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 September 30, 2021

OR

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	Nasdaq Capital Market

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 November 9, 2021, there were 33,966,497 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 for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	3
	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	46
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
	Signatures	49

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, including, 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 can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” 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, including Thryv Australia, 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;

•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.

1

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, 2020 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 Company,” “we,” “us,” “our,” “Company” and “Thryv” refer to Thryv Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.

2

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
	September 30,				September 30,
(in thousands, except share and per share data)	2021		2020		2021		2020
Revenue	$	297,290	$	240,325	$	868,943	$	862,507
Cost of services	104,167		105,444		314,934		334,025
Gross profit	193,123		134,881		554,009		528,482
Operating expenses:
Sales and marketing	94,343		73,306		258,277		241,703
General and administrative	32,983		39,002		107,362		132,758
Impairment charges	—		1,184		3,611		19,414
Total operating expenses	127,326		113,492		369,250		393,875
Operating income	65,797		21,389		184,759		134,607
Other income (expense):
Interest expense	(12,050)		(11,442)		(38,159)		(39,648)
Interest expense, related party	(4,496)		(4,167)		(13,229)		(13,903)
Other components of net periodic pension benefit (cost)	273		(30,175)		998		(31,312)
Other expense	(98)		—		(4,157)		—
Income (loss) before income tax (expense) benefit	49,426		(24,395)		130,212		49,744
Income tax (expense) benefit	(13,802)		24,250		(33,723)		(10,323)
Net income (loss)	$	35,624	$	(145)	$	96,489	$	39,421
Other comprehensive income (loss):
Foreign currency translation adjustment	(4,100)		—		(8,545)		—
Comprehensive income (loss)	$	31,524	$	(145)	$	87,944	$	39,421
Net income (loss) per common share:
Basic	$	1.05	$	—	$	2.87	$	1.25
Diluted	$	0.95	$	—	$	2.67	$	1.16
Weighted-average shares used in computing basic and diluted net income (loss) per common share:
Basic	34,013,897		30,857,617		33,585,488		31,621,039
Diluted	37,620,116		30,857,617		36,110,702		33,990,771

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

3

Thryv Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)	September 30, 2021		December 31, 2020
Assets	(unaudited)
Current assets
Cash and cash equivalents	$	10,374	$	2,406
Accounts receivable, net of allowance of $19,365 in 2021 and $33,030 in 2020	313,285		296,570
Contract assets, net of allowance of $114 in 2021 and $338 in 2020	7,024		10,975
Taxes receivable	1,890		9,229
Prepaid expenses and other current assets	33,084		26,172
Indemnification asset	25,594		24,346
Total current assets	391,251		369,698
Fixed assets and capitalized software, net	70,269		89,044
Goodwill	676,440		609,457
Intangible assets, net	101,189		31,777
Deferred tax assets	114,062		93,099
Other assets	24,278		21,902
Total assets	$	1,377,489	$	1,214,977
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	16,929	$	8,927
Accrued liabilities	153,234		139,613
Current portion of unrecognized tax benefits	31,018		30,022
Contract liabilities	35,109		18,942
Current portion of long-term debt	70,000		—
Other current liabilities	14,238		9,896
Total current liabilities	320,528		207,400
New Term Loan, net	333,938		—
New Term Loan, related party	152,286		—
Senior Term Loan, net	—		335,683
Senior Term Loan, related party	—		113,482
ABL Facility	56,181		79,238
Leaseback obligations	—		54,798
Pension obligations, net	168,793		190,827
Deferred tax liabilities	—		508
Other liabilities	41,318		36,266
Total long-term liabilities	752,516		810,802
Commitments and contingencies (see Note 13)
Stockholders' equity
Common stock - $0.01 par value, 250,000,000 shares authorized; 60,643,781, shares issued and 33,965,371 shares outstanding at September 30, 2021; and 59,590,422 shares issued and 32,912,012 shares outstanding at December 31, 2020	606		596
Additional paid-in capital	1,079,340		1,059,624
Treasury stock - 26,678,410 shares at September 30, 2021 and December 31, 2020	(468,613)		(468,613)
Accumulated other comprehensive income (loss)	(8,545)		—
Accumulated deficit	(298,343)		(394,832)
Total stockholders' equity	304,445		196,775
Total liabilities and stockholders' equity	$	1,377,489	$	1,214,977

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

4

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(unaudited)

Three 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 Income (Loss)		Accumulated (Deficit)		Total Stockholders' Equity
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	243,615	2		667		—	—		—		—		669
Exercise of stock warrants	8,569	—		209		—	—		—		—		209
Stock compensation expense	—	—		2,340		—	—		—		—		2,340
Cumulative translation adjustment	—	—		—		—	—		(4,100)		—		(4,100)
Net income	—	—		—		—	—		—		35,624		35,624
Balance as of September 30, 2021	60,643,781	$	606	$	1,079,340	(26,678,410)	$	(468,613)	$	(8,545)	$	(298,343)	$	304,445
Three Months Ended September 30, 2020
	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 June 30, 2020	57,463,943	$	574	$	1,009,001	(26,634,798)	$	(468,588)	$	—	$	(504,487)	$	36,500
Exercise of stock options	5,448	1		55		—	—		—		—		56
Private placement (see Note 10)	—	—		(813)		68,857	1,257		—		—		444
Net loss	—	—		—		—	—		—		(145)		(145)
Balance as of September 30, 2020	57,469,391	$	575	$	1,008,243	(26,565,941)	$	(467,331)	$	—	$	(504,632)	$	36,855

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

5

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 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
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
Nine Months Ended September 30, 2020
	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, 2019	57,443,282	$	574	$	1,008,701	(23,952,756)	$	(437,962)	$	—	$	(544,053)	$	27,260
Purchase of treasury stock	—	—		—		(2,682,042)	(30,626)		—		—		(30,626)
Exercise of stock options	26,109	1		355		—	—		—		—		356
Private placement (see Note 10)	—	—		(813)		68.857	1,257		—		—		444
Net income	—	—		—		—	—				39,421		39,421
Balance as of September 30, 2020	57,469,391	$	575	$	1,008,243	(26,565,941)	$	(467,331)	$	—	$	(504,632)	$	36,855

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

6

Thryv Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Nine Months Ended September 30,
(in thousands)	2021		2020
Cash Flows from Operating Activities	(unaudited)		(unaudited)
Net income	$	96,489	$	39,421
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	80,675		110,883
Amortization of debt issuance costs	3,431		801
Deferred income taxes	(57,823)		(42,346)
Provision for credit losses	3,211		27,709
Provision for service credits	10,595		28,268
Stock-based compensation expense (benefit)	6,232		(4,195)
Other components of net periodic pension (benefit) cost	(998)		31,312
Loss on termination of leaseback obligations	3,409		—
(Gain) loss on disposal/write-off of fixed assets and capitalized software	(44)		3,476
Impairment charges	3,611		19,414
Non-cash (gain) loss from remeasurement of indemnification asset	(1,248)		3,878
Other, net	592		—
Changes in working capital items, excluding acquisitions:
Accounts receivable	48,791		15,742
Contract assets	3,837		(803)
Prepaid expenses and other assets	(3,184)		(3,785)
Accounts payable and accrued liabilities	(64,377)		(44,380)
Operating lease liability	(2,366)		(3,998)
Contract liabilities	(9,294)		(5,911)
Settlement of stock option liability	—		(896)
Net cash provided by operating activities	121,539		174,590
Cash Flows from Investing Activities
Additions to fixed assets and capitalized software	(20,053)		(17,030)
Proceeds from the sale of fixed assets	63		1,546
Acquisition of a business, net of cash acquired	(175,370)		—
Net cash (used in) investing activities	(195,360)		(15,484)
Cash Flows from Financing Activities
Proceeds from New Term Loan	418,070		—
Proceeds from New Term Loan, related party	260,930		—
Payments of New Tern Loan	(86,199)		—
Payments of New Term Loan, related party	(36,801)		—
Payments of Senior Term Loan	(335,821)		(72,629)
Payments of Senior Term Loan, related party	(113,789)		(32,761)
Proceeds from ABL Facility	793,604		868,811
Payments of ABL Facility	(816,661)		(892,155)
Purchase of treasury stock	—		(30,626)
Other	4,184		113
Net cash provided by (used in) financing activities	87,517		(159,247)
Effect of exchange rate changes on cash and cash equivalents	(3,446)		—
Increase (decrease) in cash and cash equivalents and restricted cash	10,250		(141)
Cash and cash equivalents and restricted cash, beginning of period	2,406		1,912
Cash and cash equivalents and restricted cash, end of period	$	12,656	$	1,771
Supplemental Information
Cash paid for interest	$	52,491	$	56,845
Cash paid for income taxes, net	$	58,491	$	15,757

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

7

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”) and Internet Yellow Pages (“IYP”) and provides a comprehensive offering of digital marketing services such as 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 March 1, 2021, the Company completed the acquisition of Sensis Holding Limited (“Thryv Australia”), a provider of marketing solutions serving SMBs in Australia.

