Yellow Media Limited

Yellow Media Limited

August 08, 2013 07:00 ET

Yellow Media Limited Reports Second-Quarter 2013 Financial Results

- Company reports Q2 2013 basic net earnings per share of $1.81 and free cash flow of $68.5 million

- Continued progress on Yellow Media Limited's digital transformation, with digital revenues growing 10% year-over-year and representing 40% of total revenues

- Company expands its dedicated advertiser acquisition strategy to increase valuable advertiser leads and conversions

- Company makes a $26 million debt repayment, reducing net debt to $664 million

MONTREAL, QUEBEC--(Marketwired - Aug. 8, 2013) - Yellow Media Limited (TSX:Y) (the "Company") released its operational and financial results today for the second quarter ended June 30, 2013. The Company continues to invest in its digital transformation, and remains focused on becoming the leading digital media and marketing solutions provider for small and medium sized businesses nationwide.

Revenues for the second quarter ended June 30, 2013 were $243.2 million compared to $286.5 million for the second quarter in 2012. The 15.1% decline is due principally to lower print revenues and the discontinuation of duplicate directories published by Canpages. On a comparable basis, excluding Canpages, revenues decreased by 11.2% versus last year's results.

Digital revenues for the second quarter of 2013 grew to $98.4 million compared to $89.7 million the year prior, representing growth of 9.7%. On a comparable basis, excluding Canpages, digital revenues grew 12.8% versus the same period last year. Digital revenues represented approximately 40.5% of total revenues during the second quarter of 2013, compared to 31.3% for the same period in 2012.

Digital revenue growth is currently unable to offset print revenue declines. This is principally due to a decline in the acquisition of valuable advertisers, and challenges associated with migrating print revenues from larger advertisers towards digital products.

EBITDA declined to $107.2 million during the second quarter of 2013, as compared to $144.9 million last year. This decline is due to continued print revenue pressure and a lower EBITDA margin. The EBITDA margin declined from 50.6% in the second quarter of 2012 to 44.1% in 2013, and continues to be impacted by investments required to advance the Company's digital transformation and product mix changes.

Free cash flow for the second quarter of 2013 declined to $68.5 million compared to $96.2 million last year, mainly due to lower EBITDA. The Company continues to generate adequate free cash flow to service its financial obligations and invest in its digital transformation.

For the quarter ending June 30, 2013, the Company recorded net earnings of $50.3 million compared to $65.7 million last year. The decrease is due primarily to lower EBITDA and a higher provision for income taxes, partly offset by lower financial charges and a lower depreciation and amortization expense. The provision for income taxes in 2012 was lower compared to 2013 due to the impact of the impairment of goodwill.

For the quarter ending June 30, 2013, the Company recorded basic net earnings per share of $1.81, which compares to basic net earnings per share of $2.15 the year prior.

Delivering Value to Advertisers through the Yellow Pages 360° Solution

The Yellow Pages™ 360° Solution is the most comprehensive full-serve digital and traditional media and marketing solution in Canada. Backed by a national team of marketing experts, the Yellow Pages 360° Solution helps advertisers generate valuable business leads through online, mobile and print media advertising, website services, customized search engine marketing and search engine optimization, and performance reporting tools.

As at June 30, 2013, the penetration of our 360º Solution offering among our advertiser base, which we define as advertisers who purchase three product categories or more, grew to 21.1%. This compares to 11.2% at the end of the same period last year.

Online priority placement is the Company's highest penetrated digital offering. Online priority placement penetration increased to 40% as at June 30, 2013, compared to 28% last year.

Mobile priority placement and digital services (which includes websites and search engine solutions) are the fastest growing components of the Yellow Pages 360º Solution. Advertiser penetration of mobile priority placement and digital services each grew from 5% last year to 10% and 8%, respectively, as at June 30, 2013.

Increased advertiser penetration across online priority placement products, mobile priority placement products and digital services is due to the continued migration of print revenues towards digital products and services, the successful execution of the Yellow Pages 360° Solution sales approach across our sales channels, and the introduction of mobile and premium digital products throughout 2012.

