Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Description of Business and Summary of Significant Accounting Policies
General
Thryv Holdings, Inc. (“Thryv Holdings, Inc.” 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 (“Sensis”), a provider of marketing solutions serving SMBs in Australia.
Basis of Presentation
The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of 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 condensed or omitted pursuant to such rules and regulations. The condensed 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 condensed 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 condensed consolidated financial statements as of and for the three months ended March 31, 2021 and 2020 have been prepared on the same basis as the audited annual financial statements. Certain reclassifications have been made to the March 31, 2020 condensed consolidated financial statements and accompanying notes to conform to the March 31, 2021 presentation. The condensed consolidated balance sheet as of December 31, 2020 was derived from audited annual financial statements. The condensed 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 condensed consolidated statements of operations in order to provide better insight into its 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 condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020. Additionally, the Company reclassified depreciation and amortization from a single line in its condensed consolidated statements of operations to be reflected as a component of Gross profit, Sales and marketing expense, and General and administrative expense.
The following summarizes the changes made to the Company's condensed consolidated statements of operations for three months ended March 31, 2020 (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
As Reported
|
|
Adjustments
|
|
As Adjusted
|
|
Cost of services
|
$
|
99,620
|
|
|
$
|
18,356
|
|
|
$
|
117,976
|
|
|
Sales and marketing
|
75,353
|
|
|
13,939
|
|
|
89,292
|
|
|
General and administrative
|
44,132
|
|
|
5,430
|
|
|
49,562
|
|
|
Impairment charges
|
—
|
|
|
98
|
|
|
98
|
|
|
Depreciation and amortization
|
37,823
|
|
|
(37,823)
|
|
|
—
|
|
Reverse Stock Split
The Company’s condensed 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 condensed 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 condensed consolidated financial statements requires management to make estimates and assumptions about future events that affect the amounts reported and disclosed in the condensed 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 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 months ended March 31, 2021 as compared to the significant accounting policies included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
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 condensed 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 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 condensed consolidated financial statements.
Note 2 Acquisitions
Sensis Acquisition
On March 1, 2021 (the “Acquisition Date”), Thryv Australia Pty Ltd. (“Buyer”), an Australian proprietary limited company and a direct wholly-owned subsidiary of Thryv International Holdings 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 (“Sensis”), a private limited company incorporated under the laws of England and Wales, and its subsidiaries (collectively, the “Acquisition”). The Acquisition expanded the Company's market share with a broader geographical footprint. Additionally, the acquisition provided the Company with a significant increase in clients. Sensis 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 Acquisition, the Company paid consideration of approximately $215.0 million in cash, subject to customary closing adjustments, financed by a New Term Loan (defined below) 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 condensed consolidated statement of operations. Additionally, as part of the effort to fund the Acquisition, the Company incurred debt issuance costs of $4.2 million related to a New Term Loan, of which $2.5 million is capitalized and amortized using the effective interest method. See “Note 8, Debt Obligations.”
The Company accounted for the Acquisition using the acquisition method of accounting in accordance with ASC 805 Business Combinations (“ASC 805”). This requires that the assets acquired and liabilities assumed be measured at fair value. The Company determined, using Level 3 inputs, the fair value of certain assets and liabilities including fixed assets, intangible assets, and financing obligations and deferred revenue 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 property, plant and equipment and intangible 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 Sensis’s assets acquired and liabilities assumed. The preliminary purchase price allocation is expected to be finalized within 12 months after the Acquisition Date.