As of January 1, 2021, the Company began reporting based on three reportable segments:

•Marking Services, which includes the Company's print and digital solutions businesses;

•SaaS which includes the Company's flagship SMB end-to-end customer experience platform; and

•Thryv International, which is comprised of the Thryv Australia business, Australia's leading provider of marketing solutions serving SMBs.

The corresponding current and prior period segment disclosures have been recast to reflect the current segment presentation. See Note 15, Segment Information.

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”) 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 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 September 30, 2021 and 2020 have been prepared on the same basis as the audited annual financial statements. The consolidated balance sheet as of December 31, 2020 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, 2020.

Gross Profit Change

The Company has revised the format of its consolidated statements of operations since the issuance of its Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Form 10-K”) in order to provide better insight into the Company's results of operations and to align its presentation to certain industry competitors. As a result, a Gross profit subtotal line item was added within the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020. Additionally, the Company reclassified Depreciation and amortization from a single line item in its consolidated statements of operations to be reflected as a component of Gross profit, Sales and marketing expense, and General and administrative expense.

8

The following summarizes the changes made to the Company's consolidated statements of operations for three and nine months ended September 30, 2020:

	Three Months Ended September 30, 2020
(in thousands)	As Reported		Adjustments		As Adjusted
Cost of services	$	87,347	$	18,097	$	105,444
Sales and marketing	60,775		12,531		73,306
General and administrative	34,176		4,826		39,002
Impairment charges	1,184		—		1,184
Depreciation and amortization	35,454		(35,454)		—

	Nine Months Ended September 30, 2020
(in thousands)	As Reported		Adjustments		As Adjusted
Cost of services	$	278,941	$	55,084	$	334,025
Sales and marketing	201,939		39,764		241,703
General and administrative	116,723		16,035		132,758
Impairment charges	19,414		—		19,414
Depreciation and amortization	110,883		(110,883)		—

Reverse Stock Split

The Company’s consolidated financial statements reflect a 1-for-1.8 reverse stock split of the Company’s common stock, which became effective on August 26, 2020. All share and per share data for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect the reverse stock split.

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 net pension obligation. 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 addition of restricted cash and foreign currency to the Company’s significant accounting policies and the change related to income taxes, 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 September 30, 2021 as compared to the significant accounting policies included in the Company's 2020 Form 10-K.

9

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 nine months ended September 30, 2021 and 2020:

(in thousands)	September 30, 2021		September 30, 2020		December 31, 2020
Cash and cash equivalents	$	10,374	$	1,771	$	2,406
Restricted cash, included in Prepaid expenses and other current assets	2,282		—		—
Total Cash and cash equivalents and restricted cash	$	12,656	$	1,771	$	2,406

Impairment Charges

In June 2020, the Company announced its plans to become a “Remote First” company, meaning that the majority of the workforce will continue to operate in a remote working environment indefinitely. As a result, the Company closed certain office buildings, including most of the space at the corporate headquarters in Dallas. The Company kept certain office buildings open to house essential employees who cannot perform their duties remotely, such as employees who work in the data centers in Dallas and Virginia. Approximately $16.4 million and $1.8 million of the June 2020 impairment charges related to becoming a “Remote First” company were recorded in the Marketing Services and SaaS segments, respectively. During the nine months ended September 30, 2020, the Company recorded operating lease right-of-use assets impairment charges of $16.5 million and fixed assets impairment charges of $2.9 million due to the Company's decision to operate in a "Remote First" working environment and consolidate operations at certain locations.

During the nine months ended September 30, 2021, the Company recorded operating lease right-of-use assets impairment charges of $3.6 million due to the Company's decision to operate in a “Remote First” working environment. These impairment charges were recorded in the Thryv International segment. No impairment charges were recorded during the three months ended September 30, 2021.

In addition, in July 2020, the Company recorded operating lease right-of use assets impairment charges of $1.2 million related to consolidating operations at certain locations. Approximately $1.0 million and $0.2 million of these impairment charges were recorded in the Marketing Services and SaaS segments, respectively.

These operating lease right-of-use assets were remeasured at fair value based upon the discounted cash flows of estimated sublease income using market participant assumptions. These fair value measurements are considered Level 3, as defined in Note 4, Fair Value Measurements.

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 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 comprehensive income.

Income Taxes

The Company will report the tax impact of global intangible low-taxed income (“GILTI”) as a period cost when incurred. Accordingly, the Company is not providing deferred taxes for basis differences expected to reverse as GILTI.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also

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clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020. Early adoption is permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements.

Note 2      Acquisitions

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.

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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

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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). SaaS and digital 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 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. 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 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. For the three and nine months ended September 30, 2020, the Company recognized revenue of $6.2 million and $18.5 million, respectively, that was recorded in Contract liabilities as of December 31, 2019.

Pandemic Credits

During the three and nine months ended September 30, 2021, the Company recognized pandemic credits of $0.2 million and $3.2 million, respectively, provided to customers most impacted by COVID-19. During the three and nine months ended September 30, 2020, the Company recognized pandemic credits of $7.8 million and $14.2 million, respectively, provided to customers most impacted by COVID-19. The Company has reflected these price concessions as reduction to revenue in the consolidated statements of operations.

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.

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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 and nine months ended September 30, 2021 and 2020, 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 2 and 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 1.8 million 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 September 30, 2021, the number of shares expected to be returned by seller is 0.9 million, which represents the number of shares required to satisfy the uncertain tax position less $8.0 million.

Prior to September 30, 2020, the fair value of the Company's indemnification asset was measured and recorded in the consolidated balance sheets using Level 3 inputs because it was valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices. On September 30, 2020, the fair value of the Company’s indemnification asset was based on the THRY Nasdaq per share price. Accordingly, the indemnification asset was transferred from Level 3 to Level 1 within the fair value hierarchy. The Company values its indemnification asset utilizing the fair value of its common stock.

The following table presents a reconciliation of the Company’s Level 3 indemnification asset measured and recorded at fair value on a recurring basis as of September 30, 2021 and 2020:

(in thousands)	September 30, 2021		September 30, 2020
Balance as of January 1,	$	—	$	29,789
Change in fair value	—		(3,878)
Balance as of September 30	$	—	$	25,911

As of September 30, 2021 and December 31, 2020, the fair value of the Company's Level 1 indemnification asset was $25.6 million and $24.3 million, respectively. A gain of $0.4 million and $1.2 million from the change in fair value of the Company’s Level 1 indemnification asset during the three and nine months ended September 30, 2021, respectively, was recorded in General and administrative expense on the Company's consolidated statements of operations.

The loss of $0.5 million and $3.9 million from the change in fair value of the Company’s Level 3 indemnification asset during the three and nine months ended September 30, 2020, respectively, was recorded in General and administrative expense on the Company's consolidated statements of operations.

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.

Liability-classified Stock-based Compensation

At September 30, 2020, the fair value associated with the Company's liability-classified stock-based compensation awards totaled $47.9 million, of which $37.7 million was vested. The fair value of each stock option award and its subsequent period-over-period remeasurement, in the case of liability-classified stock-based compensation awards, is estimated using a Black-Scholes option pricing model using Level 3 inputs. The decrease in value of the vested portion of the liability-classified stock-based compensation awards at September 30, 2020 was primarily associated with a decrease in the Company's share fair value.

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The Company did not have liability-classified stock-based compensation as of September 30, 2021.

The following table presents a reconciliation of the Company’s stock option liability measured and recorded at fair value on a recurring basis as of September 30, 2021 and 2020:

(in thousands)	2021		2020
Balance as of January 1 (1)	$	—	$	43,026
Settlement of stock options	—		(896)
Exercise of stock options	—		(235)
Change in fair value	—		(9,656)
Amortization of grant date fair value	—		5,422
Balance as of September 30	$	—	$	37,661

(1)    As of October 1, 2020, based on the Company’s intention and ability to equity-settle upon exercise, these stock options were classified as equity awards, and the liability associated with stock-based compensation award was reclassified to Additional paid-in capital.

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 New Term Loan and the Senior Term Loan (as defined in Note 8, Debt Obligations) are carried at amortized cost; however, the Company estimates the fair value of each term loan for disclosure purposes. The fair value of the New Term Loan and the Senior Term Loan is determined based on quoted prices that are observable in the market place 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 New Term Loan and Senior Term Loan:

	September 30, 2021				December 31, 2020
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
New Term Loan, net	$	556,224	$	563,176	$	—	$	—
Senior Term Loan, net	—		—		449,165		441,742

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Note 5     Goodwill and Intangible Assets

Goodwill

The following table sets forth the changes in the carrying amount of goodwill for the Company for nine months ended September 30, 2021 and 2020:

(in thousands, except years)	Marketing Services		SaaS		Total
Balance as of December 31, 2019	$	390,573	$	218,884	$	609,457
Additions	—		—		—
Impairments	—		—		—
Balance as of December 31, 2020	$	390,573	$	218,884	$	609,457

(in thousands, except years)	Marketing Services		SaaS		Thryv International		Total
Balance as of December 31, 2020	$	390,573	$	218,884	$	—	$	609,457
Thryv Australia Acquisition	—		—		72,051		72,051
Effects of foreign currency translation	—		—		(5,068)		(5,068)
Balance as of September 30, 2021	$	390,573	$	218,884	$	66,983	$	676,440

As of March 31, 2020, the Company determined that a goodwill impairment evaluation triggering event occurred due to the economic downturn caused by COVID-19. As of March 31, 2020, the Company performed its goodwill impairment test at the reporting unit level. No impairment charges were recorded in connection with the interim impairment test.

