity, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021:

Accumulated Foreign Currency Translation Adjustment
(in thousands) 2022 2021
Beginning balance at January 1 $ (8,047) $ —
Foreign currency translation adjustment, net of tax expense of $1.1 million and $1.0 million, respectively 5,448 (2,967)
Ending balance at March 31 $ (2,599) $ (2,967)


	Accumulated Foreign Currency Translation Adjustment
(in thousands)	2022		2021
Beginning balance at January 1,	$	(8,047)	$	—
Foreign currency translation adjustment, net of tax expense of $7.8 million and $2.9 million, respectively	(12,611)		(8,545)
Ending balance at September 30,	$	(20,658)	$	(8,545)

Note 15 Segment Information

During the second quarter of 2022, the Company revised its segment reporting, as discussed in Note 1. The Company determined that the Company manages its operations using 3four operating segments, which are also its reportable segments: (1) Thryv U.S. Marketing Services, (2) Thryv U.S. SaaS, ~~and~~ (3) Thryv ~~International.~~International Marketing Services, and (4) Thryv International SaaS. As of January 1, 2022, the Company's Chief Executive Officer, who is also the chief operating decision maker (“(“CODM”), began ~~including~~including gross profit by segment in the Company's reporting to assess segment performance and allocate resources. As such, gross profit by segment has been added to the current and comparative prior period.

The Company does not allocate assets to its segments and the CODM does not evaluate performance or allocate resources based on segment asset data, and, therefore, such information is not presented.

The following tables summarize the operating results of the Company's reportable segments:


											Three Months Ended September 30, 2022
		Three Months Ended March 31, 2022									Thryv U.S.				Thryv International
(in thousands)	(in thousands)	Marketing Services		SaaS		Thryv International		Total		(in thousands)	Marketing Services		SaaS		Marketing Services		SaaS		Total
Revenue	Revenue	$	212,533	$	47,343	$	48,499	$	308,375	Revenue	$	197,174	$	55,353	$	26,833	$	1,290	$	280,650
Segment Gross profit		136,510		29,409		31,937		197,856
Segment Gross Profit										Segment Gross Profit	126,846		33,827		14,351		615		175,639
Segment Adjusted EBITDA	Segment Adjusted EBITDA	66,395		(4,364)		21,686		83,717		Segment Adjusted EBITDA	61,802		398		5,807		(2,575)		65,432


											Three Months Ended September 30, 2021
		Three Months Ended March 31, 2021									Thryv U.S.				Thryv International
(in thousands)	(in thousands)	Marketing Services		SaaS		Thryv International		Total		(in thousands)	Marketing Services		SaaS		Marketing Services		SaaS		Total
Revenue	Revenue	$	227,933	$	37,251	$	15,422	$	280,606	Revenue	$	213,210	$	44,800	$	39,149	$	131	$	297,290
Segment Gross profit		156,161		23,167		3,118		182,446
Segment Gross Profit										Segment Gross Profit	149,252		27,753		16,347		(229)		193,123
Segment Adjusted EBITDA	Segment Adjusted EBITDA	98,631		316		5,986		104,933		Segment Adjusted EBITDA	96,231		(5,508)		14,013		(2,377)		102,359


	Nine Months Ended September 30, 2022
	Thryv U.S.				Thryv International
(in thousands)	Marketing Services		SaaS		Marketing Services		SaaS		Total
Revenue	$	632,277	$	153,863	$	133,715	$	3,165	$	923,020
Segment Gross Profit	415,130		95,328		89,694		1,325		601,477
Segment Adjusted EBITDA	211,871		(3,769)		64,449		(7,402)		265,149


	Nine Months Ended September 30, 2021
	Thryv U.S.				Thryv International
(in thousands)	Marketing Services		SaaS		Marketing Services		SaaS		Total
Revenue	$	643,938	$	123,437	$	101,428	$	140	$	868,943
Segment Gross Profit	442,244		76,234		35,755		(224)		554,009
Segment Adjusted EBITDA	277,546		(7,311)		36,182		(2,372)		304,045

2124

A reconciliation of the Company’s Income before income tax expense to total Segment Adjusted EBITDA is as follows:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021		2022		2021
Income before income tax expense	Income before income tax expense	$	43,132	$	48,315	Income before income tax expense	$	19,521	$	49,426	$	142,855	$	130,212

Interest expense	Interest expense	14,867		15,672		Interest expense	14,570		16,546		44,089		51,388
Depreciation and amortization		21,969		19,718
Other components of net periodic pension (benefit)		(70)		(453)
Loss on early extinguishment of debt		—		299
Depreciation and amortization expense						Depreciation and amortization expense	23,393		31,049		65,954		80,675
Loss on termination of leaseback obligations						Loss on termination of leaseback obligations	—		—		—		3,409
Restructuring and integration expenses	Restructuring and integration expenses	5,827		9,234		Restructuring and integration expenses	3,790		2,312		14,439		15,036
Transaction costs (1)	Transaction costs (1)	1,720		10,546		Transaction costs (1)	1,461		3,987		4,797		19,973
Stock-based compensation expense	Stock-based compensation expense	1,928		1,971		Stock-based compensation expense	4,402		2,340		10,140		6,232
(Gain) from remeasurement of indemnification asset		(400)		—
Other components of net periodic pension cost (benefit)						Other components of net periodic pension cost (benefit)	3,928		(273)		(5,295)		(998)
Non-cash (gain) from remeasurement of indemnification asset						Non-cash (gain) from remeasurement of indemnification asset	(585)		(404)		(1,472)		(1,248)
Impairment charges						Impairment charges	—		—		222		3,611
Other	Other	(5,256)		(369)		Other	(5,048)		(2,624)		(10,580)		(4,245)
Total Segment Adjusted EBITDA	Total Segment Adjusted EBITDA	$	83,717	$	104,933	Total Segment Adjusted EBITDA	$	65,432	$	102,359	$	265,149	$	304,045

(1)Consists of Vivial Acquisition, Thryv Australia Acquisition and other transaction costs.

The following table sets forth the Company's disaggregation of ~~revenue~~Revenue based on services for the periods indicated:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021		2022		2021
Marketing Services
Thryv U.S.						Thryv U.S.
Print	Print	$	97,906	$	112,911	Print	$	93,436	$	106,931	$	295,606	$	313,595
Digital	Digital	114,627		115,022		Digital	103,738		106,279		336,671		330,343
Total Marketing Services	Total Marketing Services	212,533		227,933		Total Marketing Services	197,174		213,210		632,277		643,938
SaaS	SaaS	47,343		37,251		SaaS	55,353		44,800		153,863		123,437
Total Thryv U.S.						Total Thryv U.S.	$	252,527	$	258,010	$	786,140	$	767,375

Thryv International	Thryv International					Thryv International
Print	Print	21,500		5,713		Print	$	4,739	$	10,159	$	61,146	$	31,112
Digital	Digital	26,164		9,709		Digital	22,094		28,990		72,569		70,316
Total Marketing Services						Total Marketing Services	26,833		39,149		133,715		101,428
SaaS	SaaS	835		—		SaaS	1,290		131		3,165		140
Total Thryv International	Total Thryv International	48,499		15,422		Total Thryv International	28,123		39,280		136,880		101,568
Total Revenue	Total Revenue	$	308,375	$	280,606	Total Revenue	$	280,650	$	297,290	$	923,020	$	868,943

2225

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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~~approximately 400,000 SMB clients globally through ~~three~~four business segments: Thryv U.S. Marketing Services, Thryv U.S. SaaS, Thryv International Marketing Services and Thryv ~~International.~~International SaaS.

