Yellow Pages Limited
TSX : Y

Yellow Pages Limited

August 12, 2015 07:00 ET

Yellow Pages Limited Reports Second Quarter 2015 Financial Results

MONTREAL, QUEBEC--(Marketwired - Aug. 12, 2015) - Yellow Pages Limited (TSX:Y)

  • Digital revenues grew 7.4% year-over-year to reach $116.4 million for the three-month period ended June 30, 2015. For the second quarter of 2015, digital revenues represented 56.9% of total revenues.

  • EBITDA amounted to $61.6 million for the three-month period ended June 30, 2015, as compared to $81.3 million the year prior. The EBITDA margin reached 30.1% for the second quarter ended June 30, 2015, as compared to 36.8% for the same period last year.

  • The Company acquired 24,800 new customers during the twelve-month period ended June 30, 2015, up from 18,400 new customers the year prior. The customer renewal rate remained stable year-over-year at 85%.

  • Total digital visits grew 5.6% year-over-year to reach 108.2 million for the three-month period ended June 30, 2015. This compares to 102.4 million visits made to the Company's network of digital properties over the same period last year.

  • Yellow Pages acquired the ComFree/DuProprio Network ("CFDP") on July 1, 2015 for a total purchase price of $50 million. The acquisition supports the Company's media verticalization strategy and grows Yellow Pages into a leading Canadian digital real estate marketplace.

  • The Company made a $34.2 million principal mandatory redemption payment on its 9.25% Senior Secured Notes (the "Notes") on June 1, 2015. Principal mandatory redemption payments in 2015 are expected to total approximately $100 million.

Yellow Pages Limited (TSX:Y) (the "Company") released its operational and financial results today for the second quarter ended June 30, 2015. The Company remains focused on delivering more verticalized experiences to shoppers and small and medium sized enterprises ("SMEs") nationwide, ultimately growing Yellow Pages into Canada's leading local digital advertising company.

"Our Return to Growth Plan is centered on improving the way Canadians and SMEs do business," said Julien Billot, President and Chief Executive Officer of Yellow Pages. "We are introducing new verticalized experiences across our digital media properties and providing Canadian shoppers with tools to help them interact and transact with qualified local merchants. Our value proposition to SMEs has also improved. In addition to offering a superior end-to-end customer experience, we have extended our suite of digital solutions to help SMEs attract larger audiences and generate more value from their digital marketing spend."

Second Quarter 2015 Financial Results

Revenues for the three-month period ended June 30, 2015 totaled $204.8 million, representing a 7.2% year-over-year decline. This compares to a year-over-year revenue decline of 9.3% as at the same period last year. Revenues remain adversely impacted by a lower customer count and a decrease in spending among the Company's larger customers. Over the course of 2015, year-over-year revenue declines will continue to decelerate relative to 2014.

Digital revenues grew 7.4% year-over-year to total $116.4 million, as compared to $108.4 million the year prior. Growth in digital revenues was driven by customer acquisition, the ongoing migration of customers' print spend towards Yellow Pages' digital solutions, as well as a growth in spending among the Company's renewing digital customers. For the quarter ended June 30, 2015, digital revenues represented 56.9% of total revenues, up from 49.1% during the same period last year.

Print revenue decline rates continue to stabilize, following the launch of initiatives that support SME renewal of print advertising and usage of the print directory. Yellow Pages is currently rolling out Print Product Simplification, a national program that changes the structure of the print product by offering customers larger advertisement sizes at little-to-no incremental cost. This re-pricing protects renewal rates and merchant-related content, ultimately helping to preserve adoption of the print directory. For the three-month period ended June 30, 2015, print revenues decreased 21.3% year-over-year to reach $88.3 million.

EBITDA decreased to $61.6 million for the three-month period ended June 30, 2015, as compared to $81.3 million the year prior. EBITDA remains adversely impacted by print revenue pressure, investments related to the execution of the Company's Return to Growth Plan, as well as a change in product mix. The EBITDA margin for the second quarter of 2015 was 30.1%, as compared to 36.8% for the same period in 2014.