The Company performed its annual quantitative assessment as of October 1, 2020 and determined that no impairment existed. Additionally, the Company concluded that an impairment triggering event did not occur during the three or nine months ended September 30, 2021.

Intangible Assets

The following tables set forth the details of the Company's intangible assets as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021
(in thousands)	Gross		Accumulated Amortization		Effects of Foreign Currency Translation		Net		Weighted Average Remaining Amortization Period in Years
Client relationships	$	803,642	$	(734,730)	$	(5,702)	$	63,210	2.9
Trademarks and domain names	225,177		(187,518)		(1,491)		36,168		2.1
Patented technologies	19,600		(19,600)		—		—		0.0
Covenants not to compete	3,001		(1,190)		—		1,811		2.4
Total intangible assets	$	1,051,420	$	(943,038)	$	(7,193)	$	101,189	2.6

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	As of December 31, 2020
(in thousands)	Gross		Accumulated Amortization		Net		Weighted Average Remaining Amortization Period in Years
Client relationships	$	701,802	$	(701,518)	$	284	1.4
Trademarks and domain names	200,300		(169,545)		30,755		2.0
Patented technologies	19,600		(19,600)		—		0.0
Covenants not to compete	1,497		(759)		738		1.8
Total intangible assets	$	923,199	$	(891,422)	$	31,777	2.0

Amortization expense for intangible assets for the three and nine months ended September 30, 2021 was $21.3 million and $52.5 million, respectively. Amortization expense for the three and nine months ended September 30, 2020 was $28.9 million and $86.7 million, respectively.

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

(in thousands)	Estimated Future Amortization Expense
2021	$	20,477
2022	49,672
2023	21,359
2024	9,681
Total	$	101,189

Note 6     Allowance for Credit Losses

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

(in thousands)	2021		2020
Balance as of January 1	$	33,368	$	26,828
Thryv Australia Acquisition, balance as of March 1, 2021	2,733		—
Additions (1)	3,211		27,709
Deductions (2)	(19,833)		(19,598)
Balance as of September 30 (3)	$	19,479	$	34,939

(1)    For the nine months ended September 30, 2021 and 2020, represents provision for bad debt expense of $3.2 million and $27.7 million, respectively, which is included in General and administrative expense. For the three months ended September 30, 2021 and 2020, the Company recorded a provision for bad debt expense of $2.9 million and $5.3 million, respectively

(2)    For the nine months ended September 30, 2021 and 2020, represents amounts written off as uncollectible, net of recoveries.

(3)    As of September 30, 2021, $19.4 million of the allowance is attributable to Accounts receivable and $0.1 million is attributable to Contract assets. As of September 30, 2020, $34.5 million of the allowance is attributable to Accounts receivable and $0.4 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. The economic downturn caused by COVID-19 resulted in an incremental amount of $2.5 million recorded to allowance for credit losses for the nine months ended September 30, 2020. No incremental impact was recorded for the three months ended September 30, 2020 or the three and nine months ended September 30, 2021.

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Note 7     Accrued Liabilities

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

(in thousands)	September 30, 2021		December 31, 2020
Accrued salaries and related expenses	$	45,816	$	53,844
Accrued severance	849		2,280
Accrued taxes	43,695		26,209
Accrued expenses	58,931		51,284
Accrued service credits	3,943		5,996
Accrued liabilities	$	153,234	$	139,613

The following tables set forth additional information related to severance expense incurred by the Company and recorded to General and administrative expense during the periods presented:

	Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021
(in thousands)	Marketing Services		SaaS		Thryv International		Total		Marketing Services		SaaS		Thryv International		Total
Severance expense (1)	$	229	$	48	$	1,609	$	1,886	$	1,159	$	222	$	1,665	$	3,046

(1)    During the three and nine months ended September 30, 2021, none of the severance expense recorded was related to employee terminations as a result of COVID-19.

	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
(in thousands)	Marketing Services		SaaS		Total		Marketing Services		SaaS		Total
Severance expense (1)	$	2,862	$	435	$	3,297	$	9,475	$	1,171	$	10,646

(1)    During the three months ended September 30, 2020, none of the severance expense recorded was related to employee terminations as a result of COVID-19. During the nine months ended September 30, 2020, the severance expense included employee termination charges of $5.0 million recorded as a result of COVID-19.

The following tables set forth additional information related to severance payments made by the Company during the periods presented:

	Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021
(in thousands)	COVID-19 Related		YP Integration Related		Other		Total		COVID-19 Related		YP Integration Related		Other		Total
Severance payments	$	—	$	—	$	1,804	$	1,804	$	120	$	—	$	3,999	$	4,119

	Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
(in thousands)	COVID-19 Related		YP Integration Related		Other		Total		COVID-19 Related		YP Integration Related		Other		Total
Severance payments	$	1,929	$	292	$	—	$	2,221	$	4,156	$	3,190	$	1,896	$	9,242

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Note 8      Debt Obligations

The following table sets forth the Company's outstanding debt obligations as of September 30, 2021 and December 31, 2020:

(in thousands)	Maturity	Interest	Rate		September 30, 2021		December 31, 2020
New Term Loan	March 1, 2026	LIBOR +	8.5	%	$	577,000	$	—
Senior Term Loan	December 31, 2023	LIBOR +	9.0	%	—		449,610
ABL Facility (Fifth Amendment)	March 1, 2026	3-month LIBOR +	3.0	%	56,181		—
ABL Facility (Fourth Amendment)(1)	September 30, 2023	3-month LIBOR +	4.0	%	—		79,238
Unamortized original issue discount and debt issuance costs					(20,776)		(445)
Total debt obligations					$	612,405	$	528,403
Current portion of New Term Loan					(70,000)		—
Total long-term debt obligations					$	542,405	$	528,403

(1)     The Fourth Amendment to the ABL Facility was replaced by the Fifth Amendment to the ABL Facility on March 1, 2021.

Term Loan

On March 1, 2021, the Company entered into a new term loan credit agreement (the “New Term Loan”). The proceeds of the New 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 New 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 equity holders of the Company, as of 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.

The net proceeds from the New 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. 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. The remaining unamortized debt issuance costs of $0.1 million will be deferred as debt issuance costs and amortized to interest expense, over the term of the New Term Loan, using the effective interest method. The New 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 New Term Loan and the Senior Term Loan, the Company recorded interest expense with related parties for the three months ended September 30, 2021 and 2020 of $4.5 million and $4.2 million, respectively, and for the nine months ended September 30, 2021 and 2020 of $13.2 million and $13.9 million, respectively.

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The Company has recorded accrued interest of $3.5 million and $8.5 million, as of September 30, 2021 and December 31, 2020, respectively. Accrued interest is included in Other current liabilities on the Company's consolidated balance sheets.

As of September 30, 2021, 31.2% of the New Term Loan was held by related parties who are equity holders of the Company.

Term Loan Covenants

The New 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 September 30, 2021, the Company was in compliance with its New 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 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 New 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 deferred and amortized over the new term of the ABL Facility.

As of September 30, 2021 and December 31, 2020, the Company had debt issuance costs with a remaining balance of $2.9 million and $2.5 million, respectively. These debt issuance costs are included in Other assets on the Company's consolidated balance sheets.

As of September 30, 2021, the Company had borrowing capacity of $92.1 million under the ABL Facility.

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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 September 30, 2021, 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.

Leaseback Obligations

As part of the YP Acquisition on June 30, 2017, the Company assumed certain obligations including a failed sale-leaseback liability associated with land and a building in Tucker, Georgia. In conjunction with this financing liability, the fair value of the land and building was included as a part of the total tangible assets acquired in the acquisition. A certain amount of this liability consists of a non-cash residual value at termination of the lease, which on this date will be written off against the remaining carrying value of the land and building, with any amount remaining recorded as a gain on termination of the lease contract. In June 2021, the Company made a $10.2 million cash payment to terminate the lease, which is recorded in Other in Cash flows from financing activities on the Company's consolidated statement of cash flows. As of September 30, 2021, the lease termination resulted in the write-off of $48.1 million in net carrying value of assets under leaseback obligation and $55.2 million in leaseback obligations. During the nine months ended September 30, 2021, a $3.1 million loss on the termination of leaseback obligations was recorded in Other expense on the Company's consolidated statements of operations.

The following table sets forth the components of the Company's total leaseback obligations as of September 30, 2021 and December 31, 2020:

(in thousands)	September 30, 2021		December 31, 2020
Non-cash residual value of Tucker, Georgia lease	$	—	$	54,676
Future maturities associated with the Tucker, Georgia failed sale-leaseback liability	—		862
Total leaseback obligations	$	—	$	55,538

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 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.