Our Thryv U.S. Marketing Services segment ~~provides~~provides both print and digital solutions and generated ~~$212.5~~$197.2 million and ~~$227.9~~$213.2 million of consolidated ~~revenues~~revenue for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $632.3 million and $643.9 million of consolidated revenue for the nine months ended September 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 ~~$47.3~~$55.4 million and ~~$37.3~~$44.8 million of consolidated ~~revenues~~revenue for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $153.9 million and $123.4 million of consolidated revenue for the nine months ended September 30, 2021 and 2021, respectively. Our ~~Thryv®~~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®~~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®~~Thryv SaaS solution is a robust and customizable customer relationship management (“~~CRM”~~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®~~Thryv integrates with a variety of other popular name-brand payment providers in addition to its proprietary processor – ~~ThryvPay~~SMThryvPay®. ThryvPaySM is uniquely integrated within the ~~Thryv®~~Thryv Small Business Platform. It also includes an optional multi-location utility, Hub by ~~Thryv~~SMThryv®, which enables multi-location businesses and emerging franchises the ability to centrally command and control many individual ~~Thryv®~~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~~2021 (the “Thryv Australia Acquisition”). Thryv Australia is Australia’s leading provider of marketing solutions serving SMBs. The Thryv Australia Acquisition ~~brings~~brought 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 ~~$48.5~~$26.8 millionand $39.1 million of consolidated revenues for the three months ended September 30, 2022 and 2021, respectively, and $133.7 million and ~~$15.4~~$101.4 million of consolidated revenues for the nine months ended September 30, 2022 and the seven months ended September 30, 2021, respectively.

Our Thryv International SaaS segment generated $1.3 millionand $0.1 million of consolidated revenues for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $3.2 million and $0.1 million of consolidated revenues for the ~~one month~~nine months ended ~~March 31,~~September 30, 2022 and the seven months ended September 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.

On January 21, 2022 (the “Vivial Acquisition Date”), Thryv, Inc., the ~~Company~~Company’s wholly-owned subsidiary, acquired Vivial Media Holdings, Inc. (“Vivial”), a marketing and advertising company, for ~~$22.0~~$22.8 million in cash, subject to certain ~~adjustments.~~adjustments (the “Vivial Acquisition”).

23The 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 operating 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-19” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for a description of interest rate and foreign exchange currency risks.

~~Recent Developments -~~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 nine months ended ~~March 31,~~September 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 ~~$2.2~~ $0.2 million and $3.2 million reduction in revenue for the three and nine months ended ~~March 31,~~September 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 nine months ended ~~March 31,~~September 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~~operating 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 U.S. and international 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.

Investment in Growth

We intend to continue to invest in the growth of our Thryv U.S. and International SaaS ~~segment.~~segments. We have selectively utilized a portion of the cash generated from our Thryv U.S. and International Marketing Services ~~and Thryv International~~ segments to support initiatives in our evolving Thryv U.S. and International SaaS ~~segment,~~segments, 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 ~~acquisition of~~ Thryv Australia AAcquisition.~~ustralia’s leading provider of marketing solutions serving SMBs.~~ On January 21, 2022, we completed the ~~acquisition of Vivial.~~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 March 31,
(in thousands) 2022 2021
Clients (1)
Marketing Services (2)
419 447
SaaS (3)
47 44
Total (4)
439 464


	As of September 30,
(in thousands)	2022	2021
Clients (1)
Marketing Services (2)	374	404
SaaS (3)	51	45
Total (4)	399	423

(1) Clients include total clients from all ~~three~~four of our business segments: Thryv U.S. Marketing Services, Thryv U.S. SaaS, Thryv International Marketing Services and Thryv ~~International.~~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 2830 thousand as of ~~March 31,~~September 30, 2022 as compared to ~~March 31,~~September 30, 2021. The decrease in Marketing Services clients was related to a secular decline ~~to matters that impact our performance~~ in the print media industry. The decline in the ~~digital~~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.

SaaS clients increased by 36 thousand as of ~~March 31,~~September 30, 2022 as compared to ~~March 31,~~September 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 2524 thousand as of ~~March 31,~~September 30, 2022 as compared to ~~March 31,~~September 30, 2021. The primary driver of the decrease in total clients was the secular decline in the ~~print~~Print media business combined with increasing competition in the ~~digital~~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 March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021			2022		2021		2022		2021
ARPU (Monthly)	ARPU (Monthly)					ARPU (Monthly)
Marketing Services (1)	Marketing Services (1)	$	184	$	201	Marketing Services (1)	$	175	$	183	$	181	$	186
SaaS (1)	SaaS (1)	352		304		SaaS (1)	377		340		363		332

(1)Marketing Services and SaaS ~~monthly~~ ARPU ~~includes~~include combined results from both our ~~SaaS~~U.S. and Thryv International ~~clients.~~

~~Monthly ARPU for the~~ Marketing Services ~~segment~~and SaaS businesses, respectively.

Monthly Marketing Services ARPU decreased ~~by $17,~~by $8, or 8%4.4%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021, and decreased by $5, or 2.7%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The overall trend has been a decrease in Monthly Marketing Services ARPU ~~was~~ related to reduced spend by clients on our ~~print~~Print media offerings due to the secular decline of the industry caused by the continuing shift of advertising spend to less expensive ~~digital~~Digital media. This decrease in Monthly Marketing Services 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 Monthly Marketing Services ARPU are temporary and caused by timing of publishing our directories, which have variable lengths (usually 12 to 18 months).

Monthly SaaS ARPU ~~for the SaaS segment~~ increased by ~~$48,~~$37, or ~~16%~~10.9%, during the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021, and increased by $31, or 9.3%, during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. ~~The~~The increase inin Monthly SaaS 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 Monthly SaaS 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 March 31,			As of September 30,
(in thousands)	(in thousands)	2022	2021	(in thousands)	2022	2021
Monthly Active Users - SaaS	Monthly Active Users - SaaS	36	31	Monthly Active Users - SaaS	37	31

Monthly active users increased by 56 thousand, or ~~16%~~19.4%, during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 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.

2630

Key Components of Our Results of Operations

Revenue

We generate revenue from our ~~three~~four business ~~segments,~~segments: Thryv U.S. Marketing Services, Thryv U.S. SaaS, Thryv International Marketing Services and Thryv ~~International.~~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 ~~segment~~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~~Print directories and fulfillment of our ~~digital~~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~~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, ~~(cost),~~ and other ~~expense,~~income (expense), which includes a ~~loss on early extinguishment~~bargain purchase gain as a result of ~~debt,~~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.

2731

Results of Operations

Consolidated Results of Operations

The following table sets forth certain consolidated financial data for each of the periods indicated:


		Three Months Ended March 31,											Three Months Ended September 30,
		2022 (1)					2021 (2)						2022 (1)					2021 (2)
		(unaudited)											(unaudited)
(in thousands of $)	(in thousands of $)	Amount			% of Revenue		Amount			% of Revenue		(in thousands of $)	Amount			% of Revenue		Amount			% of Revenue
Revenue	Revenue	$	308,375		100	%	$	280,606		100	%	Revenue	$	280,650		100	%	$	297,290		100	%
Cost of services	Cost of services	110,519			35.8	%	98,160			35.0	%	Cost of services	105,011			37.4	%	104,167			35.0	%
Gross profit	Gross profit	197,856			64.2	%	182,446			65.0	%	Gross profit	175,639			62.6	%	193,123			65.0	%

Operating expenses:	Operating expenses:											Operating expenses:
Sales and marketing	Sales and marketing	93,955			30.5	%	76,540			27.3	%	Sales and marketing	89,891			32.0	%	94,343			31.7	%
General and administrative	General and administrative	52,194			16.9	%	41,279			14.7	%	General and administrative	54,670			19.5	%	32,983			11.1	%

Total operating expenses	Total operating expenses	146,149			47.4	%	117,819			42.0	%	Total operating expenses	144,561			51.5	%	127,326			42.8	%

Operating income	Operating income	51,707			16.8	%	64,627			23.0	%	Operating income	31,078			11.1	%	65,797			22.1	%