Growing the Acquisition of Valuable Advertisers

The Company had 291,000 advertisers as at June 30, 2013. This compares to 326,000 advertisers, excluding Canpages, at the same period last year. Over the last twelve months, the advertiser renewal rate fell slightly from 87% last year to 85% for the period ending June 30, 2013. Advertiser acquisition declined from approximately 20,000 last year to 12,400 for the twelve month period ending June 30, 2013.

"Our advertiser renewal rate remains among the strongest in the industry, however, we are working to address challenges in advertiser acquisition. We've implemented effective strategies to attract and retain valuable advertisers, as well as help small businesses better understand the importance of digital marketing in today's multi-channel society," said Marc P. Tellier, President and Chief Executive Officer of Yellow Media.

The Company recently expanded its dedicated advertiser acquisition strategy to increase the number of valuable advertisers and protect its revenue base. The Company's acquisition strategy is centered on increasing advertiser leads and conversions through the following key initiatives:

  • Inbound: The Company is investing in traditional and digital advertising campaigns to raise advertiser awareness around YPG's products and services and increase traffic towards its Yellow Pages 360º Solution business-to-business website. An inbound call center was also established to support all incoming leads.

  • Outbound: An outbound call center was created to target prospective, smaller-spend advertisers.

  • Face-to-Face Network: A face-to-face network of over 100 media account consultants was established to service larger-spend advertisers.

The Company also launched two new entry-level product packages designed exclusively to help new, prospective advertisers gain a media presence. These include Business Builder Bundle and Booster Packs, two fully-integrated media solutions which allow new advertisers to boost ROI through the development of content-rich virtual business profiles, priority placement across YPG's network of digital properties and access to print media products.

Differentiated Offering for Larger, High-Spend Advertisers

In order to support retention efforts, increase loyalty and optimize revenue growth from larger advertisers, the Company established the PriorityPlus program in early 2012. PriorityPlus offers a more attentive and specialized service by providing high-spend advertisers with dedicated account teams, a thorough evaluation of account needs and opportunities, and effective execution of their digital and traditional marketing strategy. The Company also offers larger, high-spend advertisers a suite of premium products designed to optimize their digital and traditional media presence.

PriorityPlus is now deployed across Canada and is made up of approximately 230 managers and media account consultants. Results to date remain positive as the number of advertisers receiving the PriorityPlus service and purchasing high-end products continues to increase.

Enhancing the User Experience

Improving the user experience and building valuable traffic towards our network of digital properties is key in promoting the success of our advertisers. Our online properties reached 8.7 million unduplicated unique visitors during the second quarter of 2013, representing 31% of Canada's online population.

Total mobile downloads exceeded 5.9 million by the end of the second quarter of 2013, as compared to 4.3 million downloads at the same period last year. During the quarter, the Yellow Pages application was also highlighted by the Apple Store as one of the top 25 most downloaded applications of all time.

During the second quarter of 2013, the Company developed a new search algorithm designed to optimize user performance on (online and mobile) and promote merchant ROI. The new algorithm provides more user-relevant search results, as results are now dependant on features such as proximity of location, business content, popularity, quality of reviews, etc. is now also equipped with an enhanced auto-complete service, which allows for quicker results and reduced failed searches.

As part of its brand re-positioning ad campaign, the Company launched a six-week advertising blitz in Toronto beginning in June 2013. The campaign was designed to build awareness of the Yellow Pages brand amongst the key millennial generation demographic and promote the download and use of the Yellow Pages mobile application. Advertisements were placed in newspapers, transit shelters and stations, restaurants, fitness centers, night projections and outdoor billboards, alongside online, mobile and social media sites. Brand takeovers were also staged at restaurant and pub patios within the downtown area and highly trafficked millennial hangouts. The volume of the campaign was designed to expose individuals to the Yellow Pages brand, on a daily basis, in and around areas they live, work and play.

Capital Structure

As at June 30, 2013, Yellow Media had reduced net debt to approximately $664 million. This compares to $782 million of net debt as at December 31, 2012.