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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 September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Interest cost	$	2,617	$	3,729	$	7,851	$	12,162
Expected return on assets	(2,890)		(4,001)		(8,670)		(12,060)
Settlement (gain)/loss	—		986		(15)		1,010
Remeasurement (gain)/loss	—		29,461		(164)		30,200
Net periodic pension (benefit) cost	$	(273)	$	30,175	$	(998)	$	31,312

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 and nine months ended September 30, 2021, the Company made cash contributions of $5.0 million and $20.0 million to the qualified plans and contributions and associated payments of $0.2 million and $1.0 million, respectively, to the non-qualified plans. During the three and nine months ended September 30, 2020, the Company made cash contributions of $9.9 million and $25.7 million to the qualified plans, and contributions and associated payments of $0.2 million and $0.8 million, respectively, to the non-qualified plans.

For the fiscal year 2021, the Company expects to contribute approximately $25.0 million to the qualified plans and approximately $1.4 million to the non-qualified plans.

Note 10     Stock-Based Compensation and Stockholders' Equity

Stock Options

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. Stock-based compensation expense recognized for stock option awards was $1.6 million and $4.8 million during the three and nine months ended September 30, 2021, respectively, compared to stock-based compensation expense $1.3 million and benefit of $4.2 million recognized during the three and nine months ended September 30, 2020, 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. A total of 149,865 shares were issued through the ESPP during the nine months ended September 30, 2021. No shares were issued through the ESPP during the three months ended September 30, 2021. The stock-based compensation expense recognized for the ESPP was $0.8 million and $1.4 million during the three and nine months ended September 30, 2021, respectively.

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Stock-Based Compensation Expense

The following table sets forth stock-based compensation expense (benefit), including the effects of gains and losses from changes in fair value during the three and nine months ended September 30, 2020, recognized by the Company in the following line items in the Company's consolidated statements of operations during the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Cost of services	$	156	$	70	$	320	$	(176)
Sales and marketing	1,060		349		2,686		30
General and administrative	1,124		870		3,226		(4,049)
Stock-based compensation expense (benefit)	$	2,340	$	1,289	$	6,232	$	(4,195)

Stock Warrants

As of September 30, 2021 and December 31, 2020, the Company had 9.4 million and 10.5 million fully vested outstanding warrants, respectively. As of September 30, 2021 and December 31, 2020, the holders of such warrants are entitled to purchase, in the aggregate, up to 5.2 million shares and 5.8 million shares, respectively, of common stock. 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. During the three and nine months ended September 30, 2021, 15,425 and 1,026,649 warrants, respectively, were exercised. No warrants were exercised during the three and nine months ended September 30, 2020. These warrants expire on August 15, 2023. Proceeds of $13.9 million related to the exercise of the warrants are recorded in Other in Cash flows from financing activities on the Company's consolidated statement of cash flows.

Private Placement

On August 25, 2020 the Company completed a private placement of 68,857 shares of the Company’s common stock with a per share price of $10.17. The total cash received was $0.4 million, net of expenses. These shares were issued from Treasury stock. This resulted in a loss on the reissuance of Treasury stock of $0.8 million recorded as a reduction in Additional paid-in-capital.

Share Repurchases

On January 28, 2020, the Company repurchased approximately 1.0 million shares of its outstanding common stock from a single stockholder for a total purchase price of $12.6 million. On March 10, 2020, the Company repurchased approximately 0.8 million shares of its outstanding common stock for a total purchase price of $9.2 million. During June 2020, the Company repurchased approximately 0.8 million of shares of its outstanding common stock for a total purchase price of $8.8 million. The shares acquired in each of these transactions were recorded as Treasury stock upon repurchase. There were no share repurchases during the three and nine months ended September 30, 2021.

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 September 30, 2021 and 2020:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2021		2020		2021		2020
Basic net income (loss) per share:
Net income (loss)	$	35,624	$	(145)	$	96,489	$	39,421
Weighted-average common shares outstanding during the period	34,013,897		30,857,617		33,585,488		31,621,039
Basic net income (loss) per share	$	1.05	$	—	$	2.87	$	1.25

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	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2021		2020		2021		2020
Diluted net income (loss) per share:
Net income (loss)	$	35,624	$	(145)	$	96,489	$	39,421
Basic shares outstanding during the period	34,013,897		30,857,617		33,585,488		31,621,039
Plus: Common stock equivalents associated with stock option awards	3,606,219		—		2,525,214		2,369,732
Diluted shares outstanding	37,620,116		30,857,617		36,110,702		33,990,771
Diluted net income (loss) per share	$	0.95	$	—	$	2.67	$	1.16

The computation of diluted shares outstanding for the three months ended September 30, 2021 did not exclude any shares whose effect would have been anti-dilutive, while the computation of diluted shares outstanding for the nine months ended September 30, 2021 excluded 0.1 million outstanding stock options, less than 0.1 million of ESPP shares, and 3.5 million of outstanding stock warrants, as their effect would have been anti-dilutive. The computation of diluted shares outstanding for the both the three and nine months ended September 30, 2020 excluded 2.4 million outstanding stock options and 10.5 million of stock warrants, as their effect would have been anti-dilutive.

Note 12     Income Taxes

The Company’s effective tax rate (“ETR”) was 27.9% and 25.9% for the three and nine months ended September 30, 2021. The Company's ETR differs from the U.S. statutory rate of 21.0% 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.

The Company’s ETR was 99.4% and 20.8% for the three and nine months ended September 30, 2020. The Company's ETR differed from the U.S. statutory rate of 21.0% primarily due to the change in valuation allowance, state taxes, and discrete items. The discrete items for the nine months ended September 30, 2020 were primarily attributable to a partial release of uncertain tax positions due to favorable developments with ongoing U.S. federal tax examinations.

As of September 30, 2021 and December 31, 2020, the amount of unrecognized tax benefits, excluding interest and penalties, was $23.5 million and $23.7 million, respectively, of which up to $23.5 million, respectively, would affect the Company's effective tax rate if realized. As of September 30, 2021 and December 31, 2020, the Company had $9.6 million and $8.4 million, respectively, recorded for interest in 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 $21.6 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, 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, 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

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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 for YP will likely occur during the three months ended December 31, 2021. 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 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 September 30, 2021 and December 31, 2020, the Company has reserved approximately $33.1 million and $31.9 million, respectively, in connection with the 199 disallowance and less than $0.1 million and $0.2 million, respectively, related to the research and development tax credit disallowance. The increase in the reserve balance was primarily attributable to additional interest accrued during the nine months ended September 30, 2021. 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 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 $25.6 million and $24.3 million at September 30, 2021 and December 31, 2020, respectively.

Other

Texas Sales, Excise, and Use Tax Audit: We conduct operations in many tax jurisdictions. In many of these jurisdictions, non-income-based taxes, such as sales and use tax and other indirect taxes, are assessed on our operations. Although we are diligent in collecting and remitting such taxes, there is uncertainty as to how each taxing jurisdiction will ultimately classify the Company's digital products and services for sales and use tax purposes. On June 24, 2020, the Texas Comptroller of Public Accounts 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 July 31, 2020. On August 31, 2021, the Company received the final Texas Notification of Audit Results with an assessment of less than $0.1 million, including interest. During the three months ended September 30, 2021, the Company reversed the $2.6 million reserve existing on the Company's consolidated balance sheet as of June 30, 2021 for the total combined exposure for the periods covered under the audit examination.

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 31, 2020. The Company has reserved $3.0 million for the total combined exposure for the respective period, which is accrued on the Company's consolidated balance sheet as of September 30, 2021.

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 nine months ended September 30, 2021:

(in thousands)	Accumulated Foreign Currency Translation Adjustments
Beginning balance at January 1, 2021	$	—
Foreign currency translation adjustment, net of tax expense of $2.9 million	(8,545)
Ending balance at September 30, 2021	$	(8,545)

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Note 15     Segment Information

As a result of the Thryv Australia Acquisition, we reviewed our segment reporting based on the information used by the Chief Executive Officer, who is also the chief operating decision maker (“CODM”), to assess performance and allocate resources subsequent to the acquisition. As a result of this review, we determined that the Company manages operations using three operating segments which are also its reportable segments: (1) Marketing Services, (2) SaaS, and (3) Thryv International.

During the nine months ended September 30, 2021, the Company adjusted its methodology of classifying certain revenue between products of its SaaS segment. The three and nine months ended September 30, 2021, and 2020 reflect the current methodology.