Other income (expense):	Other income (expense):											Other income (expense):
Interest expense	Interest expense	(14,867)			4.8	%	(15,672)			5.6	%	Interest expense	(14,570)			5.2	%	(16,546)			5.6	%
Other components of net periodic pension benefit		70			—	%	453			0.2	%
Other components of net periodic pension (cost) benefit												Other components of net periodic pension (cost) benefit	(3,928)			1.4	%	273			0.1	%
Other income (expense)	Other income (expense)	6,222			2.0	%	(1,093)			0.4	%	Other income (expense)	6,941			2.5	%	(98)			—	%
Income before income tax expense	Income before income tax expense	43,132			14.0	%	48,315			17.2	%	Income before income tax expense	19,521			7.0	%	49,426			16.6	%
Income tax expense	Income tax expense	(9,621)			3.1	%	(11,809)			4.2	%	Income tax expense	(6,241)			2.2	%	(13,802)			4.6	%
Net income	Net income	$	33,511		10.9	%	$	36,506		13.0	%	Net income	$	13,280		4.7	%	$	35,624		12.0	%
Other financial data:	Other financial data:											Other financial data:
Adjusted EBITDA(3)	Adjusted EBITDA(3)	$	83,717		27.1	%	$	104,933		37.4	%	Adjusted EBITDA(3)	$	65,432		23.3	%	$	102,359		34.4	%
Adjusted Gross Profit(4)	Adjusted Gross Profit(4)	$	207,748				$	193,771				Adjusted Gross Profit(4)	$	185,560				$	208,209
Adjusted Gross Margin(5)	Adjusted Gross Margin(5)	67.4		%			69.1		%			Adjusted Gross Margin(5)	66.1		%			70.0		%

(1) Consolidated results of operations includes Vivial's results of operations subsequent to the ~~January 21, 2022 acquisition date.~~Vivial Acquisition.

(2) Consolidated results of operations includes Thryv Australia's results of operations subsequent to the March 1, 2021 acquisition date.

(3) See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income, the most directly comparable measure presented in accordance with GAAP.

(4) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Profit and a reconciliation to Gross profit, the most directly comparable measure presented in accordance with GAAP.

(5) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Margin.

Comparison of the Three Months Ended ~~March 31,~~September 30, 2022 to the Three Months Ended ~~March 31,~~September 30, 2021

Revenue

The following table summarizes ~~revenue~~Revenue by business segment for the periods indicated:


		Three Months Ended March 31,				Change					Three Months Ended September 30,				Change
		2022 (1)		2021 (2)		Amount		%			2022 (1)		2021 (2)		Amount		%
(in thousands of $)	(in thousands of $)	(unaudited)								(in thousands of $)	(unaudited)
Thryv U.S.										Thryv U.S.
Marketing Services	Marketing Services	$	212,533	$	227,933	$	(15,400)	(6.8)	%	Marketing Services	$	197,174	$	213,210	$	(16,036)	(7.5)	%
SaaS	SaaS	47,343		37,251		10,092		27.1	%	SaaS	55,353		44,800		10,553		23.6	%
Thryv International	Thryv International	48,499		15,422		33,077		214.5	%	Thryv International
Total revenue		$	308,375	$	280,606	$	27,769	9.9	%
Marketing Services										Marketing Services	26,833		39,149		(12,316)		(31.5)	%
SaaS										SaaS	1,290		131		1,159		NM
Total Revenue										Total Revenue	$	280,650	$	297,290	$	(16,640)	(5.6)	%

(1) Thryv U.S. Marketing Services includes Vivial revenue subsequent to the ~~January 21, 2022 acquisition date.~~Vivial Acquisition.

(2) Thryv International includes Thryv Australia revenue subsequent to the ~~March 1, 2021 acquisition date.~~Thryv Australia Acquisition.

Total ~~revenue increased~~Revenue decreased by ~~$27.8~~$16.6 million, or ~~9.9%~~5.6%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31, 2021.~~September 30, 2021. The ~~increase~~decrease in total ~~revenue~~Revenue was driven by a decrease in Thryv U.S. Marketing Services Revenue of $16.0 million and a decrease in Thryv International Marketing Services Revenue of $12.3 million, offset by an increase in Thryv U.S. SaaS ~~revenue~~Revenue of ~~$10.1~~$10.6 million and an increase in Thryv International ~~revenue~~SaaS Revenue of ~~$33.1 million, partially offset by a decrease in Marketing Services revenue of $15.4~~$1.2 million.

Thryv U.S. Revenue

Marketing Services Revenue

Thryv U.S. Marketing Services revenue decreased by ~~$15.4~~$16.0 million, or ~~6.8%~~7.5%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021.

Print revenue decreased by ~~$15.0~~$13.5 million, or ~~13.3%~~12.6%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The decrease was primarily driven by the secular decline in industry demand for Print services that resulted in a ~~24%~~14% decline in revenue compared to the three months ended ~~March 31,~~September 30, 2021, ~~partially offset by~~net of the impact of publication timing differences caused by our Print agreements having greater than 12 month terms. Print revenue is recognized upon delivery of the published directories. Individual directory titles have different lifecycles, with a typical lifecycle of 15 ~~months.~~months for books published during the three months ended September 30, 2021 and 18 months during the three months ended September 30, 2022. The titles published during the three months ended ~~March 31,~~September 30, 2022 are therefore different, and have longer terms, than the titles published during the three months ended ~~March 31,~~September 30, 2021 and represented more revenue than the titles published during the three months ended ~~March 31,~~September 30, 2021. This decrease was ~~further~~also partially offset by ~~an increase in print~~Print revenue recognized as a result of the Vivial ~~Acquisition.~~Acquisition in the first quarter of 2022.

Digital revenue decreased by ~~$0.4~~$2.5 million, or ~~0.3%~~2.4%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. ~~This~~The decrease was primarily driven by a continued trending decline in the Company’s Marketing Services client base and significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. This decrease was partially offset by an increase in ~~digital~~Digital revenue as a result of the Vivial Acquisition.

~~SaaS Revenue~~

SaaS Revenue

Thryv U.S. SaaS revenue increased by ~~$10.1~~$10.6 million, or ~~27.1%~~23.6%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The increase was driven by increased demand for our Thryv SaaS product as SMBs accelerate their move away from manual processes and towards cloud platforms to more efficiently manage and grow their businesses, and by our success in re-focusing our go-to-market and onboarding strategy to target higher ~~spend and higher engaged~~value clients. This increase was partially offset by a decline in our lower-spend and less-engaged legacy SaaS clients that tend to have a higher churn rate.

Thryv International Revenue

Marketing Services Revenue

Thryv International Marketing Services revenue ~~was $48.5~~decreased by $12.3 million, ~~and $15.4 million~~or 31.5%, for the three months ended ~~March 31,~~September 30, 2022 ~~and~~compared to the ~~one month~~three months ended ~~March 31,~~September 30, 2021 ~~respectively~~. ~~As the~~ ~~Thryv Australia Acquisition was completed on March 1, 2021, no~~The decrease in revenue was ~~recognized~~driven by lower Print and digital revenue primarily resulting from the secular decline in industry demand for Print services in Australia and negative impact from changes in foreign currency rates.

SaaS Revenue

Thryv International ~~during the two months ended February 28, 2021. Thryv International revenue included print revenue of $21.5 million, digital revenue of $26.2 million and~~ SaaS revenue ~~of $0.8~~increased $1.2 million for the three months ended ~~March 31, 2022.~~September 30, 2022 compared to the three months ended September 30, 2021. The increase was driven by increased demand for our Thryv platform as we continue to increase sales to SMBs in Australia.

