Acquisitions

9 Months Ended

Sep. 30, 2021

Thryv Australia Acquisition

On March 1, 2021 (the “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 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) Sensis Holding Limited (“Thryv Australia”), 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 a New Term Loan (as defined in Note 8, Debt Obligations) that was entered into on the 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. Additionally, as part of the effort to fund the Thryv Australia Acquisition, the Company incurred debt issuance costs of $4.2 million related to a New 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 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, 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 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 Thryv Australia’s assets acquired and liabilities assumed. The preliminary purchase price allocation is expected to be finalized within 12 months after the Acquisition Date.

The following table summarizes the consideration transferred and the preliminary purchase price allocation of the fair values of the assets acquired and liabilities assumed at the 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	88,529
Other assets	10,426
Fixed assets and capitalized software	40,957
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	(31,163)
Accrued liabilities	(40,713)
Contract liabilities	(27,075)
Other current liabilities	(6,733)
Deferred tax liabilities	(42,121)
Other liabilities	(15,505)
Total identifiable net assets	$	144,113
Goodwill	72,051
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 $72.1 million was primarily related to the benefits expected from the Thryv Australia Acquisition and was allocated to the Thryv International segment. The goodwill recognized is not deductible for income tax purposes.

The Thryv Australia Acquisition contributed $101.6 million in revenue and $28.6 million in net loss since the Acquisition Date.

Pro Forma Results

The pro forma combined financial information presented below was derived from 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 experience:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Revenue	$	297,290	$	271,192	$	937,204	$	998,994
Net income (loss)	37,440		(9,566)		135,671		28,158