The following table summarizes the consideration transferred and the preliminary purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Acquisition Date (in thousands):
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|
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|
|
|
|
|
|
|
|
Total cash consideration
|
|
$
|
214,984
|
|
|
Total purchase consideration, as allocated below:
|
|
$
|
214,984
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
40,794
|
|
|
Accounts receivable and other current assets
|
|
88,529
|
|
|
Other assets
|
|
11,801
|
|
|
Fixed assets and capitalized software
|
|
40,957
|
|
|
Intangible assets:
|
|
|
|
Client relationships (useful life 3.5 years)
|
|
101,839
|
|
|
Trademarks (useful life 3.5 years)
|
|
24,877
|
|
|
Accounts payable
|
|
(31,163)
|
|
|
Accrued liabilities
|
|
(39,654)
|
|
|
Contract liabilities
|
|
(27,075)
|
|
|
Other current liabilities
|
|
(11,641)
|
|
|
Deferred tax liabilities
|
|
(40,497)
|
|
|
Other liabilities
|
|
(15,505)
|
|
|
Total identifiable net assets
|
|
$
|
143,262
|
|
|
Goodwill
|
|
71,722
|
|
|
Total net assets acquired
|
|
$
|
214,984
|
|
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 $71.7 million was primarily related to the benefits expected from the acquisition as is allocated to the Thryv International segment. The goodwill recognized is not deductible for income tax purposes.
The Acquisition contributed $15.4 million in revenue and $(4.0) million in net (loss) since the Acquisition Date.
Pro Forma Results
The pro forma condensed combined financial information presented below was derived from historical financial records of Thryv and Sensis and presents the operating results of the combined Company, with results prior to the Acquisition Date adjusted as if the Acquisition had occurred 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 Sensis 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 (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
|
Revenue
|
$
|
318,752
|
|
|
$
|
359,204
|
|
|
Net income
|
52,415
|
|
|
13,073
|
|
Note 3 Revenue Recognition
The Company has determined that each of its 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. Therefore, revenue associated with print services is recognized at a point in time upon delivery to the intended market. 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 condensed 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 months ended March 31, 2021, the Company recognized revenue of $4.7 million that was recorded in Contract liabilities as of December 31, 2020. For the three months ended March 31, 2020, the Company recognized revenue of $6.2 million that was recorded in Contract liabilities as of December 31, 2019.
Pandemic Credits
During the three months ended March 31, 2021 and 2020, the Company recognized pandemic credits of $2.2 million and $0.7 million, respectively, provided to customers most impacted by COVID-19. The Company has reflected these price concessions as reduction to revenue in the condensed 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 transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value.
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3 — Unobservable inputs that reflect the Company's own assumptions incorporated into valuation techniques.
These valuations require significant judgment.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input, to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have a significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach.
The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels at the end of each reporting period. During the three months ended March 31, 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 an impairment charge is recognized. Such fair value measurements are based predominantly on Level 2 and Level 3 inputs.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Prior to September 30, 2020, the fair value of the Company's indemnification asset was measured and recorded in the condensed 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 March 31, 2021 and 2020, (in thousands):
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|
|
|
|
|
|
|
|
|
2021
|
2020
|
|
Balance as of January 1,
|
$
|
—
|
|
$
|
29,789
|
|
|
Change in fair value
|
—
|
|
(3,801)
|
|
|
Balance as of March 31
|
$
|
—
|
|
$
|
25,988
|
|
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 up to the fair value of 1.8 million shares held in escrow, subject to certain contract limitations. Due to an increase in the Company’s share prices as of March 31, 2021, the number of shares expected to be returned by the seller is 1.0 million, which represents the number of shares required to satisfy the uncertain tax position less $8.0 million.
Therefore, as of March 31, 2021 and December 31, 2020, the fair value of the Company's Level 1 indemnification asset was $24.3 million.
The loss of $3.8 million on the Company’s Level 3 indemnification asset during the three months ended March 31, 2020 was recorded in General and administrative expense on the Company's condensed consolidated statements of operations.
The fair value of benefit plan assets is measured and recorded on the Company's condensed consolidated balance sheets using Level 2 inputs. See “Note 9, Pensions.”
At March 31, 2020, the fair value associated with the Company's liability classified stock-based compensation awards totaled $49.1 million, of which $36.7 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 the 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 March 31, 2020 is primarily associated with a decrease in the Company's per share fair value.