Cost of Services

Cost of services increased by ~~$12.4~~$0.8 million, or ~~12.6%~~0.8%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The increase was primarily attributable to ~~$17.4 million of~~ additional Cost of services ~~that were included~~incurred in the three months ended ~~March 31,~~September 30, 2022 as a result of the ~~acquisitions of Thryv Australia and Vivial. The increase was~~Vivial Acquisition. These increases were partially offset by lower depreciation and amortization expense of $5.1 million, due to the accelerated amortization method used by the Company, along with lower expenses resulting from the impact of strategic cost-saving initiatives. ~~Specifically, we reduced employee-related costs by $2.0 million and printing, distribution and digital and fulfillment support costs by $1.4 million~~

Gross Profit

Gross profit ~~increased~~decreased by ~~$15.4~~$17.5 million, or ~~8.4%~~9.1%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The ~~increase~~decrease in Gross profit was primarily due to a decrease in revenue recognized. This was partially offset by the ~~results~~impact of the Vivial Acquisition, the result of increasing the terms of our Print publications from 15 months to 18 months in our Thryv ~~Australia, which was acquired on March 1, 2021, decreases in employee-related costs, printing, distribution, and digital and fulfillment support costs~~U.S. Marketing Services segment and growth in our Thryv U.S. SaaS ~~segment, partially offset by the decline in Marketing Services revenue.~~segment. Our gross margin decreased by 80240 basis points to ~~64.2%~~62.6% for the three months ended ~~March 31,~~September 30, 2022 compared to 65.0% for the three months ended ~~March 31,~~September 30, 2021.

Operating Expenses

Sales and Marketing

Sales and marketing expense ~~increased~~decreased by ~~$17.4~~$4.5 million, or ~~22.8%~~4.7%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The ~~increase~~decrease was primarily attributable to ~~$16.0 million~~a decrease in sales promotion expenses of additional Sales and marketing expenses that were included in the three months ended March 31, 2022 as a result of the acquisitions of Thryv Australia and Vivial and an increase in advertising and sales promotion expense of ~~$3.8~~$7.4 million, primarily driven by a decrease in costs incurred to promote the Thryv ~~platform.~~platform, a decrease in depreciation and amortization expense of $3.5 million, due to the accelerated amortization method used by the Company, and a decrease of $2.2 million in contract services, due to strategic cost-saving initiatives. The decrease in Sales and marketing expense was partially offset by increases in employee-related costs of $5.0 million, partially driven by the Vivial Acquisition, and an increase in sales commissions of $3.1 million.

General and Administrative

General and administrative expense increased by ~~$10.9~~$21.7 million, or ~~26.4%~~65.8%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. This increasewas primarily attributable to ~~$13.5 million of~~ ~~additional General and administrative expenses that were included in the three months ended March 31, 2022 as a result of the acquisitions of Thryv Australia and Vivial and~~ an increase in employee-related costs of ~~$6.4~~$11.4 million,. ~~This~~ driven primarily by the Vivial Acquisition. General and administrative expenses also increased as a result of higher software development costs, legal expenses and other expenses related to the Vivial Acquisition. The increase in General and administrative expenses was partially offset by a ~~$8.8~~$2.1 million decrease in transaction costs related to the Thryv ~~International~~Australia Acquisition, which occurred in the first quarter of 2021.

Other Income (Expense)

Interest Expense

Interest expense decreased by ~~$0.8~~$2.0 million, or ~~5.1%~~11.9%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021, driven primarily by lower outstanding debt balances resulting from payments made on long-term debt.

Other Components of Net Periodic Pension (Cost) Benefit ~~(Cost)~~

Other components of net periodic pension ~~benefit decreased~~cost increased by ~~$0.4~~$4.2 million ~~from a benefit of $0.5 million during~~for the three months ended ~~March 31, 2021, to a benefit of $0.1 million during the three months ended March 31,~~September 30, 2022. This ~~decrease~~increase was primarily due to ~~higher interest expense of $0.8 million, and~~ a remeasurement ~~gain~~loss of ~~$0.2~~$3.5 million, ~~recognized~~triggered by settlements occurring during the three months ended ~~March 31, 2021,~~September 30, 2022, while no remeasurement ~~gain~~loss was recognized during the three months ended ~~March 31, 2022, partially offset by a higher expected return on assets of $0.6 million.~~September 30, 2021.

Other ~~Expense~~Income (Expense)

During the three months ended ~~March 31,~~September 30, 2022, the Company ~~incurred~~recognized other income, net, of ~~$6.2~~$6.9 million, which primarily ~~represents the $7.3~~represented a $3.2 million bargain purchase gain as a result of the Vivial ~~Acquisition.~~Acquisition and foreign currency-related gains. During the three months ended ~~March 31,~~September 30, 2021, the Company incurred other expense, net, of ~~$1.1~~$0.1 million, which ~~included~~represented foreign ~~currency related expense of $0.8 million and a loss on early extinguishment of debt of $0.3 million.~~currency-related expense.

Income Tax Expense

Income tax expense decreased by ~~$2.2~~$7.6 million, or ~~18.5%~~54.8%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021. The ETR was ~~22.3%~~32.0% and ~~24.4%~~27.9% for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The ETR differs from the 21.0% U.S. Federal statutory rate primarily due to our geographic mix of taxable income in various tax jurisdictions and permanent tax differences attributable to the net impact of non-U.S. taxing jurisdictions.

Adjusted EBITDA

Adjusted EBITDA decreased by ~~$21.2~~$36.9 million, or ~~20.2%~~36.1%, for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31, 2021~~. September 30, 2021. The decrease in Adjusted EBITDA was primarily driven by the secular decline in ~~industry demand for~~both our Thryv U.S. and International Marketing Services segments. The decrease was partially offset by the impact of the Vivial Acquisition, the result of increasing the terms of our Print ~~services.~~publications from 15 months to 18 months in our Thryv U.S. Marketing Services segment and growth in our Thryv U.S. SaaS segment. See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income, the most directly comparable measure presented in accordance with GAAP.

Results of Operations

Consolidated Results of Operations

The following table sets forth certain consolidated financial data for each of the periods indicated:


	Nine Months Ended September 30,
	2022 (1)					2021 (2)
	(unaudited)
(in thousands of $)	Amount			% of Revenue		Amount			% of Revenue
Revenue	$	923,020		100	%	$	868,943		100	%
Cost of services	321,543			34.8	%	314,934			36.2	%
Gross profit	601,477			65.2	%	554,009			63.8	%

Operating expenses:
Sales and marketing	275,659			29.9	%	258,277			29.7	%
General and administrative	159,514			17.3	%	107,362			12.4	%
Impairment charges	222			—	%	3,611			0.4	%
Total operating expenses	435,395			47.2	%	369,250			42.5	%

Operating income	166,082			18.0	%	184,759			21.3	%

Other income (expense):
Interest expense	(44,089)			4.8	%	(51,388)			5.9	%
Other components of net periodic pension benefit	5,295			0.6	%	998			0.1	%
Other income (expense)	15,567			1.7	%	(4,157)			0.5	%
Income before income tax expense	142,855			15.5	%	130,212			15.0	%
Income tax expense	(38,062)			4.1	%	(33,723)			3.9	%
Net income	$	104,793		11.4	%	$	96,489		11.1	%
Other financial data:
Adjusted EBITDA(3)	$	265,149		28.7	%	$	304,045		35.0	%
Adjusted Gross Profit(4)	$	630,558				$	597,320
Adjusted Gross Margin(5)	68.3		%			68.7		%

(1) Consolidated results of operations includes Vivial's results of operations subsequent to the Vivial Acquisition.

(2) Consolidated results of operations includes Thryv Australia's results of operations subsequent to the Thryv Australia Acquisition.

(3) See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income, the most directly comparable measure presented in accordance with GAAP.

(4) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Profit and a reconciliation to Gross profit, the most directly comparable measure presented in accordance with GAAP.

(5) See “Non-GAAP Financial Measures” for a definition of Adjusted Gross Margin.

