THRY: Digital Transformation Will Support Future Margin Improvement And Value Creation

Key Takeaways

• Expansion into digital SaaS solutions and targeted industry offerings is boosting customer retention, recurring revenue, and profitability through increased multiproduct adoption.
  
• Reduced debt obligations and possible reclassification as a software company position Thryv for higher investment capacity and improved market valuation.
  
• Reliance on upselling amid subscriber losses, managed legacy declines, and integration risks leaves Thryv vulnerable to competition, margin compression, and long-term revenue challenges.

Catalysts

Provides digital marketing solutions and cloud-based tools to the small-to-medium-sized businesses in the United States.

• The accelerating shift of SMBs to digital and cloud-based platforms continues to expand Thryv's addressable market for its SaaS solutions, as demonstrated by 25% year-over-year SaaS revenue growth and ongoing print-to-SaaS customer migrations; this bodes well for future revenue growth and higher recurring revenue visibility.
  
• Verticalization initiatives (e.g., Thryv for HVAC) and product ecosystem enhancements (like Workforce Center) are increasing ARPU, customer retention, and cross-sell rates, supporting stronger profitability and higher net margins as more value-added services are adopted by the existing base.
  
• Continued integration of data-driven automation and marketing tools is driving multiproduct adoption and net revenue retention (currently at 103%), likely reducing churn and leading to more durable, predictable earnings growth.
  
• Thryv's progress on deleveraging and upcoming lower amortization requirements unlocks free cash flow, enabling greater investment in R&D, sales channels, marketing, or potential share buybacks-each a potential catalyst for higher earnings and share price re-rating.
  
• The anticipated reclassification of Thryv under the software industry GICS code could improve market visibility and investor discovery, potentially narrowing the valuation gap and catalyzing a re-rating as software peer multiples are applied.

Thryv Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Thryv Holdings's revenue will decrease by 15.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 1.9% today to 1.4% in 3 years time.
• Analysts expect earnings to reach $6.3 million (and earnings per share of $0.05) by about June 2029, down from $14.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $23.5 million in earnings, and the most bearish expecting $-10.7 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 48.3x on those 2029 earnings, up from 11.4x today. This future PE is greater than the current PE for the US Software industry at 28.2x.
• Analysts expect the number of shares outstanding to grow by 0.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.46%, as per the Simply Wall St company report.

Risks

• Thryv's continued organic subscriber contraction and flat subscriber growth in 2025 highlight an underlying risk of "churn masking" revenue growth with ARPU gains, which could limit long-term recurring revenue expansion and ultimately pressure future topline growth if new customer acquisition fails to rebound.
  
• The company's legacy Marketing Services (print and traditional directory) revenues are experiencing a managed but persistent multi-year decline, and even with successful SaaS migration, the eventual sunsetting of these pre-existing cash flows by 2028 introduces a potential revenue gap and long-term margin headwind as high-margin legacy profits run off.
  
• Thryv's SaaS growth remains heavily dependent on upselling additional products to existing customers rather than rapid net new client acquisition-this leaves the business acutely exposed to intensifying competition from large cloud and software platforms (e.g., Intuit, Salesforce, Google, ServiceTitan) as well as low-cost disruptors, risking price compression and increased churn that could compress margins.
  
• The Keep acquisition, while generating substantial cost synergies, still faces significant challenges: the acquired business had pre-existing revenue decline trends, is underperforming prior projections, and remains reliant on delayed partner-channel revenue synergies. This heightens the risk that Keep's integration may not yield incremental recurring revenue/ARR, potentially weighing on earnings and net margins if synergies are slower or smaller than expected.
  
• A prolonged period of under-investment in sales/marketing, international expansion, and new channel development as a result of the "pinch point"/deleveraging focus may have allowed competitors to strengthen their market position and brand among SMBs. If investments in go-to-market and product innovation do not ramp swiftly or successfully, the company could face customer acquisition cost (CAC) inflation and be forced into large catch-up spending, which would pressure EBITDA margins and free cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $4.67 for Thryv Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.0, and the most bearish reporting a price target of just $4.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $462.0 million, earnings will come to $6.3 million, and it would be trading on a PE ratio of 48.3x, assuming you use a discount rate of 12.5%.
• Given the current share price of $3.72, the analyst price target of $4.67 is 20.3% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.