The Company did not have liability classified stock-based compensation as of March 31, 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 March 31, 2021 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Balance as of January 1 (1)
|
$
|
—
|
|
|
$
|
43,026
|
|
|
Exercise of stock options
|
—
|
|
|
(224)
|
|
|
Change in fair value
|
—
|
|
|
(7,884)
|
|
|
Amortization of grant date fair value
|
—
|
|
|
1,820
|
|
|
Balance as of March 31
|
$
|
—
|
|
|
$
|
36,738
|
|
(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.
The stock compensation expense of $2.0 million and benefit of $6.1 million recognized during the three months ended March 31, 2021, and 2020, respectively, was recorded as stock compensation expense (benefit) in Cost of services, Sales and marketing, and General and administrative expense in the Company's condensed consolidated statements of operations.
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 and financing obligations to approximate their 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 (as defined below) and the Senior Term Loan (as defined below) 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 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
New Term Loan, net
|
$
|
676,552
|
|
|
$
|
658,793
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Senior Term Loan, net
|
—
|
|
|
—
|
|
|
449,165
|
|
|
441,742
|
|
Note 5 Goodwill and Intangible Assets
Goodwill
The following table sets forth the changes in the carrying amount of goodwill for the Company for three months ended March 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
Services
|
|
SaaS
|
|
Thryv International
|
|
Total
|
|
Balance as of December 31, 2020
|
$
|
390,573
|
|
|
$
|
218,884
|
|
|
$
|
—
|
|
|
$
|
609,457
|
|
|
Sensis acquisition
|
—
|
|
|
—
|
|
|
71,722
|
|
|
71,722
|
|
|
Effects of foreign currency translation
|
—
|
|
|
—
|
|
|
(1,620)
|
|
|
(1,620)
|
|
|
Balance as of March 31, 2021
|
$
|
390,573
|
|
|
$
|
218,884
|
|
|
$
|
70,102
|
|
|
$
|
679,559
|
|
Intangible Assets
The following tables set forth the details of the Company's intangible assets as of March 31, 2021 and December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
|
Gross
|
|
Accumulated
Amortization
|
|
Effects of Foreign Currency Translation
|
|
Net
|
|
Weighted
Average
Remaining
Amortization
Period in Years
|
|
Client relationships
|
$
|
803,641
|
|
|
$
|
706,388
|
|
|
$
|
2,211
|
|
|
$
|
95,042
|
|
|
3.5
|
|
Trademarks and domain names
|
225,177
|
|
|
174,457
|
|
|
768
|
|
|
49,953
|
|
|
2.6
|
|
Patented technologies
|
19,600
|
|
|
19,600
|
|
|
—
|
|
|
—
|
|
|
0.0
|
|
Covenants not to compete
|
1,521
|
|
|
869
|
|
|
—
|
|
|
652
|
|
|
1.7
|
|
Total intangible assets
|
$
|
1,049,939
|
|
|
$
|
901,314
|
|
|
$
|
2,979
|
|
|
$
|
145,647
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
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 the three months ended March 31, 2021, and 2020 was approximately $9.9 million and $28.9 million, respectively.
Estimated aggregate future amortization expense by fiscal year for the Company's intangible assets is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Estimated Future
Amortization Expense
|
|
2021
|
|
$
|
63,648
|
|
|
2022
|
|
51,014
|
|
|
2023
|
|
21,979
|
|
|
2024
|
|
9,006
|
|
|
Total
|
|
$
|
145,647
|
|
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
|
|
|
Sensis acquisition, balance as of March 1, 2021
|
2,733
|
|
—
|
|
|
Additions (1)
|
2,018
|
|
10,588
|
|
|
Deductions (2)
|
(3,318)
|
|
(3,630)
|
|
|
Balance as of March 31 (3)
|
$
|
34,801
|
|
$
|
33,786
|
|
(1) For the three months ended March 31, 2021 and 2020, represents provision for bad debt expense of $2.0 million and $10.6 million, respectively, which is included in General and administrative expense.
(2) For the three months ended March 31, 2021 and 2020, represents amounts written off as uncollectible, net of recoveries.