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

Revenue

The following table summarizes revenue by business segment for the periods indicated:


	Nine Months Ended September 30,				Change
	2022 (1)		2021 (2)		Amount		%
(in thousands of $)	(unaudited)
Thryv U.S.
Marketing Services	$	632,277	$	643,938	$	(11,661)	(1.8)	%
SaaS	153,863		123,437		30,426		24.6	%
Thryv International
Marketing Services	133,715		101,428		32,287		31.8	%
SaaS	3,165		140		3,025		NM
Total Revenue	$	923,020	$	868,943	$	54,077	6.2	%

(1) Thryv U.S. Marketing Services includes Vivial revenue subsequent to the Vivial Acquisition.

(2) Thryv International includes Thryv Australia revenue subsequent to the Thryv Australia Acquisition.

Total Revenue increased by $54.1 million, or 6.2%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase in total Revenue was driven primarily by an increase in Thryv International Marketing Services Revenue of $32.3 million and Thryv U.S. SaaS Revenue of $30.4 million.

Thryv U.S. Revenue

Marketing Services Revenue

Thryv U.S. Marketing Services revenue decreased by $11.7 million, or 1.8%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Print revenue decreased by $18.0 million, or 5.7%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease was primarily driven by the secular decline in industry demand for Print services that resulted in a 15% decline in revenue compared to the nine months ended September 30, 2021, net of the impact of publication timing differences caused by our Print agreements having greater than 12 month terms and the extension of the terms of our Print agreements. Print revenue is recognized upon delivery of the published directories. Individual directory titles have different lifecycles, with a typical lifecycle of 15 months during the nine months ended September 30, 2021. Starting in the three months ended June 30, 2022, the typical life cycle was extended to 18 months for new directories. The titles published during the nine months ended September 30, 2022 are therefore different, and the terms are longer, than the titles published during the nine months ended September 30, 2021 and represented more revenue than the titles published during the nine months ended September 30, 2021. This decrease was further offset by an increase in Print revenue as a result of the Vivial Acquisition.

Digital revenue increased by $6.3 million, or 1.9%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase was primarily driven by Digital revenue as a result of the Vivial Acquisition. This increase was partially offset by a continued trending decline in the Company’s Marketing Services client base and significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook.

SaaS Revenue

Thryv U.S. SaaS revenue increased by $30.4 million, or 24.6%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was driven by increased demand for our Thryv SaaS product as SMBs accelerate their move away from manual processes and towards cloud platforms to more efficiently manage and grow their businesses, and by our success in re-focusing our go-to-market and onboarding strategy to target higher value clients.

This increase was partially offset by a decline in our lower-spend and less-engaged legacy SaaS clients that tend to have a higher churn rate.

Thryv International Revenue

Marketing Services Revenue

Thryv International Marketing Services revenue increased by $32.3 million, or 31.8%, for the nine months ended September 30, 2022 compared to the seven months ended September 30, 2021. As the Thryv Australia Acquisition was completed on March 1, 2021, no revenue was recognized for Thryv International during the two months ended February 28, 2021. In addition, upon the Thryv Australia Acquisition, an adjustment was recognized to reduce the deferred revenue balance assumed, which negatively impacted revenue recognized in the seven months ended September 30, 2021 by $37.9 million. These increases in revenue were partially offset by lower Print revenue resulting from the secular decline in industry demand for Print services in Australia.

SaaS Revenue

Thryv International SaaS revenue increased $3.0 million for the nine months ended September 30, 2022 compared the seven months ended September 30, 2021. The increase was driven by increased demand for our Thryv platform as we continue to increase sales to SMBs in Australia.

Cost of Services

Cost of services increased by $6.6 million, or 2.1%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily attributable to $17.2 million of printing, distribution and digital and fulfillment support costs, primarily related to the Vivial Acquisition. Contract services also increased $13.6 million, primarily related to the Vivial Acquisition and continued investments in the Thryv platform. The increase was partially offset by a $14.2 million decrease in depreciation and amortization expense, driven by the accelerated amortization method used by the Company.

Gross Profit

Gross profit increased by $47.5 million, or 8.6%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase in Gross profit was primarily due to higher revenue from Thryv Australia and growth in our SaaS segments. Our gross margin increased by 140 basis points to 65.2% for the nine months ended September 30, 2022 compared to 63.8% for the nine months ended September 30, 2021.

Operating Expenses

Sales and Marketing

Sales and marketing expense increased by $17.4 million, or 6.7%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily attributable to $14.1 million of additional employee-related costs primarily related to the acquisitions of Thryv Australia and Vivial, and an increase in commission expenses of $12.5 million as a result of the Vivial Acquisition and higher Thryv platform sales. The increase was partially offset by a $5.3 million decrease in contract services, due to strategic cost-saving initiatives, and a $2.0 million decrease in advertising and sales promotion expenses.

General and Administrative

General and administrative expense increased by $52.2 million, or 48.6%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increasewas primarily attributable to an increase in employee-related costs, driven by the acquisitions of Thryv Australia and Vivial of $24.1 million and bad debt expense of $7.5 million. General and administrative expenses also increased $14.7 million as a result of higher software development costs and other expenses related to the Vivial Acquisition. In addition, General and administrative expenses increased by $4.3 million as a result of depreciation and amortization expense, driven by the accelerated amortization method used by the Company. The increase was partially offset by a $15.2 million decrease in transaction costs related to the Thryv Australia Acquisition, which occurred in the first quarter of 2021.

Impairment Charges

Impairment charges decreased by $3.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Impairment charges of $0.2 million were incurred during the nine months ended September 30, 2022, while $3.6 million of impairment charges were recognized during the nine months ended September 30, 2021 related to operating lease right-of-use asset impairments due to the Company's decision to operate in a "Remote First" working environment and consolidate operations at certain locations.

Other Income (Expense)

Interest Expense

Interest expense decreased by $7.3 million, or 14.2%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, driven primarily by lower outstanding debt balances resulting from payments made on long-term debt.

Other Components of Net Periodic Pension Benefit

Other components of net periodic pension benefit increased by $4.3 million for the nine months ended September 30, 2022. The increase was primarily due to a remeasurement gain of $5.2 million recognized during the nine months ended September 30, 2022, compared to a gain of $0.2 million recognized during the nine months ended September 30, 2021.

Other Income (Expense)

During the nine months ended September 30, 2022, the Company incurred other income, net, of $15.6 million, which primarily represents the $10.2 million bargain purchase gain as a result of the Vivial Acquisition and foreign currency-related gains. During the nine months ended September 30, 2021, the Company incurred other expense of $4.2 million, which included a loss of $3.1 million on the termination of leaseback obligations associated with land and a building in Tucker, Georgia and foreign currency-related losses.

Income Tax Expense

Income tax expense increased by $4.3 million, or 12.9%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The ETR was 26.6% and 25.9% for the nine months ended September 30, 2022 and 2021, respectively. The ETR differs from the 21.0% U.S. Federal statutory rate primarily due to our geographic mix of taxable income in various tax jurisdictions and permanent tax differences attributable to the net impact of non-U.S. taxing jurisdictions.

Adjusted EBITDA

Adjusted EBITDA decreased by $38.9 million, or 12.8%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in in Adjusted EBITDA was primarily driven by the secular decline in both our Thryv U.S. and International Marketing Services segments. These decreases were partially offset by increased revenue in the Thryv International Marketing Services segment due to an adjustment recognized upon the Thryv Australia Acquisition to reduce the deferred revenue balance assumed, which negatively impacted revenue recognized in the nine months ended September 30, 2021. These decreases were further offset by the impact of the Vivial Acquisition and the result of increasing the terms of our print publications from 15 months to 18 months in our Thryv U.S. Marketing Services segment. See “Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to Net income, the most directly comparable measure presented in accordance with GAAP.