The net debt to latest twelve month EBITDA ratio as at June 30, 2013 was 1.3 times compared to 1.4 times as at December 31, 2012. The Company had approximately $213 million of cash and cash equivalents as at August 7, 2013.

Pursuant to the indenture governing the 9.25% Senior Secured Notes due November 30, 2018, the Company is required to use an amount equivalent to 75% of its consolidated Excess Cash Flow for the immediately preceding six-month period ending March 31 or September 30 to redeem the Senior Secured Notes at par. These mandatory redemption payments will be made on a semi-annual basis on the last day of May and November of each year.

The Company made a $26.1 million mandatory redemption payment on May 31, 2013, and has sufficient financial liquidity to meet the minimum annual aggregate mandatory redemption payment of $100 million in 2013.

In August 2013, the Company entered into a five-year, $50 million asset-based loan (ABL) expiring in August 2018. The ABL has a first priority lien over the receivables of the Company and will be used for general corporate purposes.

As at August 7, 2013, the ABL was fully available and was undrawn.

Investor Conference Call

Yellow Media Limited will hold an analyst and media call at 10:00 a.m. (Eastern Time) on August 8, 2013 to discuss the second quarter 2013 results. The call may be accessed by dialing (416) 340-8427 within the Toronto area, or 1 866 225-6564 outside of Toronto.

The call will be simultaneously webcast on the Company's website at

The conference call will be archived in the Investor Center of the site at

A playback of the call can also be accessed from August 8 to August 15, 2013 by dialing (905) 694-9451 within the Toronto area, or 1 800 408-3053 outside Toronto.

The conference passcode is 4799718.

About Yellow Media Limited

Yellow Media Limited (TSX:Y) is a leading media and marketing solutions company in Canada. The Company owns and operates some of Canada's leading properties and publications including Yellow Pages™ print directories, Yellow™, and™. Its online destinations reach 8.7 million unique visitors monthly and its mobile applications for finding local businesses and deals have been downloaded over 5.9 million times. Yellow Media Limited is also a leader in national digital advertising through Mediative, a division of Yellow Pages Group devoted to digital marketing and performance media services for national agencies and advertisers. For more information, visit

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements about the objectives, strategies, financial conditions, results of operations and businesses of the Company.

These statements are forward-looking as they are based on our current expectations, as at August 8, 2013, about our business and the markets we operate in, and on various estimates and assumptions. Our actual results could materially differ from our expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, there is no assurance that any forward-looking statements will materialize. Risks that could cause our results to differ materially from our current expectations are discussed in section 6 of our August 8, 2013 Management's Discussion and Analysis. We disclaim any intention or obligation to update any forward-looking statements, except as required by law, even if new information becomes available, as a result of future events or for any other reason.

Financial Highlights
(in thousands of Canadian dollars - except share information)
For the three-month periods ended June 30, For the six-month periods ended June 30,
Yellow Media Limited 2013 2012 2013 2012
Revenues $243,183 $286,484 $496,460 $575,557
Income (loss) from operations $92,455 $120,719 $188,050 ($2,732,335 )
Net earnings (loss) $50,326 $65,681 $103,791 ($2,806,140 )
Basic earnings (loss) per share attributable to common shareholders $1.81 $2.15 $3.71 ($100.78 )
Cash flow from operating activities $86,457 $104,777 $173,045 $127,184
EBITDA1 $107,234 $144,939 $222,712 $289,813
EBITDA margin1 44.1 % 50.6 % 44.9 % 50.4 %
Weighted average number of common shares outstanding 27,872,822 27,955,077 27,913,722 27,955,077

Non-IFRS Measures1

In order to provide a better understanding of the results, the Company uses the term EBITDA, defined as income from operations before depreciation and amortization, impairment of goodwill and restructuring and special charges. Management believes this measure is reflective of ongoing operations. This term is not a performance measure defined under IFRS. EBITDA does not have any standardized meaning and is therefore not likely to be comparable to similar measures used by other publicly traded companies. Management believes EBITDA to be an important measure.

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