(3) As of March 31, 2021, $34.6 million of the allowance is attributable to Accounts receivable and $0.2 million is attributable to Contract assets. As of March 31, 2020, $33.5 million of the allowance is attributable to accounts receivable and $0.3 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 $3.1 million recorded to allowance for credit losses for the three months ended March 31, 2020. No incremental impact was recorded for the three months ended March 31, 2021.
Note 7 Accrued Liabilities
The following table sets forth additional financial information related to the Company's accrued liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Accrued salaries and related expenses
|
$
|
49,708
|
|
|
$
|
53,844
|
|
|
Accrued severance (1)
|
1,293
|
|
|
2,280
|
|
|
Accrued taxes
|
36,385
|
|
|
26,209
|
|
|
Accrued expenses
|
64,940
|
|
|
51,284
|
|
|
Accrued service credits
|
5,211
|
|
|
5,996
|
|
|
Accrued liabilities
|
$
|
157,537
|
|
|
$
|
139,613
|
|
(1) During the three months ended March 31, 2021, the Company incurred a total of $0.6 million in severance expense, which was recorded in General and administrative expense. During the three months ended March 31, 2021, severance expense of $0.5 million and $0.1 million was recorded in the Marketing Services and SaaS segments, respectively.
During the three months ended March 31, 2020, the Company incurred a total of $3.3 million in severance expense, which was recorded in General and administrative expense. The severance expense included employee separation charges of $1.0 million recorded as a result of COVID-19. Severance expense of $3.0 million and $0.3 million was recorded in the Marketing Services and SaaS segments, respectively.
During the three months ended March 31, 2021, the Company paid a total of $1.4 million related to severance, consisting of $0.1 million due to COVID-19 employee separations and $1.3 million of other severance costs.
During the three months ended March 31, 2020, the Company paid a total of $2.7 million related to severance, inclusive of $1.8 million and $0.9 million related to severance incurred as part of the post-merger integration of YP and ongoing severance expense, respectively. No payments were made related to COVID-19 employee separations during the three months ended March 31, 2020.
Note 8 Debt Obligations
The following table sets forth the Company's outstanding debt obligations as of March 31, 2021 and December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
Interest
|
|
Rate
|
|
March 31, 2021
|
|
December 31, 2020
|
|
New Term Loan, net (1)
|
March 1, 2026
|
|
LIBOR +
|
|
8.5
|
%
|
|
$
|
676,552
|
|
|
$
|
—
|
|
|
Senior Term Loan, net (2)
|
December 31, 2023
|
|
LIBOR +
|
|
9.0
|
%
|
|
—
|
|
|
449,165
|
|
|
ABL Facility (Fifth Amendment)
|
March 1, 2026
|
|
3-month LIBOR +
|
|
3.0
|
%
|
|
43,682
|
|
|
—
|
|
|
ABL Facility (Fourth Amendment)
|
September 30, 2023
|
|
3-month LIBOR +
|
|
4.0
|
%
|
|
—
|
|
|
79,238
|
|
|
Total debt obligations
|
|
|
|
|
|
|
$
|
720,234
|
|
|
$
|
528,403
|
|
|
Less: Current portion of New Term Loan
|
|
|
|
|
|
|
70,000
|
|
|
—
|
|
|
Total debt obligations, long-term
|
|
|
|
|
|
|
$
|
650,234
|
|
|
$
|
528,403
|
|
(1) Net of original issue discount costs of $20.8 million and debt issuance costs of $2.6 million, as of March 31, 2021.
(2) Net of debt issuance costs of $0.4 million, as of December 31, 2020.
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 Sensis Acquisition, refinance in full the Company's existing term loan facility (the “Senior Term Loan”), and pay fees and expenses related to the Sensis 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, including GoldenTree Asset Management LP, Paulson & Co. Inc., and Mudrick Capital Management, LP, who held 25.0%, 7.1%, and 6.3% of the debt, respectively, as of March 1, 2021. The Term Loan Facility matures on March 1, 2026 and borrowings under the Term Loan Facility will bear interest at a fluctuating rate per annum equal to, at the Company’s option, LIBOR or 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.