Non-GAAP Financial Measures

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. We also present Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin, as defined below, as non-GAAP financial measures in this Quarterly Report.

We have included Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin in this report because management believes they provide useful information to investors in gaining an overall understanding of our current financial performance and provide consistency and comparability with past financial performance. Specifically, we believe Adjusted

EBITDA provides useful information to management and investors by excluding certain non-operating items that we believe are not indicative of our core operating results. In addition, Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin are used by management for budgeting and forecasting as well as measuring the Company’s performance. We believe Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Margin provide investors with the financial measures that closely align with our internal processes.

We define Adjusted EBITDA (“Adjusted EBITDA”) as Net income plus ~~Interest~~Income tax expense, ~~Income tax~~Interest expense Depreciation and amortization expense, Loss on ~~early extinguishment~~termination of ~~debt,~~leaseback obligations, Restructuring and integration expenses, Transaction costs, Stock-based compensation expense, and non-operating expenses, such as, Other components of net periodic pension cost (benefit) ~~cost,~~, Non-cash (gain) ~~loss~~ from remeasurement of indemnification asset, and certain unusual and non-recurring charges that might have been incurred. Adjusted EBITDA should not be considered as an alternative to Net income ~~(loss)~~ as a performance measure. We define Adjusted Gross Profit (“Adjusted Gross Profit”) and Adjusted Gross Margin (“Adjusted Gross Margin”) as Gross profit and Gross margin, respectively, adjusted to exclude the impact of ~~depreciation~~Depreciation and amortization expense and stock-based compensation expense.

Non-GAAP financial information has limitations as an analytical tool and is presented for supplemental informational purposes only. Such information should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly-titled non-GAAP measures used by other companies.

The following is a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, Net ~~income~~:income:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021		2022		2021
Reconciliation of Adjusted EBITDA	Reconciliation of Adjusted EBITDA					Reconciliation of Adjusted EBITDA
Net income	Net income	$	33,511	$	36,506	Net income	$	13,280	$	35,624	$	104,793	$	96,489
Income tax expense						Income tax expense	6,241		13,802		38,062		33,723
Interest expense	Interest expense	14,867		15,672		Interest expense	14,570		16,546		44,089		51,388
Income tax expense		9,621		11,809
Depreciation and amortization expense	Depreciation and amortization expense	21,969		19,718		Depreciation and amortization expense	23,393		31,049		65,954		80,675
Loss on early extinguishment of debt		—		299
Loss on termination of leaseback obligations						Loss on termination of leaseback obligations	—		—		—		3,409
Restructuring and integration expenses (1)	Restructuring and integration expenses (1)	5,827		9,234		Restructuring and integration expenses (1)	3,790		2,312		14,439		15,036
Transaction costs (2)	Transaction costs (2)	1,720		10,546		Transaction costs (2)	1,461		3,987		4,797		19,973
Stock-based compensation expense (3)	Stock-based compensation expense (3)	1,928		1,971		Stock-based compensation expense (3)	4,402		2,340		10,140		6,232
Other components of net periodic pension (benefit) cost (4)		(70)		(453)
Other components of net periodic pension cost (benefit) (4)						Other components of net periodic pension cost (benefit) (4)	3,928		(273)		(5,295)		(998)
Non-cash (gain) from remeasurement of indemnification asset (5)	Non-cash (gain) from remeasurement of indemnification asset (5)	(400)		—		Non-cash (gain) from remeasurement of indemnification asset (5)	(585)		(404)		(1,472)		(1,248)
Impairment charges						Impairment charges	—		—		222		3,611
Other (6)	Other (6)	(5,256)		(369)		Other (6)	(5,048)		(2,624)		(10,580)		(4,245)
Adjusted EBITDA	Adjusted EBITDA	$	83,717	$	104,933	Adjusted EBITDA	$	65,432	$	102,359	$	265,149	$	304,045

(1)For the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, expenses relate to periodic efforts to enhance efficiencies and reduce costs, and include severance benefits, loss on disposal of fixed assets and capitalized software, and costs associated with abandoned facilities and system consolidation.

(2)Expenses related to the Vivial Acquisition, Thryv Australia Acquisition and other transaction costs.

(3)The Company records stock-based compensation expense related to the amortization of grant date fair value of the Company’s stock-based compensation awards. See Note 4, Fair Value Measurements, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

(4)Other components of net periodic pension cost (benefit) ~~cost~~ is from our non-contributory defined benefit pension plans that are currently frozen and incur no additional service costs. The most significant component of other components of net periodic pension cost (benefit) ~~cost~~ relates to the mark-to-market pension remeasurement.

(5)In connection with the YP Acquisition, the seller indemnified the Company for future potential losses associated with certain federal and state tax positions taken in tax returns filed by the seller prior to the acquisition date.

(6)Other primarily includes expenses related to potential ~~non-income based~~non-income-based tax ~~liabilities.~~liabilities and foreign exchange-related expense. Additionally, during the ~~three~~nine months ended ~~March 31,~~September 30, 2022, Other includes the bargain purchase gain as a result of the Vivial ~~Acquisition and foreign exchange-related expense.~~Acquisition.

The following tables set forth reconciliations of Adjusted Gross Profit and Adjusted Gross Margin, to their most directly comparable GAAP measures, Gross profit and Gross margin:


															Three Months Ended September 30, 2022
		Three Months Ended March 31, 2022													Thryv U.S.						Thryv International
(in thousands)	(in thousands)	Marketing Services			SaaS			International			Consolidated			(in thousands)	Marketing Services			SaaS			Marketing Services			SaaS			Total
Reconciliation of Adjusted Gross Profit	Reconciliation of Adjusted Gross Profit													Reconciliation of Adjusted Gross Profit
Gross profit	Gross profit	$	136,510		$	29,409		$	31,937		$	197,856		Gross profit	$	126,846		$	33,827		$	14,351		$	615		$	175,639
Plus:	Plus:													Plus:
Depreciation and amortization expense	Depreciation and amortization expense	4,395			979			4,442			9,816			Depreciation and amortization expense	4,593			1,287			3,739			195			9,814
Stock-based compensation expense	Stock-based compensation expense	61			15			—			76			Stock-based compensation expense	85			22			—			—			107
Adjusted Gross Profit	Adjusted Gross Profit	$	140,966		$	30,403		$	36,379		$	207,748		Adjusted Gross Profit	$	131,524		$	35,136		$	18,090		$	810		$	185,560
Gross Margin	Gross Margin	64.2		%	62.1		%	65.9		%	64.2		%	Gross Margin	64.3		%	61.1		%	53.5		%	47.7		%	62.6		%
Adjusted Gross Margin	Adjusted Gross Margin	66.3		%	64.2		%	75.0		%	67.4		%	Adjusted Gross Margin	66.7		%	63.5		%	67.4		%	62.8		%	66.1		%


															Three Months Ended September 30, 2021
		Three Months Ended March 31, 2021													Thryv U.S.						Thryv International
(in thousands)	(in thousands)	Marketing Services			SaaS			International			Consolidated			(in thousands)	Marketing Services			SaaS			Marketing Services			SaaS			Total
Reconciliation of Adjusted Gross Profit	Reconciliation of Adjusted Gross Profit													Reconciliation of Adjusted Gross Profit
Gross profit	Gross profit	$	156,161		$	23,167		$	3,118		$	182,446		Gross profit	$	149,252		$	27,753		$	16,347		$	(229)		$	193,123
Plus:	Plus:													Plus:
Depreciation and amortization expense	Depreciation and amortization expense	4,619			755			5,870			11,244			Depreciation and amortization expense	4,442			942			9,510			36			14,930
Stock-based compensation expense	Stock-based compensation expense	70			11			—			81			Stock-based compensation expense	127			29			—			—			156
Adjusted Gross Profit	Adjusted Gross Profit	$	160,850		$	23,933		$	8,988		$	193,771		Adjusted Gross Profit	$	153,821		$	28,724		$	25,857		$	(193)		$	208,209
Gross Margin	Gross Margin	68.5		%	62.2		%	20.2		%	65.0		%	Gross Margin	70.0		%	61.9		%	41.8		%	(174.8)		%	65.0		%
Adjusted Gross Margin	Adjusted Gross Margin	70.6		%	64.2		%	58.3		%	69.1		%	Adjusted Gross Margin	72.1		%	64.1		%	66.0		%	(147.3)		%	70.0		%