The following tables summarize the operating results of our reportable segments:

	Three Months Ended September 30, 2021
(in thousands)	Marketing Services		SaaS		Thryv International		Total
Revenue	$	213,210	$	44,800	$	39,280	$	297,290
Segment EBITDA	96,231		(5,508)		11,636		102,359

	Three Months Ended September 30, 2020
(in thousands)	Marketing Services		SaaS		Thryv International		Total
Revenue	$	208,504	$	31,821	$	—	$	240,325
Segment EBITDA	66,733		2,561		—		69,294

	Nine Months Ended September 30, 2021
(in thousands)	Marketing Services		SaaS		Thryv International		Total
Revenue	$	643,938	$	123,437	$	101,568	$	868,943
Segment EBITDA	277,546		(7,311)		33,810		304,045

	Nine Months Ended September 30, 2020
(in thousands)	Marketing Services		SaaS		Thryv International		Total
Revenue	$	767,553	$	94,954	$	—	$	862,507
Segment EBITDA	289,423		10,785		—		300,208

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Income (loss) before income tax expense (benefit)	$	49,426	$	(24,395)	$	130,212	$	49,744
Interest expense	16,546		15,609		51,388		53,551
Depreciation and amortization	31,049		35,454		80,675		110,883
Other components of net periodic pension (benefit) cost	(273)		30,175		(998)		31,312
Loss on termination of leaseback obligations	—		—		3,409		—
Impairment charges	—		1,184		3,611		19,414
Restructuring and integration expenses (1)	2,312		6,710		15,036		23,902
Transaction costs (2)	3,987		4,913		19,973		14,679
Stock-based compensation expense (benefit)	2,340		1,289		6,232		(4,195)
(Gain) loss from remeasurement of indemnification asset	(404)		(540)		(1,248)		3,878
Other	(2,624)		(1,105)		(4,245)		(2,960)
Total Segment EBITDA	$	102,359	$	69,294	$	304,045	$	300,208

(1)During the three and nine months ended September 30, 2021, the Company incurred $1.9 million and $3.0 million of severance expense, respectively, of which none was a result of the COVID-19 pandemic. During the three and nine months ended September 30, 2020, the Company incurred a total of $3.3 million and $10.6 million of severance expense, respectively, of which none and $5.0 million, respectively, was a result of the COVID-19 pandemic. In addition, during the three and nine months ended September 30, 2020, the Company incurred losses on disposal of fixed assets and capitalized software and costs associated with abandoned facilities and system consolidation.

(2)Consists of direct listing, Thryv Australia Acquisition and other transaction costs.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Marketing Services
PYP	$	106,931	$	79,395	$	313,595	$	355,942
IYP	58,914		68,169		184,013		212,436
SEM	31,887		40,247		98,521		130,905
Other	15,478		20,693		47,809		68,270
Total Marketing Services	213,210		208,504		643,938		767,553
SaaS
Thryv Platform	27,268		24,935		79,966		74,466
Thryv Add-ons	17,532		6,886		43,471		20,488
Total SaaS	44,800		31,821		123,437		94,954
Thryv International
PYP	10,159		—		31,112		—
IYP	16,105		—		39,742		—
SEM	5,642		—		13,671		—
Other	7,243		—		16,903		—
Thryv Platform and Thryv Add-Ons	131		—		140		—
Total Thryv International	39,280		—		101,568		—
Total revenue	$	297,290	$	240,325	$	868,943	$	862,507

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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 400,000 SMB clients globally through three business segments: Marketing Services, SaaS, and Thryv International.

Our Marketing Services segment provides both print and digital solutions and generated $213.2 million and $208.5 million of consolidated revenues for the three months ended September 30, 2021 and 2020, respectively, and $643.9 million and $767.6 million of consolidated revenues for the nine months ended September 30, 2021 and 2020, respectively. Our Marketing Services offerings include our owned and operated Print Yellow Pages (“PYP”), which carry the “The Real Yellow Pages” tagline, 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, which include online display and social advertising, online presence, and video and search engine optimization (“SEO”) tools.

Our SaaS segment generated $44.8 million and $31.8 million of consolidated revenues for the three months ended September 30, 2021 and 2020, respectively, and $123.4 million and $95.0 million of consolidated revenues for the nine months ended September 30, 2021 and 2020, respectively. Our primary SaaS offerings include Thryv®, our flagship SMB end-to-end customer experience platform, and Thryv Add-Ons. Thryv Add-Ons include an automated lead generation service that fully integrates with our Thryv platform, website development, SEO tools, Google My Business optimization, and Hub by ThryvSM. An additional add-on, ThryvPaySM, is our own branded payment solution that allows users to get paid via credit card and ACH and is tailored to service focused businesses that want to provide consumers safe, contactless, and fast online payment options. These optional platform subscription-based add-ons provide a seamless user experience for our end-users and drive higher engagement within the Thryv Platform while also producing incremental revenue growth.

Our Thryv International segment is comprised of Thryv Australia Pty Ltd (formerly Sensis Pty Ltd) (“Thryv Australia”), which the Company acquired on March 1, 2021 (the “Thryv Australia Acquisition”). Thryv Australia is Australia’s leading provider of marketing solutions serving SMBs. The Thryv Australia Acquisition brings 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 segment generated $39.3 million and $101.6 million of consolidated revenues for the three and 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 2021, 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.

Recent Developments - 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, have significantly disrupted the global economy, resulting in an adverse effect on the business operations of certain SMBs. However, many of our SMB clients operate service-based businesses that can

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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 nine months ended September 30, 2021 and 2020 was somewhat mitigated as many of our clients continue to operate during this pandemic.

Marketing Services segment revenue increased by $4.7 million, or 2.3%, during the three months ended September 30, 2021 as compared to the corresponding period in 2020, and decreased by $123.6 million, or 16.1%, during the nine months ended September 30, 2021 as compared to the corresponding period in 2020, primarily due to the continued decline in demand for print and digital services and increased competition in all areas of Marketing Services. This declining revenue trend in Marketing Services predated the COVID-19 pandemic. In addition, in our Marketing Services segment, in March 2020, we began offering certain pandemic credit incentives to select clients, including free advertising or headings, and payment extensions of up to three months. While the ongoing impact of the COVID-19 pandemic on our revenue depends upon the rate of continued spread of the virus as well as regulatory and private sector response, we expect Marketing Services revenue will continue to be impacted primarily by trends predating the COVID-19 pandemic.

In our SaaS segment, we have continued to experience an increase in demand as SMBs seek cloud-based solutions to facilitate virtual interactions with their customers instead of in-person interactions. We have seen continued strength in demand during this period from many of our key categories such as home services and other professional services. Partially offsetting this growth is a decline in our legacy SaaS client base as we shift from lower-spend, less engaged clients that tend to have a higher churn rate, to higher spend, higher engaged clients. Additionally, in March 2020, we began offering certain pandemic credit incentives to select clients, including free digital and SaaS services for two to four months, and payment extensions of up to three months.

In our Thryv International segment, we continue to experience a limited negative impact to Australia in 2021 as a result of the COVID-19 pandemic. During the nine months ended September 30, 2021, there were a number of Australian cities that have experienced a slight increase in cases and subsequent restrictions, however the number of COVID-19 cases in Australia have remained relatively low since the initial outbreak and the impact to our clients has been minimal as most have continued to remain open for business throughout the COVID-19 pandemic.

We have taken steps to mitigate the overall potential impact of the COVID-19 pandemic on our operating results by enhancing the capabilities of our inside and outside sales force while also actively managing costs. We minimized business disruptions by quickly and proactively transitioning our sales and client support teams into a remote working environment and providing increased training, technical capabilities and resources to enable virtual interactions with our clients. Additionally, in March 2020, we began offering certain pandemic credit incentives to select clients. These pandemic credit incentives resulted in a $0.2 million and $3.2 million reduction in revenue for the three and nine months ended September 30, 2021, respectively, compared to a reduction in revenue of $7.8 million and $14.2 million for the three and nine months ended September 30, 2020, respectively. Requests for incentives continued to decline in the first half of 2021, and the majority of clients who accepted incentives in 2020 have resumed contractual terms and pricing. As of September 30, 2021, we have virtually discontinued providing pandemic credits and accepting client requests to pause search campaigns due to the COVID-19 pandemic. All client requests for adjustments effective April 1, 2021 are now being handled as part of normal business operations consistent with historical practices.

Depending upon future development and spread of the virus, including existing and new variants, we generally expect the business environment to improve as more people are vaccinated. During the three and nine months ended September 30, 2021, we incurred total severance expense of $1.9 million and $3.0 million, respectively, none of which was incurred as a result of the COVID-19 pandemic. During the three and nine months ended September 30, 2020, we recognized severance expense of $3.3 million and $10.6 million, respectively. Of the severance expense recognized in the nine months ended September 30, 2020, $5.0 million was related to employee separations as a result of the COVID-19 pandemic. During the three months ended September 30, 2020, none of the severance expense recorded was related to employee terminations as a result of COVID-19. The economic downturn caused by COVID-19 resulted in an incremental amount of $2.5 million recorded to allowance for credit losses for the nine months ended September 30, 2020. No incremental impact was recorded for the three and nine months ended September 30, 2021. In addition, we remain committed to our variable cost structure and to limiting our capital expenditures, which will allow us to continue operating with relatively low working capital needs.

While the effects of the COVID-19 pandemic have impacted our financial results for the three and nine months ended September 30, 2021, the overall impact was somewhat mitigated by the nature of our client base (SMBs offering services related to home, health and wellness, automotive, etc. and certain SMBs designated as “essential” by state and local authorities), the terms of our print agreements (typically 14 to 15 months), and the gradual increase in demand for our Thryv

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platform. The increase in demand for our Thryv platform and our decision to target higher spend and higher retention clients have also somewhat mitigated the impact of a reduction in the size of our salesforce on our ability to generate revenues.