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 GoldenTree Asset Management, Silver Point Capital, and Mudrick Capital Management as a modification. The transaction with other lenders party to only the Existing 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 condensed 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 was 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 condensed 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 initiated by Thryv, Inc., the Company’s operating subsidiary, is secured by all the property 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, for the three months ended March 31, 2021 and 2020, the Company recorded interest expense with related parties of $4.1 million and $5.2 million, respectively.
The Company has recorded accrued interest of $6.5 million and $8.5 million, as of March 31, 2021 and December 31, 2020, respectively. Accrued interest is included in Other current liabilities on the Company's condensed consolidated balance sheets.
As of March 31, 2021, 38.4% of the New Term Loan was held by related parties who are equity holders of the Company, including GoldenTree Asset Management LP, Paulson & Co. Inc., and Mudrick Capital Management, LP, who held 25.0%, 7.1%, and 6.3% of the debt, respectively.
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 (commencing with the fiscal quarter ending June 30, 2021). As of March 31, 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 June 30, 2017 ABL Facility (“ABL Amendment”). The ABL Amendment was entered into in order to permit the term loan refinancing, the Sensis 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 Sensis Acquisition as borrowers and guarantors, and establish an Australian borrowing base; and
•make certain other conforming changes consistent with the Term Loan Agreement.
The Company accounted for this transaction as a modification of the ABL Facility. Accordingly, the existing unamortized debt issuance costs of $2.4 million, as well as additional third-party fees and lender fees of $0.9 million associated with the latest ABL Amendment, will be deferred and will be amortized over the new term of the ABL Facility.
As of March 31, 2021 and December 31, 2020, the Company had debt issuance costs with a remaining balance of $3.2 million and $2.5 million, respectively. These debt issuance costs are included in Other assets on the Company's condensed consolidated balance sheets.
As of March 31, 2021, the Company had borrowing capacity of $113.1 million under the ABL Facility.
ABL Facility Covenants
The ABL Facility contains certain covenants that, subject to exceptions, limit or restrict the borrower's incurrence of additional indebtedness liens, investments, loans, advances, guarantees, acquisitions, disposals of assets, payments of certain indebtedness, certain affiliate transactions, changes in fiscal year or accounting methods, issuance or sale of equity instruments, mergers, liquidations and consolidations, use of proceeds, maintenance of certain deposit accounts, compliance
with certain ERISA requirements and compliance with certain Australian tax requirements. The Company is required to maintain compliance with a fixed charge coverage ratio that must exceed a ratio of 1.00. The fixed charge coverage ratio is defined as, with respect to any fiscal period determined on a consolidated basis in accordance with GAAP, the ratio of (a) Consolidated EBITDA as defined in the ABL credit agreement for such period minus capital expenditures incurred during such period, to (b) fixed charges. Fixed charges is defined as with respect to any fiscal period determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) consolidated interest expense accrued (other than amortization of debt issuance costs, and other non-cash interest expense) during such period, (b) scheduled principal
payments in respect of indebtedness paid during such period, and (c) all federal, state, and local income taxes accrued during such period, (d) all management, consulting, monitoring, and advisory fees paid to certain individuals or their affiliates during such period, and (e) all restricted payments paid during such period (whether in cash or other property, other than common equity interest). The Company is also required to maintain excess availability of at least $14.0 million, and U.S. excess availability of $10.0 million, in each case, at all times. As of March 31, 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 in August 2022, 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.
The following table sets forth the components of the Company's total leaseback obligations as of March 31, 2021 and December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Non-cash residual value of Tucker, Georgia lease
|
$
|
54,676
|
|
|
$
|
54,676
|
|
Future maturities associated with the Tucker, Georgia failed
sale-leaseback liability
|
691
|
|
|
862
|
|
|
Total leaseback obligations
|
$
|
55,367
|
|
|
$
|
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.