	Nine Months Ended September 30, 2022
	Thryv U.S.						Thryv International
(in thousands)	Marketing Services			SaaS			Marketing Services			SaaS			Total
Reconciliation of Adjusted Gross Profit
Gross profit	$	415,130		$	95,328		$	89,694		$	1,325		$	601,477
Plus:
Depreciation and amortization expense	13,381			3,278			11,771			337			28,767
Stock-based compensation expense	251			63			—			—			314
Adjusted Gross Profit	$	428,762		$	98,669		$	101,465		$	1,662		$	630,558
Gross Margin	65.7		%	62.0		%	67.1		%	41.9		%	65.2		%
Adjusted Gross Margin	67.8		%	64.1		%	75.9		%	52.5		%	68.3		%


	Nine Months Ended September 30, 2021
	Thryv U.S.						Thryv International
(in thousands)	Marketing Services			SaaS			Marketing Services			SaaS			Total
Reconciliation of Adjusted Gross Profit
Gross profit	$	442,244		$	76,234		$	35,755		$	(224)		$	554,009
Plus:
Depreciation and amortization expense	13,485			2,598			26,869			39			42,991
Stock-based compensation expense	265			55			—			—			320
Adjusted Gross Profit	$	455,994		$	78,887		$	62,624		$	(185)		$	597,320
Gross Margin	68.7		%	61.8		%	35.3		%	(160.0)		%	63.8		%
Adjusted Gross Margin	70.8		%	63.9		%	61.7		%	(132.1)		%	68.7		%

Liquidity and Capital Resources

Thryv Holdings, Inc. is a holding company that does not conduct any business operations of its own. We derive cash flows from cash transfers and other distributions from our operating subsidiary, Thryv Inc., who in turn generates cash flow from its own operations and operations of its subsidiaries, and has cash and cash equivalents on hand, funds provided under the Term Loan (as defined below) and funds available under the ABL ~~Facility.~~Facility (as defined below). The agreements governing our debt may restrict the ability of our subsidiaries to make loans or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of our senior credit facilities and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions or the making of loans by such subsidiaries to us. Our and our subsidiaries’ ability to meet our debt service requirements is dependent on our ability to generate sufficient cash flows from operations.

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, such as working capital requirements for our operations, business development and investment activities, and payments for our debt obligations, for the following 12 months. Any projections of future earnings and cash flows are subject to substantial uncertainty. Our future success and capital adequacy will depend on, among other things, our ability to achieve anticipated levels of revenues and cash flows from operations and our ability to address our annual cash obligations and reduce our outstanding debt, all of which are subject to general economic, financial, competitive, and other factors beyond our control. As a result of COVID-19, many SMBs may continue to experience a reduction in revenues and cash flows and may not have the ability to pay amounts owed to us. While COVID-19 has not had a material impact on our liquidity to date, we continue to assess our business operations and the impact that COVID-19 may have on our financial results and liquidity. We continue to monitor our capital requirements to ensure our needs are in line with available capital resources.

In addition, our board of directors authorizes us to undertake share repurchases from time to time. The amount and timing of any share repurchases that we make will depend on a variety of factors, including available liquidity, cash flows, our capacity to make repurchases under our debt agreements and market conditions.

3342

For a discussion on contingent obligations, see Note 13, Contingent Liabilities, to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report.

Sources and Uses of Cash

The following table sets forth a summary of our cash flows from operating, investing and financing activities for the periods indicated:


		Three Months Ended March 31,				$			Nine Months Ended September 30,				$
		2022		2021		Change			2022		2021		Change
(in thousands)	(in thousands)	(unaudited)						(in thousands)	(unaudited)
Cash flows provided by (used in):	Cash flows provided by (used in):							Cash flows provided by (used in):
Operating activities	Operating activities	$	29,327	$	14,204	$	15,123	Operating activities	$	104,221	$	121,539	$	(17,318)
Investing activities	Investing activities	(26,002)		(177,858)		151,856		Investing activities	(42,138)		(195,360)		153,222
Financing activities	Financing activities	6,386		191,796		(185,410)		Financing activities	(57,696)		87,517		(145,213)
Effects of exchange rate changes on Cash and cash equivalents	Effects of exchange rate changes on Cash and cash equivalents	541		(707)		1,248		Effects of exchange rate changes on Cash and cash equivalents	(1,610)		(3,446)		1,836
Increase in Cash and cash equivalents		$	10,252	$	27,435	$	(17,183)
Increase in Cash and cash equivalents and restricted cash								Increase in Cash and cash equivalents and restricted cash	$	2,777	$	10,250	$	(7,473)

Cash Flows from Operating Activities

Net cash provided by operating activities ~~increased~~decreased by ~~$15.1~~$17.3 million, or ~~106.5%~~14.2%, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The ~~increase in net cash provided by operating activities of $15.1 million~~decrease was primary due to changes in working capital, particularly accounts receivable, which was impacted by the timing of payments. This decrease was partially offset by lower restructuring and integration and transaction cost payments of ~~$9.6~~$14.7 million, related to the Vivial Acquisition on January 1,21, 2022 compared to the Thryv Australia Acquisition on March 1, ~~2021. Additionally, the increase in net cash provided by operating activities was driven by~~2021, and lower interest payments of ~~$5.3~~$10.1 million ~~during the three months ended March 31, 2022~~ compared to the ~~three~~nine months ended ~~March 31, 2021, partially offset by changes in working capital.~~September 30, 2021.

Cash Flows from Investing Activities

Net cash used in investing activities decreased by ~~$151.9~~$153.2 million, or ~~85.4%~~78.4%, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The decrease ~~in net cash used in investing activities of $151.9 million~~ was primarily due to the difference in the cash paid of ~~$174.2~~$175.4 million in connection with the Thryv Australia Acquisition on March 1, 2021, compared to the cash paid of ~~$22.0~~$22.8 million in connection with the Vivial Acquisition on January 21, 2022.

Cash Flows from Financing Activities

Net cash ~~from~~provided by financing activities decreased by ~~$185.4~~$145.2 million, or ~~96.7%~~165.9%, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The decrease ~~in net cash from financing activities of $185.4 million~~ was primarily driven by net proceeds received from the Term Loan of $679.0 million ~~partially offset by~~and cash used to repay the remaining outstanding principal balance of the Senior Term Loan of $449.6 million, used to finance the Thryv Australia Acquisition and refinance the Senior Term Loan, during the ~~three~~nine months ended ~~March 31, 2021,~~September 30, 2021. This was partially offset by payments made on the Term Loan of $81.5 million during the nine months ended September 30, 2022, compared to payments made on the Term Loan of ~~$17.5~~$123.0 million during the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2021. The decrease ~~in net cash from financing activities~~ was ~~partially~~further offset by an increase in net proceeds from the ABL Facility of ~~$52.4~~$42.0 million, as a result of lower proceeds of $46.9 million and lower payments of ~~$6.2~~$88.9 million on the ABL Facility during the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2022.

Debt

Term Loan

On March 1, 2021, the Company entered into a Term Loan credit agreement (the “Term Loan”). The proceeds of the Term Loan were used to finance the Thryv Australia Acquisition, refinance in full the Company's existing term loan facility (the “Senior Term Loan”) and pay fees and expenses related to the Thryv Australia Acquisition and related financing.