During the three and nine months ended September 30, 2021, we have continued to see trends similar to those experienced during the year ended December 31, 2020, including an increase in demand for our SaaS solutions and a continuing decline in our Marketing Services business. The challenges we 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 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 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 SaaS segment. We have selectively utilized a portion of the cash generated from our Marketing Services and Thryv International segments to support initiatives in our evolving SaaS segment, 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, Australia’s leading provider of marketing solutions serving SMBs. 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.

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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. Total clients does not include Thryv International clients, as we are in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the total clients of Thryv International in our future filings.

Marketing Services Clients

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.

SaaS Clients

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.

	September 30,
(in thousands)	2021	2020
Clients
Marketing Services	268	333
SaaS	45	44
Total (1)	286	349

(1)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. Total clients does not include Thryv International clients, as we are still in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the total clients of Thryv International in our future filings.

Marketing Services clients decreased by 65 thousand, or 20%, as of September 30, 2021 as compared to September 30, 2020. The decrease in Marketing Services clients was related to a secular decline in the print media industry. The decline in the digital portion of our Marketing Services business was due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook.

SaaS clients increased by 1 thousand, or 2%, as of September 30, 2021 as compared to September 30, 2020. 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 63 thousand, or 18%, as of September 30, 2021 as compared to September 30, 2020. The primary driver of the decrease in total clients was the secular decline in the print media business combined with increasing competition in the digital media space.

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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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
ARPU (Monthly)
Marketing Services	$	212	$	222	$	213	$	223
SaaS	340		260		323		244
Total (1)	$	251	$	244	$	248	$	243

(1)During the three and nine months ended September 30, 2020, the Total monthly ARPU is higher than the monthly ARPU for Marketing Services due to clients that purchase both Marketing Services and SaaS solutions. During the three and nine months ended September 30, 2021, SaaS ARPU is higher than the Total monthly ARPU as we shift to selling to more higher spend SaaS-only clients. The Total monthly ARPU does not include Thryv International, as we are in the process of recalculating the Thryv Australia data using our calculation methodology. We plan to include the monthly ARPU of Thryv International in our future filings.

Monthly ARPU for the Marketing Services segment decreased by $10, or 5%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and $10, or 4%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease in ARPU for these periods was related to reduced spend by clients on our print media offerings due to the secular decline of the industry caused by the continuing shift of advertising spend to less expensive digital media. This decrease in 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.

Monthly ARPU for the SaaS segment increased by $80, or 31%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, and increased by $79, or 32%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in ARPU for these periods 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 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. It should be noted that the inherent challenge is that one individual may register for, and use, multiple accounts across computer and mobile devices which 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 September 30,
(in thousands)	2021	2020
Monthly Active Users - SaaS	31	27

Monthly active users increased by 4 thousand, or 15%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. 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

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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.

Key Components of Our Results of Operations

Revenue

We generate revenue from our three business segments, Marketing Services, SaaS and Thryv International. Our primary sources of revenue in our Marketing Services and Thryv International segments are print and digital services. Our primary source of revenue in our SaaS segment 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 directories and fulfillment of our 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, non-capitalizable software and hardware purchases, and allocated overhead costs which includes information technology expenses, 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, and allocated overhead costs which includes information technology expenses, 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 finance and accounting, legal, internal audit, human resources, billing and receivables, and management personnel. In addition, 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 information technology expenses, 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.

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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 September 30,
	2021(1)					2020 (2)
	(unaudited)
(in thousands of $)	Amount			% of Revenue		Amount			% of Revenue
Revenue	$	297,290		100	%	$	240,325		100	%
Cost of services	104,167			35.0	%	105,444			43.9	%
Gross profit	193,123			65.0	%	134,881			56.1	%
Operating expenses:
Sales and marketing	94,343			31.7	%	73,306			30.5	%
General and administrative	32,983			11.1	%	39,002			16.2	%
Impairment charges	—			—	%	1,184			0.5	%
Total operating expenses	127,326			42.8	%	113,492			47.2	%
Operating income	65,797			22.1	%	21,389			8.9	%
Other income (expense):
Interest expense	(16,546)			(5.6)	%	(15,609)			(6.5)	%
Other components of net periodic pension benefit (cost)	273			0.1	%	(30,175)			(12.6)	%
Other expense	(98)			—	%	—			—	%
Income (loss) before income tax (expense) benefit	49,426			16.6	%	(24,395)			(10.2)	%
Income tax (expense) benefit	(13,802)			(4.6)	%	24,250			10.1	%
Net income (loss)	$	35,624		12.0	%	$	(145)		(0.1)	%
Other financial data:
Adjusted EBITDA(3)	$	102,359		34.4	%	$	69,294		28.8	%
Adjusted Gross Profit(4)	$	208,209				$	153,048
Adjusted Gross Margin(5)	70.0		%			63.7		%

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

(2)The three months ended September 30, 2020 has been updated to include a Gross profit subtotal line item and the reclassification of depreciation and amortization from a single line item in the consolidated statements of operations to a component of Gross profit, Sales and marketing expense, and General and administrative expense. See Note 1 to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

(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.

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Comparison of the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

Revenue

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

	Three Months Ended September 30,				Change
	2021		2020		Amount		%
(in thousands of $)	(unaudited)
Marketing Services	$	213,210	$	208,504	$	4,706	2.3	%
SaaS	44,800		31,821		12,979		40.8	%
Thryv International (1)	39,280		—		39,280		NM
Total revenue	$	297,290	$	240,325	$	56,965	23.7	%

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

Total revenue increased by $57.0 million, or 23.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in total revenues was driven by an increase in Marketing Services revenue of $4.7 million, SaaS revenue of $13.0 million and Thryv International revenue of $39.3 million.

Marketing Services Revenue

Marketing Services revenue increased by $4.7 million, or 2.3%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Print revenue increased by $27.5 million, or 34.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was primarily driven by publication timing differences caused by our print agreements having greater than 12 month terms and partially offset by the secular decline in industry demand for print services that would have resulted in a 25% decline in revenue compared to the three months ended September 30, 2020. Print revenue is recognized upon delivery of the published directories. Individual directory titles have different lifecycles, with a typical lifecycle of 15 months. The titles published during the three months ended September 30, 2021 are therefore different than the titles published during the three months ended September 30, 2020 and represented more revenue than the titles published during the three months ended September 30, 2020.

Digital services revenue decreased by $22.8 million, or 17.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. IYP revenue decreased by $9.3 million, or 13.6%, driven by a continued trending decline in the Company’s Marketing Services client base. SEM revenue decreased by $8.4 million, or 20.8%, due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. Other digital media solutions revenue decreased by $5.2 million, or 25.2%, as we shifted to selling these services only to existing customers.

SaaS Revenue

SaaS revenue increased by $13.0 million, or 40.8%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was driven by increased demand for our Thryv platform and Thryv add-ons as SMBs have increased their contact less customer interactions and remote working capabilities due to the COVID-19 pandemic, and by our success in re-focusing our go-to-market and onboarding strategy to target higher spend and higher engaged 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

Thryv International revenue was $39.3 million for the three months ended September 30, 2021. Given that the Thryv Australia Acquisition was completed on March 1, 2021, no revenue was recognized for Thryv International during the three months ended September 30, 2020. Thryv International revenue included print revenue of $10.2 million, IYP revenue of $16.1 million, SEM revenue of $5.6 million, other digital media solutions revenue of $7.2 million, and SaaS revenue of $0.1 million for the three months ended September 30, 2021.

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Cost of Services

Cost of services decreased by $1.3 million, or 1.2%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Cost of services as a percentage of revenue decreased to 35.0% for the three months ended September 30, 2021 from 43.9% for the three months ended September 30, 2020. This decrease was primarily driven by strategic cost saving initiatives. Specifically, we reduced employee-related costs by $4.2 million and printing, distribution and digital fulfillment support costs by $4.1 million. Additionally, depreciation and amortization expense decreased by $12.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by Cost of services of $23.2 million related to Thryv International, which was acquired on March 1, 2021.

Gross Profit

Gross profit increased by $58.2 million, or 43.2%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in Gross profit was primarily due to the increase in domestic revenue and the decreases in printing, distribution, and digital and fulfillment support costs, employee-related costs, depreciation and amortization expense and Gross profit related to Thryv International, which was acquired on March 1, 2021.

Our gross margin increased by 8.9 percentage points, to 65.0%, for the three months ended September 30, 2021 compared to 56.1% for the three months ended September 30, 2020. The increase in gross margin was primarily driven by the increase in domestic revenue and decreases in printing, distribution, and digital and fulfillment support costs, employee-related costs and depreciation and amortization expense.

Operating Expenses

Sales and Marketing

Sales and marketing expense increased by $21.0 million, or 28.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Sales and marketing expense as a percentage of revenue increased to 31.7% for the three months ended September 30, 2021 from 30.5% for the three months ended September 30, 2020. The increase was primarily attributable to $17.5 million of Thryv International Sales and marketing expense that was included in the three months ended September 30, 2021, while none was included in the three months ended September 30, 2020. Additionally, advertising and sales promotion expense increased $9.2 million, primarily driven by costs incurred to promote the Thryv platform. This was partially offset by a $7.4 million decrease in depreciation and amortization expense, due to the accelerated amortization method used by the Company.