Net Periodic Pension Cost
The following table details the other components of net periodic pension cost for the Company's pension plans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Interest cost
|
|
|
|
|
$
|
2,616
|
|
|
$
|
4,234
|
|
|
Expected return on assets
|
|
|
|
|
(2,890)
|
|
|
(4,033)
|
|
|
Settlement (gain)
|
|
|
|
|
(15)
|
|
|
—
|
|
|
Remeasurement (gain)
|
|
|
|
|
(164)
|
|
|
—
|
|
|
Net periodic pension (benefit) cost
|
|
|
|
|
$
|
(453)
|
|
|
$
|
201
|
|
Since all pension plans are frozen and no employees accrue future pension benefits under any of the pension plans, the rate of compensation increase assumption is no longer needed. The Company determines the weighted-average discount rate by applying a yield curve comprised of the yields on several hundred high-quality, fixed income corporate bonds available on the measurement date to expected future benefit cash flows.
During the three months ended March 31, 2021, the Company recognized a pension settlement gain of less than $0.1 million. During the three months ended March 31, 2020, no pension settlement gains or losses were recognized.
During the three months ended March 31, 2021, the Company made cash contributions of $5.0 million to the qualified plans and contributions and associated payments of $0.7 million to the non-qualified plans. During the three months ended March 31, 2020, the Company made cash contributions of $3.6 million to the qualified plans, and contributions and associated payments of $0.5 million 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-Based Compensation Expense
Stock Options
During the three months ended March 31, 2021, the Company issued an aggregate of 215,544 shares of common stock to employees upon the exercise of options previously granted under the 2016 Stock Incentive Plan at exercise prices ranging from $3.68 to $13.82 per share. The stock-based compensation expense (benefit) recognized for stock option awards was $1.7 million and $(6.1) million during the three months ended March 31, 2021 and 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 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. No shares were issued through the ESPP during the three months ended March 31, 2021. The stock-based compensation expense recognized for the ESPP was $0.3 million during the three months ended March 31, 2021.
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 for the three months ended March 31, 2020, recognized by the Company in the following line items in the Company's condensed consolidated statements of operations during the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
|
Cost of services
|
$
|
81
|
|
|
$
|
(316)
|
|
|
Sales and marketing
|
832
|
|
|
(532)
|
|
|
General and administrative
|
1,058
|
|
|
(5,216)
|
|
|
Stock-based compensation expense (benefit)
|
$
|
1,971
|
|
|
$
|
(6,064)
|
|
Stock Warrants
As of March 31, 2021 and December 31, 2020, the Company had 10.5 million fully vested outstanding warrants. The holders of such warrants are entitled to purchase, in the aggregate, up to 5.8 million shares 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 months ended March 31, 2021, 200 warrants were exercised. No warrants were exercised during the three months ended March 31, 2020. These warrants expire on August 15, 2023.
Share Repurchases
On January 28, 2020, the Company repurchased approximately 1.0 million shares of its outstanding common stock from a single stockholder. The total purchase price of this transaction was approximately $12.6 million. On March 10, 2020, the Company repurchased approximately 0.8 million shares of its outstanding common stock. The total purchase price of this
transaction was $9.2 million. The shares acquired in each of these transactions were recorded as Treasury stock upon repurchase. There were no share repurchases during the three months ended March 31, 2021.
Note 11 Earnings per Share
The following table sets forth the calculation of basic earnings per share and diluted earnings per share for the three months ended March 31, 2021 and 2020 (in thousands, except share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
$
|
36,506
|
|
|
$
|
28,102
|
|
|
Weighted-average common shares outstanding during the period
|
|
|
|
|
33,108,422
|
|
|
32,578,286
|
|
|
Basic net income per share
|
|
|
|
|
$
|
1.10
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
$
|
36,506
|
|
|
$
|
28,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding during the period
|
|
|
|
|
33,108,422
|
|
|
32,578,286
|
|
|
Plus: Common stock equivalents associated with stock option awards
|
|
|
|
|
905,058
|
|
|
2,448,240
|
|
|
Diluted shares outstanding
|
|
|
|
|
34,013,480
|
|
|
35,026,526
|
|
|
Diluted net income per share
|
|
|
|
|
$
|
1.07
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The computation of diluted shares outstanding excluded approximately 0.4 million of outstanding stock options and 0.1 million of ESPP shares for the three months ended March 31, 2021, 4.6 million of outstanding stock options for the three months ended March 31, 2020, and 10.5 million of outstanding stock warrants for the three months ended March 31, 2021 and 2020, as their effect would have been anti-dilutive.
