Thryv Holdings is undergoing a significant business transformation, shifting from its legacy Yellow Pages operations to a modern SaaS model. This strategic pivot has positioned the company as a compelling small-cap value investment. Despite recent stock performance, the underlying strength of its SaaS segment, characterized by high growth and increasing revenue contribution, suggests a promising future. Investors are encouraged to consider a diversified approach to small-cap value investing, with Thryv Holdings representing a strong candidate for a rebound.
Amidst market concerns regarding valuations and geopolitical tensions, the necessity for active portfolio management becomes evident. Thryv Holdings (THRY) stands out as an attractive opportunity within this environment. The company's successful transition from its traditional Yellow Pages business to a recurring SaaS model is a testament to its adaptability and forward-thinking strategy. The SaaS segment now constitutes a substantial 58% of the company's total revenue, demonstrating an impressive growth rate exceeding 30%. This shift has not only modernized its business but also improved its financial stability, as evidenced by an adjusted EBITDA margin approaching 20%. Despite a notable 60% decline in its stock value, the company's valuation, at just 3.3 times its enterprise value to fiscal year 2025 adjusted EBITDA, indicates a deep undervaluation by the market, likely due to prevalent pessimism. The author strongly reiterates a "Buy" rating for THRY, emphasizing its potential for a significant rebound. While advocating for a diversified small-cap value investment strategy, the recommendation includes modest position sizing to mitigate risks associated with market volatility. This cautious yet optimistic outlook underscores the belief that Thryv Holdings offers a valuable opportunity for investors seeking growth in an evolving market.
Thryv's Strategic Transformation and SaaS Growth
Thryv Holdings is making a significant shift from its traditional print directory business to a dynamic, recurring Software-as-a-Service (SaaS) model. This strategic move is repositioning the company within the technology sector, focusing on providing essential digital tools for small and medium-sized businesses. The SaaS segment's rapid expansion is a core driver of this transformation, demonstrating robust revenue growth that now represents a majority of Thryv's overall income. This pivot is critical for the company's long-term sustainability and growth potential in an increasingly digital economy, allowing it to tap into a broader market of businesses seeking efficient digital solutions.
The company's strategic evolution involves a comprehensive overhaul of its service offerings and operational focus. By moving away from its historical reliance on print advertising, Thryv is embracing a future centered on digital innovation. The SaaS division is experiencing accelerated growth, with its revenue contribution now surpassing that of the legacy segments. This growth is not merely incremental but reflective of a fundamental change in the company's business model, emphasizing recurring revenue streams and scalable digital platforms. The expansion into SaaS products, such as customer relationship management (CRM) tools, online scheduling, and marketing automation, enables Thryv to cater to the evolving needs of small and medium-sized enterprises (SMEs). This transition is designed to create a more resilient and growth-oriented business, less susceptible to the cyclical downturns and structural declines inherent in traditional advertising. The company's commitment to this transformation is further evidenced by its focus on enhancing product features and expanding its client base within the digital solutions market.
Undervalued Potential and Investment Recommendation
Despite significant stock price volatility, Thryv Holdings appears to be substantially undervalued by the market. Its current valuation multiples, particularly when compared to its strong SaaS growth and profitability metrics, suggest a disconnect between its intrinsic value and market perception. This situation presents a compelling opportunity for investors who recognize the company's successful transition and future growth prospects. The market's pessimism, likely stemming from its legacy business, seems to overshadow the robust performance of its rapidly expanding digital services.
The investment thesis for Thryv Holdings centers on its deep value proposition, which is currently obscured by broader market sentiment. The company's enterprise value to fiscal year 2025 adjusted EBITDA ratio of just 3.3x stands in stark contrast to its impressive SaaS segment growth and healthy adjusted EBITDA margins. This valuation metric indicates that the market has not fully appreciated the extent of Thryv's successful transformation and its potential for sustained profitability. While the stock has experienced a considerable decline, this downturn may be viewed as an entry point for value-oriented investors. The recommendation for a "Buy" rating is based on the expectation that the market will eventually recognize the inherent value in Thryv's evolving business model. However, acknowledging the inherent risks in small-cap investments and current market uncertainties, it is advisable for investors to adopt a diversified small-cap value approach and allocate capital to Thryv with modest position sizing, thereby balancing potential returns with risk management. This strategy aims to capture the upside potential while safeguarding against unforeseen market fluctuations.