"Our objective is to return Yellow Pages to revenue and EBITDA growth in 2018," said Ginette Maillé, Chief Financial Officer of Yellow Pages. "We will return to growth by accelerating local customer acquisition, upselling these customers to new digital products and services, delivering an improved value proposition to our national clients, and growing CFDP's presence Canada-wide. Profitability will also be protected as investment levels abate and benefits are realized from the implementation of cost saving initiatives."

Net earnings for the second quarter of 2015 decreased to $16.5 million, as compared to $27.6 million for the same period last year, principally explained by lower EBITDA. For the quarter ended June 30, 2015, the Company recorded basic earnings per share of $0.62. This compares to basic earnings per share of $1.01 for the same period last year.

Free cash flow for the three-month period ended June 30, 2015 decreased to $17.4 million, as compared to $42.1 million during the same period in 2014. This decrease is mainly attributable to lower EBITDA.

Net debt as at June 30, 2015, when excluding $50 million of cash placed in trust until the closing of the acquisition of CFDP on July 1, 2015, reached $488.8 million. This compares to $494.1 million as at December 31, 2014. The Company made a $34.2 million principal mandatory redemption payment on its Notes on June 1, 2015, with redemption payments in 2015 expected to total approximately $100 million. Since their inception on December 20, 2012, Yellow Pages has repaid $327.2 million of its Notes, reducing their outstanding balance to $472.8 million as at June 30, 2015.

Operational Update

"Strengthening our brand, media and digital marketing programs is key to providing local shoppers and business owners with an industry leading value proposition," said Mr. Billot. "With investments targeted at strengthening our media's brand awareness and user experience, our digital traffic continues to grow in line with internal expectations. We are also pleased with initiatives taken to diversify our digital product suite and improve related sales, customer service and fulfillment processes. To date, these investments have helped accelerate customer acquisition and protect customer retention, resulting in a deceleration of our customer count decline."

Extending its Brand Promise

  • Yellow Pages continues to invest in local advertising to grow awareness of the Company's digital properties and transform brand perception among Canadian consumers and SMEs. From May 18 through July 12, 2015, the Company held its second annual Local Market Attack ("LMA") campaign in Montreal, Toronto, Vancouver and Calgary. With over 250 advertisements created and customized for each of these markets, the LMA campaign showcased the depth of the content and functionalities available on the YP application to help Canadians discover and transact within their local neighbourhoods.

Strengthening its Media Assets

  • Total digital visits, which measures the number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda and dine.TO online and mobile properties, grew to 108.2 million for the three-month period ended June 30, 2015. This represents a year-over-year growth of 5.6% relative to 102.4 million visits made on our network of digital properties during the same period last year.

  • Yellow Pages' digital media is becoming increasingly verticalized to help address the local needs of Canadians. The homepage of YP.ca was recently redesigned to showcase richer merchant and editorial content for each of the shopping, dining and real estate verticals. This provides users with a more engaging and effective search experience, allowing them to discover their local neighbourhoods and transact with merchants best suited to meet their specific search intent. New functionalities were also added on YP Shopwise, the Company's dedicated shopping application, to help Canadians save time and money through mobile browsing and clipping of local flyers.

  • On July 1, 2015, Yellow Pages acquired CFDP for a purchase price of $50 million, growing the Company into a leading digital real estate marketplace. The acquisition extends Yellow Pages' reach of Canadian home buyers and sellers and provides the Company with the platforms and technologies required to monetize consumer audiences within the real estate vertical. Operating under the DuProprio and ComFree banners in Quebec and the rest of Canada, respectively, CFDP offers homeowners a proven, professional and cost effective service to market and sell their properties. CFDP currently holds a 17% share of Quebec's total listings market and acts as a leading digital real estate property across the rest of Canada. The transaction was fully funded with cash on hand.

