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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)     
Delaware13-2740040
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareTHRY
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)
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Risk Factors
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




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.
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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 EndedNine Months Ended
September 30,September 30,
(in thousands, except share and per share data)2021202020212020
Revenue$297,290 $240,325 $868,943 $862,507 
Cost of services 104,167 105,444 314,934 334,025 
Gross profit193,123 134,881 554,009 528,482 
Operating expenses:
Sales and marketing94,343 73,306 258,277 241,703 
General and administrative32,983 39,002 107,362 132,758 
Impairment charges 1,184 3,611 19,414 
Total operating expenses127,326 113,492 369,250 393,875 
Operating income65,797 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) benefit49,426 (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:
Basic34,013,897 30,857,617 33,585,488 31,621,039 
Diluted37,620,116 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, 2021December 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 receivable1,890 9,229 
Prepaid expenses and other current assets33,084 26,172 
Indemnification asset25,594 24,346 
Total current assets391,251 369,698 
Fixed assets and capitalized software, net70,269 89,044 
Goodwill676,440 609,457 
Intangible assets, net101,189 31,777 
Deferred tax assets114,062 93,099 
Other assets24,278 21,902 
Total assets$1,377,489 $1,214,977 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$16,929 $8,927 
Accrued liabilities153,234 139,613 
Current portion of unrecognized tax benefits31,018 30,022 
Contract liabilities35,109 18,942 
Current portion of long-term debt70,000  
Other current liabilities14,238 9,896 
Total current liabilities320,528 207,400 
New Term Loan, net333,938 — 
New Term Loan, related party152,286 — 
Senior Term Loan, net— 335,683 
Senior Term Loan, related party— 113,482 
ABL Facility56,181 79,238 
Leaseback obligations 54,798 
Pension obligations, net168,793 190,827 
Deferred tax liabilities 508 
Other liabilities41,318 36,266 
Total long-term liabilities752,516 810,802 
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 capital1,079,340 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' equity304,445 196,775 
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 StockTreasury Stock
(in thousands, except share amounts)
SharesAmountAdditional Paid-in CapitalSharesAmountAccumulated Other Comprehensive Income (Loss)Accumulated
(Deficit)
Total Stockholders'
Equity
Balance as of June 30, 202160,391,597 $604 $1,076,124 (26,678,410)$(468,613)$(4,445)$(333,967)$269,703 
Exercise of stock options243,615 2 667 — — — — 669 
Exercise of stock warrants8,569 — 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 StockTreasury Stock
(in thousands, except share amounts)
SharesAmountAdditional Paid-in CapitalSharesAmountAccumulated Other Comprehensive Income (Loss)Accumulated
(Deficit)
Total Stockholders'
Equity
Balance as of June 30, 202057,463,943 $574 $1,009,001 (26,634,798)$(468,588)$ $(504,487)$36,500 
Exercise of stock options5,448 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 StockTreasury Stock
(in thousands, except share amounts)
SharesAmountAdditional Paid-in CapitalSharesAmountAccumulated 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 options482,890 4 (405)— — — — (401)
Exercise of stock warrants570,469 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 StockTreasury Stock
(in thousands, except share amounts)
SharesAmountAdditional Paid-in CapitalSharesAmountAccumulated 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 options26,109 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)20212020
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 amortization80,675 110,883 
Amortization of debt issuance costs3,431 801 
Deferred income taxes(57,823)(42,346)
Provision for credit losses3,211 27,709 
Provision for service credits10,595 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 obligations3,409  
(Gain) loss on disposal/write-off of fixed assets and capitalized software(44)3,476 
Impairment charges3,611 19,414 
Non-cash (gain) loss from remeasurement of indemnification asset(1,248)3,878 
Other, net592  
Changes in working capital items, excluding acquisitions:
Accounts receivable48,791 15,742 
Contract assets3,837 (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 activities121,539 174,590 
Cash Flows from Investing Activities
Additions to fixed assets and capitalized software(20,053)(17,030)
Proceeds from the sale of fixed assets63 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 Loan418,070  
Proceeds from New Term Loan, related party260,930  
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 Facility793,604 868,811 
Payments of ABL Facility(816,661)(892,155)
Purchase of treasury stock  (30,626)
Other4,184 113 
Net cash provided by (used in) financing activities87,517 (159,247)
Effect of exchange rate changes on cash and cash equivalents(3,446) 
Increase (decrease) in cash and cash equivalents and restricted cash10,250 (141)
Cash and cash equivalents and restricted cash, beginning of period2,406 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 statementsThe 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 ReportedAdjustmentsAs Adjusted
Cost of services$87,347 $18,097 $105,444 
Sales and marketing60,775 12,531 73,306 
General and administrative34,176 4,826 39,002 
Impairment charges1,184  1,184 
Depreciation and amortization35,454 (35,454)— 

Nine Months Ended September 30, 2020
(in thousands)As ReportedAdjustmentsAs Adjusted
Cost of services$278,941 $55,084 $334,025 
Sales and marketing201,939 39,764 241,703 
General and administrative116,723 16,035 132,758 
Impairment charges19,414  19,414 
Depreciation and amortization110,883 (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, 2021September 30, 2020December 31, 2020
Cash and cash equivalents$10,374 $1,771 $2,406 
Restricted cash, included in Prepaid expenses and other current assets2,282   
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
10


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.

11


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 assets88,529 
Other assets10,426 
Fixed assets and capitalized software40,957 
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 
Goodwill72,051 
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)2021202020212020
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, 2021September 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)20212020
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, 2021December 31, 2020
(in thousands)Carrying AmountFair ValueCarrying AmountFair 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
SaaSTotal
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
SaaSThryv InternationalTotal
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)GrossAccumulated
Amortization
Effects of Foreign Currency TranslationNetWeighted
Average
Remaining
Amortization
Period in Years
Client relationships$803,642 $(734,730)$(5,702)$63,210 2.9
Trademarks and domain names225,177 (187,518)(1,491)36,168 2.1
Patented technologies19,600 (19,600)  0.0
Covenants not to compete3,001 (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)GrossAccumulated
Amortization
NetWeighted
Average
Remaining
Amortization
Period in Years
Client relationships$701,802 $(701,518)$284 1.4
Trademarks and domain names200,300 (169,545)30,755 2.0
Patented technologies19,600 (19,600) 0.0
Covenants not to compete1,497 (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 
202249,672