Note 12 Income Taxes
The Company’s effective tax rate (“ETR”) was 24.4% for the three months ended March 31, 2021 and 32.3% for the three months ended March 31, 2020. The ETR differs from the 21.0% U.S. Federal statutory rate primarily due to tax permanent differences and discrete items recorded in each of the respective periods.
As of March 31, 2021 and December 31, 2020, the amount of unrecognized tax benefits was $23.7 million excluding interest and penalties, respectively, of which up to $23.7 million, respectively, would affect the Company's effective tax rate if realized. As of March 31, 2021 and December 31, 2020, the Company had $8.8 million and $8.4 million, respectively, recorded for interest in the condensed 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 $21.8 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, the Company is not able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss. 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 condensed consolidated statements of operations, balance sheets or cash flows.
Section 199 and Research and Development Tax Case: Section 199 of the Tax Code provides for deductions for manufacturing performed in the U.S. The government has taken the position that directory providers are not entitled to take advantage of the deductions because printing vendors are already taking deductions and only one taxpayer can claim the deduction. The Tax Code also grants tax credits related to research and development expenditures. The government took the position that the expenditures have not been sufficiently documented to be eligible for the tax credit. The Company disagrees with these positions.
The government has challenged the Company's positions. With respect to the tax years 2012 through June 2015 for the YP LLC partnership, the government 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 is suspended. The appeals conference for YP will likely occur in the second quarter of 2021. In advance of the IRS Appeals conference, the parties did reach 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 government issued a 90-day notice to the Company. The Company filed a petition in the Tax Court to challenge the government’s denial.
As of March 31, 2021, and December 31, 2020, the Company has reserved approximately $32.3 million and $31.9 million in connection with the 199 disallowance and $0.2 million and $0.2 million related to the research and development tax credit disallowance, respectively. The decrease in the reserve balance is primarily attributable to a partial release of uncertain tax positions due to favorable developments with ongoing U.S. federal tax examinations. Pursuant to the acquisition transaction whereby the Company acquired certain entities from the YP Acquisition, 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, however, is subject to a provision in the YP Acquisition agreement that limits the seller’s liability to certain stock that was escrowed in connection with the YP Acquisition. The value of that escrowed stock is estimated to be approximately $24.3 million at both March 31, 2021 and December 31, 2020.
Other
Texas Sales, Excise, and Use Tax Audit: We conduct operations in many tax jurisdictions. In many 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. The Company has reserved $2.6 million for the total combined exposure for the periods open to audit examination, which is accrued on the Company's condensed consolidated balance sheet as of March 31, 2021.
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 $2.9 million for the total combined exposure for the respective period, which is accrued on the Company's condensed consolidated balance sheet as of March 31, 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 three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Foreign Currency Translation Adjustments
|
|
Beginning balance at January 1, 2021
|
|
|
|
|
$
|
—
|
|
|
Foreign currency translation adjustment, net of tax expense of $1.0 million
|
|
|
|
|
(2,967)
|
|
|
Ending balance at March 31, 2021
|
|
|
|
|
$
|
(2,967)
|
|
Note 15 Segment Information
As a result of the Sensis 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 Sensis 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 three months ended March 31, 2021, the Company adjusted its methodology of classifying certain revenue between products of its SaaS segment. The current and prior three months ended March 31 reflect the current methodology.