Enhancing its Customer Value Proposition

  • The Company's customer count totaled 248,000 as at June 30, 2015, as compared to 265,000 at the same period last year. This amounts to a customer count decrease of 17,000 during the twelve-month period ended June 30, 2015, down from 26,000 customers the year prior.

  • Customer acquisition for the twelve-month period ended June 30, 2015 totaled 24,800, as compared to 18,400 the year prior. Accelerated customer acquisition continues to be supported by a growing acquisition sales team, the introduction of sales incentive programs, dedicated advertising campaigns, as well as the launch of new digital solutions. New sales technologies have also helped improve the productivity of Yellow Pages' media account consultants and provide sales managers with the tools required to optimize lead assignment and conversion.

  • For the twelve-month periods ended June 30, 2015 and 2014, renewal among Yellow Pages' customers remained stable at 85%. Despite newly acquired customers churning at higher rates relative to the Company's historical customer base, the delivery of improved sales, customer service and digital fulfillment processes has played a key role in protecting customer retention rates.

Investor Conference Call

Yellow Pages Limited will hold an analyst and media call at 9:30 a.m. (Eastern Time) on August 12, 2015 to discuss second quarter 2015 results. The call may be accessed by dialing (416) 340-2220 within the Toronto area, or 1 866 225-6564 outside of Toronto.

The call will be simultaneously webcast on the Company's website at https://corporate.yp.ca/en/yellow-pages-news/events/2015-second-quarter-earnings-release/

The conference call will be archived in the Investors section of the site at https://corporate.yp.ca/en/investors/financial-events-presentations/

A playback of the call can also be accessed from August 12 to September 12, 2015 by dialing (905) 694-9451 within the Toronto area, or 1 800 408-3053 outside of Toronto.

The conference passcode is 6538546.

About Yellow Pages Limited

Yellow Pages Limited (TSX:Y) is a Canadian digital media and marketing solutions company that supports local economies by helping neighbourhood businesses reach new customers and foster stronger relationships with existing clients through its various media and products. Yellow Pages holds some of Canada's leading local online properties including YP.ca™, RedFlagDeals.com™, Canada411.ca, Bookenda.com, dine.TO, DuProprio.com, ComFree.com and YP NextHome. The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda, DuProprio, ComFree and YP NextHome mobile applications and Yellow Pages™ print directories. In addition, Yellow Pages is a leader in national digital advertising through Mediative, a division of Yellow Pages devoted to digital marketing and performance media services for national-scale agencies and customers. More at www.corporate.yp.ca

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 12, 2015, 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 12, 2015 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 percentage and per share information)
For the three-month periods For the six-month periods
ended June 30, ended June 30,
Yellow Pages Limited 2015 2014 2015 2014
Revenues $ 204,771 $ 220,579 $ 410,673 $ 443,782
EBITDA1 $ 61,593 $ 81,261 $ 132,379 $ 175,882
EBITDA margin1 30.1% 36.8% 32.2% 39.6%
Net earnings $ 16,510 $ 27,551 $ 42,034 $ 66,773
Basic earnings per share $ 0.62 $ 1.01 $ 1.57 $ 2.45
Cash flow from operating activities $ 38,028 $ 57,823 $ 100,862 $ 68,733
Free cash flow1 $ 17,379 $ 42,083 $ 62,271 $ 38,785

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 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. As well, free cash flow is a non-IFRS measure generally used as an indicator of financial performance. It should not be seen as a substitute for cash flow from operating activities. Free cash flow is defined as cash flow from operating activities, as reported in accordance with IFRS, less an adjustment for capital expenditures. Free cash flow is not a standardized measure and is not comparable with that of other public companies.

Contact Information

  • Investor Relations
    Amanda Di Gironimo
    Director, Corporate Planning and Investor Relations
    (514) 934-2680
    Amanda.DiGironimo@yp.ca

    Media
    Fiona Story
    Director, Public Relations and Corporate Communications
    (514) 934-2672
    Fiona.Story@yp.ca