General and Administrative

General and administrative expense decreased by $6.0 million, or 15.4%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. This decrease was primarily driven by lower severance and legal expenses of $10.0 million and lower bad debt expense of $2.6 million. Additionally, depreciation and amortization expense decreased by $3.6 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by $9.6 million in General and administrative expense incurred in the three months ended September 30, 2021 related to Thryv International, which was acquired on March 1, 2021.

General and administrative expense as a percentage of revenue decreased to 11.1% for the three months ended September 30, 2021 from 16.2% for the three months ended September 30, 2020. This decrease was primarily attributable to lower severance and legal expenses, bad debt expense and depreciation and amortization.

Impairment Charges

Impairment charges decreased by $1.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. There were no Impairment charges incurred during the three months ended September 30, 2021, while $1.2 million of operating lease right-of-use asset impairment charges related to consolidating operations at certain locations were recognized during the three months ended September 30, 2020.

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Other Income (Expense)

Interest Expense

Interest expense increased by $0.9 million, or 6.0%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to overall higher levels of indebtedness, which was partially offset by lower weighted average interest rates.

Other Components of Net Periodic Pension Cost

Other components of net periodic pension cost decreased by $30.4 million from an expense of $30.2 million for the three months ended September 30, 2020 to a benefit of $0.3 million for the three months ended September 30, 2021. This change was primarily due to a remeasurement loss of $29.5 million recognized during the three months ended September 30, 2020, and lower interest expense of $1.1 million, partially offset by lower expected return on assets of $1.1 million.

Other Expense

During the three months ended September 30, 2021, the Company incurred other expense of $0.1 million, which represents foreign currency-related expense.

Income Tax (Expense) Benefit

Income tax (expense) increased by $38.1 million, or 156.9%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The ETR was 27.9% and 99.4% for the three months ended September 30, 2021 and 2020, 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 increased by $33.1 million, or 47.7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in Adjusted EBITDA was primarily driven by the increase in domestic revenue, declining costs as we continue to focus on cost reductions, and the results of Thryv International, which was acquired on March 1, 2021. 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.

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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,
	2021 (1)					2020 (2)
	(unaudited)
(in thousands of $)	Amount			% of Revenue		Amount			% of Revenue
Revenue	$	868,943		100	%	$	862,507		100	%
Cost of services	314,934			36.2	%	334,025			38.7	%
Gross profit	554,009			63.8	%	528,482			61.3	%
Operating expenses:
Sales and marketing	258,277			29.7	%	241,703			28.0	%
General and administrative	107,362			12.4	%	132,758			15.4	%
Impairment charges	3,611			0.4	%	19,414			2.3	%
Total operating expenses	369,250			42.5	%	393,875			45.7	%
Operating income	184,759			21.3	%	134,607			15.6	%
Other income (expense):
Interest expense	(51,388)			(5.9)	%	(53,551)			(6.2)	%
Other components of net periodic pension benefit (cost)	998			0.1	%	(31,312)			(3.6)	%
Other expense	(4,157)			(0.5)	%	—			—	%
Income before income tax (expense)	130,212			15.0	%	49,744			5.8	%
Income tax (expense)	(33,723)			(3.9)	%	(10,323)			(1.2)	%
Net income	$	96,489		11.1	%	$	39,421		4.6	%
Other financial data:
Adjusted EBITDA(3)	$	304,045		35.0	%	$	300,208		34.8	%
Adjusted Gross Profit(4)	$	597,320				$	583,390
Adjusted Gross Margin(5)	68.7		%			67.6		%

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

(2)    The nine months ended September 30, 2020 has been updated to include a Gross profit subtotal line item and the reclassification of depreciation and amortization from a single line item in the consolidated statements of operations to a component of Gross profit, Sales and marketing expense, and General and administrative expense. See Note 1 to our consolidated financial statements included in Part I, Item 1 in this Quarterly Report for more information.

(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.

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Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

Revenue

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

	Nine Months Ended September 30,				Change
	2021		2020		Amount		%
(in thousands of $)	(unaudited)
Marketing Services	$	643,938	$	767,553	$	(123,615)	(16.1)	%
SaaS	123,437		94,954		28,483		30.0	%
Thryv International(1)	101,568		—		101,568		NM
Total revenue	$	868,943	$	862,507	$	6,436	0.7	%

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

Total revenue increased by $6.4 million, or 0.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in total revenue was driven by an increase in SaaS revenue of $28.5 million, and Thryv International revenue of $101.6 million, offset by a decrease in Marketing Services revenue of $123.6 million.

Marketing Services Revenue

Marketing Services revenue decreased by $123.6 million, or 16.1%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Print revenue decreased by $42.3 million, or 11.9%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Secular decline in industry demand for print services resulted in a 25% decline in revenue compared to the nine months ended September 30, 2020, partially offset by 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. The titles published during the nine months ended September 30, 2021 are therefore different than the titles published during the nine months ended September 30, 2020. This lifecycle difference should be considered when comparing results period-over-period.

Digital services revenue decreased by $81.3 million, or 19.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. IYP revenue decreased by $28.4 million, or 13.4%, driven by a continued trending decline in the Company’s Marketing Services client base. SEM revenue decreased by $32.4 million, or 24.7%, which was consistent with expectations due to significant competition in the consumer search and display space, particularly from large, well-capitalized businesses such as Google, Yelp and Facebook. Other digital media solutions revenue decreased by $20.5 million, or 30.0%, as we shifted to selling these services only to existing customers.

SaaS Revenue

SaaS revenue increased by $28.5 million, or 30.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase was driven by increased demand for our Thryv platform and Thryv add-ons as SMBs have increased their contact less customer interactions and remote working capabilities due to the COVID-19 pandemic, and by our success in re-focusing our go-to-market and onboarding strategy to target higher spend and higher engaged 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.

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Thryv International Revenue

Thryv International revenue was $101.6 million for the seven months ended September 30, 2021. Given that 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 or the nine months ended September 30, 2020. Thryv International revenue included print revenue of $31.1 million, IYP revenue of $39.7 million, SEM revenue of $13.7 million, other digital media solutions revenue of $16.9 million, and SaaS revenue of $0.1 million recognized subsequent to the completion of the Thryv Australia Acquisition.

Cost of Services

Cost of services decreased by $19.1 million, or 5.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease was primarily driven by strategic cost saving initiatives. The cost savings were primarily due to lower printing, distribution and digital and fulfillment support costs of $24.5 million and employee-related costs of $10.9 million. Additionally, depreciation and amortization expense decreased by $39.0 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by $66.0 million of Thryv International Cost of services that was included in the seven months ended September 30, 2021, while none was included in the nine months ended September 30, 2020.

Cost of services as a percentage of revenue decreased to 36.2% for the nine months ended September 30, 2021 from 38.7% for the nine months ended September 30, 2020. This decrease was primarily driven by decreases in printing, distribution, and digital and fulfillment support costs, and depreciation and amortization expense and partially offset by declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021.

Gross Profit

Gross profit increased by $25.5 million, or 4.8%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in gross profit was primarily due to the decreases in printing, distribution, and digital and fulfillment support costs, and depreciation and amortization expense and the results of Thryv International, which was acquired on March 1, 2021, and our SaaS segment partially offset by the decline in Marketing Services revenue. Our gross margin increased by 2.5 percentage points to 63.8% for the nine months ended September 30, 2021 compared to 61.3% for the nine months ended September 30, 2020.

Operating Expenses

Sales and Marketing

Sales and marketing expense increased by $16.6 million, or 6.9%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase was primarily driven by $36.9 million of Thryv International Sales and marketing expenses included in the seven months ended September 30, 2021, while none was included in the nine months ended September 30, 2020, and an increase in advertising and sales promotion expense of $16.9 million, primarily driven by costs incurred to promote the Thryv platform. These increases were partially offset by strategic cost-saving initiatives. Specifically, due to lower employee-related costs of $5.3 million, contract services of $3.9 million, and sales commissions of $3.9 million. Additionally, depreciation and amortization expense decreased by $25.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to the accelerated amortization method used by the Company.

Sales and marketing expense as a percentage of revenue increased to 29.7% for the nine months ended September 30, 2021 from 28.0% for the nine months ended September 30, 2020. This increase was primarily due to declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021, partially offset by decreases in employee related costs, contract services and depreciation and amortization expense.

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General and Administrative

General and administrative expense decreased by $25.4 million, or 19.1%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This decrease was primarily driven by lower bad debt expense of $24.0 million, a $9.3 million decrease in severance expenses, a $5.1 million decrease in the loss on the remeasurement of our indemnification asset, and a $3.3 million loss on the sale of property recognized in the nine months ended September 30, 2021. Additionally, depreciation and amortization expense decreased by $12.2 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to the accelerated amortization method used by the Company. These decreases were partially offset by higher stock-based compensation expense of $7.3 million and General and administrative expenses of $18.5 million related to Thryv International, which was acquired on March 1, 2021.