The following tables summarize the operating results of our reportable segments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
Marketing Services
|
|
SaaS
|
|
Thryv International
|
|
Total
|
|
Revenue
|
$
|
227,933
|
|
|
$
|
37,251
|
|
|
$
|
15,422
|
|
|
$
|
280,606
|
|
|
Segment EBITDA
|
98,631
|
|
|
316
|
|
|
5,986
|
|
|
104,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
Marketing Services
|
|
SaaS
|
|
Thryv International
|
|
Total
|
|
Revenue
|
$
|
286,722
|
|
|
$
|
31,848
|
|
|
$
|
—
|
|
|
$
|
318,570
|
|
|
Segment EBITDA
|
110,078
|
|
|
2,701
|
|
|
—
|
|
|
112,779
|
|
A reconciliation of total Segment EBITDA to the Company’s Income before benefit (provision) for income taxes is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Total Segment EBITDA
|
|
|
|
|
$
|
104,933
|
|
|
$
|
112,779
|
|
|
Interest expense
|
|
|
|
|
(15,672)
|
|
|
(19,930)
|
|
|
Depreciation and amortization
|
|
|
|
|
(19,718)
|
|
|
(37,823)
|
|
|
Other components of net periodic pension benefit (cost)
|
|
|
|
|
453
|
|
|
(201)
|
|
|
(Loss) on early extinguishment of debt
|
|
|
|
|
(299)
|
|
|
—
|
|
|
Impairment charges
|
|
|
|
|
—
|
|
|
(98)
|
|
|
Restructuring and integration expenses (1)
|
|
|
|
|
(9,234)
|
|
|
(9,845)
|
|
|
Transaction costs (2)
|
|
|
|
|
(10,546)
|
|
|
(6,534)
|
|
|
Stock-based compensation (expense) benefit
|
|
|
|
|
(1,971)
|
|
|
6,064
|
|
|
(Loss) from remeasurement of indemnification asset
|
|
|
|
|
—
|
|
|
(3,801)
|
|
|
Other
|
|
|
|
|
369
|
|
|
900
|
|
|
Income before (provision) for income taxes
|
|
|
|
|
$
|
48,315
|
|
|
$
|
41,511
|
|
(1)For the three months ended March 31, 2021, the Company incurred $0.6 million of severance expense, of which none was a result of the COVID-19 pandemic. For the three months ended March 31, 2020, the Company incurred $3.3 million of severance expense, of which $1.0 million was a result of the COVID-19 pandemic. In addition, 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, Sensis Acquisition and other transaction costs.
The following table sets forth the Company's disaggregation of revenue based on services for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Marketing Services
|
|
|
|
|
|
|
|
|
PYP
|
|
|
|
|
$
|
112,911
|
|
|
$
|
137,387
|
|
|
IYP
|
|
|
|
|
64,095
|
|
|
74,946
|
|
|
SEM
|
|
|
|
|
34,432
|
|
|
49,708
|
|
|
Other
|
|
|
|
|
16,495
|
|
|
24,681
|
|
|
Total Marketing Services
|
|
|
|
|
227,933
|
|
|
286,722
|
|
|
SaaS
|
|
|
|
|
|
|
|
|
Thryv Platform
|
|
|
|
|
25,900
|
|
|
25,268
|
|
|
Thryv Add-ons
|
|
|
|
|
11,351
|
|
|
6,580
|
|
|
Total SaaS
|
|
|
|
|
37,251
|
|
|
31,848
|
|
|
Thryv International
|
|
|
|
|
|
|
|
|
PYP
|
|
|
|
|
5,713
|
|
|
—
|
|
|
IYP
|
|
|
|
|
6,570
|
|
|
—
|
|
|
SEM
|
|
|
|
|
2,001
|
|
|
—
|
|
|
Other
|
|
|
|
|
1,138
|
|
|
—
|
|
|
Total Thryv International
|
|
|
|
|
15,422
|
|
|
—
|
|
|
Total Revenue
|
|
|
|
|
$
|
280,606
|
|
|
$
|
318,570
|
|
Note 16 Subsequent Events
On April 30, 2021, 1.0 million warrants were exercised to purchase approximately 0.6 million common shares at a strike price of $24.39 per common share, bringing our total outstanding shares to 33.7 million.