Thryv(THRY) - 2025 Q4 - Annual Report

Client Transition and SaaS Growth - As of December 31, 2025, the company serves approximately 230,000 SMB clients, with SaaS being the strategic growth engine[14] - The conversion of approximately 12,000 clients from Digital marketing services to the Thryv Platform increased SaaS revenue by $9.4 million for the year ended December 31, 2025[40] - Approximately 9,000 of the converted clients from Digital marketing services remained active SaaS clients as of December 31, 2025[40] - The transition of Marketing Services clients to the Thryv Platform is expected to enhance client retention and increase customer lifetime value[45] - The company is accelerating the transition of clients from Marketing Services to the Thryv Platform, which may lead to higher client churn and impact key business metrics negatively[86] - The transition of Marketing Services clients to the Thryv Platform is expected to increase SaaS revenue, but there is no guarantee of successful client retention[86] Marketing Services Strategy - The company plans to exit the Marketing Services segment entirely by the end of 2028, with the final publication of printed directories expected in December 2028[44] - The company plans to terminate its Marketing Services solutions by the end of 2028, focusing on maximizing profitability and managing a revenue mix that includes declining services like Print[51] - In 2025, 41.3% of the company's revenue was derived from Marketing Services offerings, with a strategic decision made to terminate these solutions by the end of 2028[84] Financial Performance and Cash Flow - The company generated significant cash flow and aims to reduce debt while pursuing acquisitions to create value for stockholders[52] - The company employs a highly variable cost structure to support its SaaS business model, which is designed to generate significant cash flow[52] - The company generated revenue through subscription plans, platform extensions, payment solutions, and professional services in its SaaS segment[18] - Revenue from print services is recognized upon delivery, leading to variability based on publication cycles, with most directories on a 24-month cycle[93] - The company may incur significant expenses if it fails to meet service level commitments under client contracts, which could lead to credits or refunds[188] Competition and Market Risks - The company faces significant competition in the Marketing Services and SaaS sectors, which could impede its ability to add new clients and retain existing ones[78] - The company faces risks related to competition, including the potential for competitors to offer superior products or services, which could adversely affect market position and financial results[134] - Adverse economic conditions, including potential recessions, could materially affect the demand for marketing solutions, particularly from small and medium-sized businesses (SMBs)[138] International Expansion and Acquisitions - International market expansion is a key growth opportunity, with plans to penetrate through acquisitions and commercial arrangements, including the Keap acquisition[55] - The company executed an acquisition of Keap in October 2024, which is expected to drive significant cost synergies and new client acquisition[54] - Acquisitions are a key growth strategy, but challenges in identifying and integrating suitable candidates could adversely affect operations[106] Employee and Operational Management - As of December 31, 2025, the company had 2,729 employees, with approximately 99% being full-time[64] - The company has implemented various employee development programs, including the Emerging Leaders Program, which saw 19 employees complete it in 2025[67] - The loss of key employees or challenges in attracting skilled personnel could have a material adverse effect on the company's operations and financial condition[142] Regulatory and Compliance Challenges - The company is subject to various U.S. and international laws regarding privacy and data protection, and non-compliance could result in significant penalties and reputational harm[147] - Future regulations concerning data protection, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), may impose additional compliance burdens that could limit business operations[149] - The evolving definitions of personally identifiable information (PII) may restrict the company's ability to collect and use data, impacting service effectiveness and client acquisition[150] - Compliance with laws such as HIPAA and CCPA is critical, and failure to meet these standards could adversely affect business results[156] Technology and Security Risks - Cybersecurity breaches could materially impact business operations and client trust, leading to financial losses and reputational damage[159] - The company relies on third-party data centers, increasing vulnerability to data breaches and unauthorized access to sensitive information[159] - The company must continuously improve security controls to mitigate risks associated with data breaches and unauthorized access[163] Financial Reporting and Internal Controls - The company has identified material weaknesses in its internal control over financial reporting, which could hinder accurate financial reporting and lead to regulatory consequences[177] - As of December 31, 2025, the company had state net operating loss carryforwards that may expire unused, potentially adversely affecting its financial condition and results of operations[184] Debt and Financial Obligations - The company faces risks related to its substantial indebtedness, which could limit operational flexibility and increase vulnerability to economic changes[199] - The company may be unable to generate sufficient cash flows to meet debt service obligations, potentially requiring asset sales or refinancing[206] - A reduction in debt ratings could negatively impact access to capital markets and increase borrowing costs[209]