3443

March 1, 2021. The Term Loan Facility matures on March 1, 2026 and borrowings under the Term Loan Facility bear interest at a fluctuating rate per annum equal to, at the Company’s option, LIBOR or a base rate, in each case, plus an applicable margin per annum equal to (i) 8.50% (for LIBOR loans) and (ii) 7.50% (for base rate loans). The Term Loan Facility requires mandatory amortization payments equal to $17.5 million per fiscal quarter. As of ~~March 31,~~September 30, 2022, ~~13.9%~~6.9% of the Term Loan was held by related parties who ~~are~~were equity holders of the ~~Company.~~Company on that date.

ABL Facility

•revise the maximum revolver amount to $175.0 million;

•reduce the interest rate per annum to (i) 3-month LIBOR plus 3.00% for LIBOR loans and (ii) base rate plus 2.00% for base rate loans;

•reduce the commitment fee on undrawn amounts under the ABL Facility to 0.375%;

•extend the maturity date of the ABL Facility to the earlier of March 1, 2026 and 91 days prior to the stated maturity

date of the Term Loan Facility;

•add the Australian subsidiaries acquired pursuant to the Thryv Australia Acquisition as borrowers and guarantors, and establish an Australian borrowing base; and

•make certain other conforming changes consistent with the Term Loan ~~Agreement.~~Facility.

We maintain debt levels that we consider appropriate after evaluating a number of factors, including cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities), and overall cost of capital. Per the terms of the Term Loan Facility, payments of the Term Loan balance are determined by the Company's Excess Cash Flow (as defined within the Term Loan Facility). We are in compliance with all covenants under the Term Loan and ABL Facility as of ~~March 31,~~September 30, 2022. We had total recorded debt outstanding of ~~$569.3~~$503.7 million (net of ~~$18.2~~$15.6 million of unamortized original issue discount (“OID”) and debt issuance cost) at ~~March 31,~~September 30, 2022, which was comprised of amounts outstanding under our Term Loan of ~~$524.5~~$460.5 million and ABL Facility of ~~$63.0~~$58.9 million.

As of ~~March 31,~~September 30, 2022, we had borrowing capacity of ~~$68.9~~$72.3 million under the ABL Facility.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates have not changed from those described in our 2021 Form 10-K, under “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and ~~Estimates.~~Estimates.”

Recent Accounting Pronouncements

For a description of accounting pronouncements recently adopted and issued, see “Part I, Item 1. Note 1, Description of Business and Summary of Significant Accounting ~~Policies.~~Policies.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

As of ~~March 31,~~September 30, 2022, we had total debt outstanding of ~~$569.3~~$503.7 million (net of ~~$18.2~~$15.6 million of unamortized OID and debt issuance costs), which was comprised of amounts outstanding under our Term Loan of ~~$524.5~~$460.5 million and ABL Facility of ~~$63.0~~$58.9 million. Substantially all this debt bears interest at floating rates. Changes in interest rates affect the interest expense we pay on our floating rate debt. A hypothetical 100 basis point increase in interest rates would increase our interest expense by approximately ~~$5.9~~$5.2 million annually, based on the debt outstanding at ~~March 31,~~September 30, 2022.

Foreign Exchange Currency Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Australian dollar. Since we translate foreign currencies into U.S. dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results.

We have experienced and will continue to experience fluctuations in our Net income as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We recognized immaterial amounts of foreign currency gains and losses in each of the periods presented. We have not hedged our foreign currency transactions to date. We are evaluating the costs and benefits of initiating a hedging program and may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operations and our risk grows.

Item 4. Controls and Procedures

Acquisition

We are in the process of integrating Vivial, a marketing and advertising company that we acquired on January 21, 2022. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures as of ~~March 31,~~September 30, 2022 excludes an assessment of the internal control over financial reporting related to the Vivial Acquisition. The Vivial Acquisition represented 3% ~~of our consolidated total assets at March 31, 2022,~~7% and 8%of our consolidated revenue included in our consolidated financial statements for the three and nine months ended ~~March 31, 2022.~~September 30, 2022, respectively.

~~Evaluation of~~ Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~March 31,~~September 30, 2022.

Changes in Internal Control over Financial Reporting

We have completed one acquisition in the past 12 months. As part of our ongoing integration activities, we continue to implement our controls and procedures over the business we acquired and to augment our company-wide controls to reflect the risks inherent in our acquisition. Throughout the integration process, we monitor these efforts and take corrective action as needed to reinforce the application of our controls and procedures. Other than the foregoing, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the ~~three months~~quarter ended ~~March 31,~~September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information in response to this item is provided in “Part I - Item 1. Note 13, Contingent ~~Liabilities”~~Liabilities” and is incorporated by reference into Part II of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There have been no material changes to our risk factors disclosed in our 2021 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~Forms of Award Agreements~~None.

The foregoing descriptions of the RSU Award Agreement and the PSU Award Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of each agreement, copies of which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

~~RSU and PSU Awards~~

Also on May 3, 2022, the Compensation Committee of the Company’s Board of Directors approved grants of RSU and PSU awards under the 2020 Plan to the Company’s named executive officers, as set forth in the table below.

Name and Principal Position Number of RSU Awards Number of PSU Awards
Joseph A. Walsh, Chairman & CEO 40,245 74,742
Paul D. Rouse, Chief Financial Officer, EVP & Treasurer 33,538 62,285
Gordon Henry, Chief Strategy Officer & EVP 23,476 43,600
James McCusker, Chief Revenue Officer & EVP 23,476 43,600
John Wholey, Chief Operations & Information Officer & EVP 23,476 43,600

The RSU and PSU awards were granted pursuant to award agreements that are materially consistent with the form of RSU Award Agreement and form of PSU Award Agreement, respectively. One-third of the RSUs will vest in January 2023 and, for the named executive officers other than the CEO, one-third will vest in January 2024 and the remaining one-third will vest in January 2025, subject to the recipient’s continued employment through such dates. The remaining two-thirds of the RSUs granted to the CEO will vest on a monthly basis following January 23, 2023, subject to his continued employment through each vesting date. The PSUs will vest, if at all, following the achievement of certain performance measures over a three year performance period.

Item 6. Exhibits

The following documents are filed as an exhibit to this Quarterly Report on Form 10-Q:


Exhibit No.						Description
2.1						Share Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K, filed with the Securities and Exchange Commission on March 2, 2021)
3.1						Fourth Amended and Restated Certificate of Incorporation of Thryv Holdings, Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed on September 24, 2020)
3.2						Second Amended and Restated Bylaws of Thryv Holdings, Inc. (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on September 24, 2020)
10.1+*						~~Form of Restricted Stock Unit Award Agreement under the Thryv Holdings, Inc. 2020 Incentive Award Plan~~
10.2+*						~~Form of Performance-Based Restricted Stock Unit Award Agreement under the Thryv Holdings, Inc. 2020 Incentive Award Plan~~
31.1*						Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2022, formatted in Inline XBRL (included in Exhibits 101).

*Filed herewith

** Furnished herewith

+ Management contract of compensatory plan or arrangement

3846

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


THRYV HOLDINGS, INC.

~~May 5,~~November 3, 2022	By:	/s/ Joseph A. Walsh
		Joseph A. Walsh Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)


~~May 5,~~November 3, 2022	By:	/s/ Paul D. Rouse
		Paul D. Rouse Chief Financial Officer, Executive Vice President and Treasurer
		(Principal Financial Officer)


Name and Principal Position	Number of RSU Awards	Number of PSU Awards
Joseph A. Walsh, Chairman & CEO	40,245	74,742
Paul D. Rouse, Chief Financial Officer, EVP & Treasurer	33,538	62,285
Gordon Henry, Chief Strategy Officer & EVP	23,476	43,600
James McCusker, Chief Revenue Officer & EVP	23,476	43,600
John Wholey, Chief Operations & Information Officer & EVP	23,476	43,600