General and administrative expense as a percentage of revenue decreased to 12.4% for the nine months ended September 30, 2021 from 15.4% for the nine months ended September 30, 2020. This decrease was primarily attributable to lower bad debt expense and a decrease in depreciation and amortization expense, partially offset by declining domestic revenue and the results of Thryv International, which was acquired on March 1, 2021.

Impairment Charges

Impairment charges decreased by $15.8 million, or 81.4% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Impairment charges of $3.6 million were incurred during the nine months ended September 30, 2021, while $19.4 million of impairment charges were recognized during the nine months ended September 30, 2020. Impairment charges in both periods were primarily 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 $2.2 million, or 4.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to lower weighted average interest rates.

Other Components of Net Periodic Pension Cost

Other components of net periodic pension cost decreased by $32.3 million, from an expense of $31.3 million during the nine months ended September 30, 2020 to a benefit of $1.0 million during for the nine months ended September 30, 2021. This change was primarily due to a remeasurement gain of $0.2 million recognized during the nine months ended September 30, 2021 compared to a remeasurement loss of $30.2 million recognized during the nine months ended September 30, 2020, and lower interest expense of $4.3 million, partially offset by a lower expected return on assets of $3.4 million.

Other Expense

During the nine months ended September 30, 2021, the Company incurred other expense of $4.2 million, which included a loss of $3.4 million primarily resulting from the termination of leaseback obligations associated with land and a building in Tucker, Georgia, and foreign currency-related expense of $0.7 million.

Income Tax Expense

Income tax expense increased by $23.4 million, or 226.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The ETR was 25.9% and 20.8% for the nine months ended September 30, 2021 and 2020, 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 increased by $3.8 million, or 1.3%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in Adjusted EBITDA was primarily driven by the increase in domestic revenue, declining costs as we continue to focus on cost reductions, and the results of Thryv International, which was acquired

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on March 1, 2021. 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 provides 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 (loss) plus Interest expense, Income tax expense (benefit), Depreciation and amortization expense, Loss on termination of leaseback obligations, Restructuring and integration expenses, Transaction costs, Stock-based compensation expense (benefit), Impairment charges and non-operating expenses, such as, Other components of net periodic pension (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 and amortization expense and stock-based compensation expense (benefit).

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 U.S. 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:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Reconciliation of Adjusted EBITDA
Net income (loss)	$	35,624	$	(145)	$	96,489	$	39,421
Interest expense	16,546		15,609		51,388		53,551
Income tax expense (benefit)	13,802		(24,250)		33,723		10,323
Depreciation and amortization expense	31,049		35,454		80,675		110,883
Loss on termination of leaseback obligations	—		—		3,409		—
Restructuring and integration expenses (1)	2,312		6,710		15,036		23,902
Transaction costs (2)	3,987		4,913		19,973		14,679
Stock-based compensation expense (benefit) (3)	2,340		1,289		6,232		(4,195)
Other components of net periodic pension (benefit) cost (4)	(273)		30,175		(998)		31,312
Non-cash (gain) loss from remeasurement of indemnification asset (5)	(404)		(540)		(1,248)		3,878
Impairment charges	—		1,184		3,611		19,414
Other (6)	(2,624)		(1,105)		(4,245)		(2,960)
Adjusted EBITDA	$	102,359	$	69,294	$	304,045	$	300,208

(1)For the three and nine months ended September 30, 2021 and 2020, 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.

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(2)Expenses related to the Company's direct listing, 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. Additionally, stock-based compensation expense includes the remeasurement of these awards at each period end, prior to October 1, 2020. 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 (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 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 tax liabilities. Additionally, during the three and nine months ended September 30, 2021, Other includes foreign exchange-related expense.

The following is a reconciliation 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,
(in thousands)	2021			2020
Reconciliation of Adjusted Gross Profit
Gross profit	$	193,123		$	134,881
Plus:
Depreciation and amortization expense	14,930			18,097
Stock-based compensation expense	156			70
Adjusted Gross Profit	$	208,209		$	153,048
Gross Margin	65.0		%	56.1		%
Adjusted Gross Margin	70.0		%	63.7		%

	Nine Months Ended September 30,
(in thousands)	2021			2020
Reconciliation of Adjusted Gross Profit
Gross profit	$	554,009		$	528,482
Plus:
Depreciation and amortization expense	42,991			55,084
Stock-based compensation expense (benefit)	320			(176)
Adjusted Gross Profit	$	597,320		$	583,390
Gross Margin	63.8		%	61.3		%
Adjusted Gross Margin	68.7		%	67.6		%

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 New Term Loan and funds available under the ABL Facility. 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.

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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.

For a discussion on contingent obligations, see Note 13, Contingent Liabilities, to our consolidated financial statements included in Part I, Item I 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:

	Nine Months Ended September 30,				$
	2021		2020		Change
(in thousands)	(unaudited)
Cash flows provided by (used in):
Operating activities	$	121,539	$	174,590	$	(53,051)
Investing activities	(195,360)		(15,484)		(179,876)
Financing activities	87,517		(159,247)		246,764

Cash Flows from Operating Activities

Net cash provided by operating activities decreased by $53.1 million, or 30.4%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease in net cash provided by operating activities of $53.1 million was primarily due to higher income tax payments of $42.7 million and transaction cost payments related to the Thryv Australia Acquisition.

Cash Flows from Investing Activities

Net cash used in investing activities increased by $179.9 million, or 1,161.7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in net cash used in investing activities of $179.9 million was primarily due to cash paid of $175.4 million in connection with the Thryv Australia Acquisition on March 1, 2021. The increase in net cash used was also driven by an increase of $3.0 million in capitalized expenditures and a decrease in proceeds from the sales of buildings and other fixed assets of $1.5 million compared to the nine months ended September 30, 2020.

Cash Flows from Financing Activities

Net cash from financing activities increased by $246.8 million, or 155.0%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in net cash from financing activities of $246.8 million was primarily driven by net proceeds received from the New Term Loan of $679.0 million, partially offset by cash used to repay the remaining outstanding principal balance of the Senior Term Loan of $449.6 million, and payments made on the New Term Loan of $123.0 million, compared to payments made on the Senior Term Loan of $105.4 million during the nine months ended September 30, 2020. The increase in net cash from financing activities was further driven by lower payments of $75.5

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million on the ABL Facility and $30.6 million for the repurchase of shares of our outstanding common stock. These increases in net cash from financing activities were partially offset by lower proceeds from the ABL Facility of $75.2 million.

Debt

Term Loan

On March 1, 2021, the Company entered into a new term loan credit agreement (the “New Term Loan”). The proceeds of the New 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 New 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 were equity holders of the Company, as of 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 commencing June 30, 2021.

As of September 30, 2021, 31.2% of the New Term Loan was held by related parties who are equity holders of the Company.

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 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.

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 New 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 New Term Loan and ABL Facility as of September 30, 2021. We had total recorded debt outstanding of $612.4 million (net of $20.8 million of unamortized original issue discount (“OID”) and debt issuance cost) at September 30, 2021, which was comprised of amounts outstanding under our New Term Loan of $577.0 million and ABL Facility of $56.2 million.

As of September 30, 2021, the Company had borrowing capacity of $92.1 million under the ABL Facility.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are material to our results of operations, financial condition or liquidity.

Critical Accounting Policies and Estimates

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 other comprehensive loss.

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Income and expense accounts are translated at the weighted-average exchange rates during the period. Foreign currency transaction gains and losses are recorded in other expense.

Other than the foreign currency accounting policy referenced above, our critical accounting policies and estimates have not changed from those described in our 2020 Form 10-K, under “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and 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.”

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

As of September 30, 2021, we had total recorded debt outstanding of $612.4 million (net of $20.8 million of unamortized OID and debt issuance costs), which was comprised of amounts outstanding under our New Term Loan of $577.0 million and ABL Facility of $56.2 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 $6.3 million annually, based on the debt outstanding at September 30, 2021.

Inflation Risk

We currently operate in the United States and internationally in Australia. We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.

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 Thryv Australia that we acquired on March 1, 2021. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2021 excludes an assessment of the internal control over financial reporting related to the Thryv Australia Acquisition. The Thryv Australia Acquisition represented 20% of our consolidated total assets at September 30, 2021, and 13% and 12% of our consolidated revenue included in our consolidated financial statements for the three and nine months ended September 30, 2021, respectively.

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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 September 30, 2021.

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 quarter ended September 30, 2021 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” 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 2020 Form 10-K, except as disclosed in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2021 and March 31, 2021.

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

None.

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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)
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 September 30, 2021, formatted in Inline XBRL (included in Exhibits 101).

*Filed herewith

**    Furnished herewith

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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.
November 12, 2021	By:	/s/ Joseph A. Walsh
		Joseph A. Walsh Chief Executive Officer and President
		(Principal Executive Officer)
November 12, 2021	By:	/s/ Paul D. Rouse
		Paul D. Rouse Chief Financial Officer, Executive Vice President and Treasurer
		(Principal Financial Officer)

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