Yellow Pages Q3 2023 Earnings Call Transcript

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November 9, 2023

There are 3 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to Yellow Pages' Third Quarter 2023 Earnings Release Call. Today's conference call contains forward looking information about Yellow Pages' outlook, objectives and strategy. These statements are based on assumptions and are subject to important risks and uncertainties. Yellow Pages' actual results could differ materially from expectations discussed.

Operator

The details of Yellow Pages' caution regarding forward looking information, including key assumptions and risks, can be found in Yellow Pages' Management Discussion and Analysis for the Q3 of 2023. This call is being recorded and webcast, and all of the disclosure documents are available on the company's website and on SEDAR. I would now like to turn the meeting over to Mr. David Eckert, President and Chief Executive Officer. Please go ahead, sir.

Speaker 1

Thank you, and good morning, everyone. Thank you for joining us today. From the company, I'm here with Franco Chenamblo, our Senior Vice President, Chief Financial Officer and Cherilyn King, our Senior Vice President of Sales, Marketing and Customer Service. As usual today, we'll make a few introductory comments and then we will be available to answer your questions. In the Q3 this year, we continued to produce what I think is very strong profitability and generate very good cash In spite of the headwinds that we all face in the global economy that of course are hindering our progress somewhat on the revenue front, Our earnings this quarter, this Q3 adjusted EBITDA was approximately 31% of revenue.

Speaker 1

And that's in spite of the fact that we have continued unabated our investments in our revenue initiatives, including expanding our sales force. Our cash generation has led to a very Increasing cash balance at the end of October, not the end of the quarter, but the end of October, our cash balance stood $76,000,000 We've made continued good progress on our revenue initiatives. Of course, the headwinds have contributed to a somewhat challenging quarter for revenue, but we remain very pleased with our progress On underlying metrics, including the size of our sales force and our rate of churn of customers, Our rate of gaining new accounts are all fundamentals that we think bode very well for our medium and long term future. Again, our Board has declared a dividend for the quarter payable on December 15 of $0.20 per common share. Our funding of the pension plan continues on track consistent with our voluntary deficit reduction plan And we made in the quarter $1,500,000 of voluntary incremental payments toward the wind up deficit of our of that plan.

Speaker 1

As we announced a little while ago, we are planning to spend $50,000,000 of cash to buy back some of the company's shares and $12,000,000 of cash to accelerate some already planned Voluntary contributions further than what I just referred to above, to our defined benefit pension plan as part of a plan of arrangement. And we remain on track to make those transactions. So in summary, despite the economic headwinds, I think in the Q3, we have very good performance And we feel very good about the building that we're doing for the long term. I'd like to ask Franco Chenambolo, our Chief Financial Officer to Make some more amplifying comments about our results for the quarter. Franco?

Speaker 2

Thanks, David, and good morning, everyone. Let me take you through our financial results in a little bit more detail for the quarter ended September 30, 2023. On revenues, Our total revenues decreased by $8,200,000 or 12.4 percent year over year and amounted to $58,100,000 for the 3rd quarter. Digital revenues decreased 10.6% year over year and amounted to $46,700,000 for the 3 month period ended September 30, 20 23, the decline was mainly attributable to a decrease in digital customer count, partially offset by an increase in spend per customer. Print revenues decreased 19.1 percent year over year and amounted to $11,400,000 for the quarter.

Speaker 2

The decline in revenues was mainly attributable the decrease in number of print customers and to a lesser extent a decrease in spend per customer. The decline rate of total revenues increased year over year and compared to prior quarter. The higher decline rate is attributable in part to the headwinds in the global economy, whereby customer renewal rates have remained strong, but stable while the improvements in average Spend per customer has slowed as customers look to optimize their spend. The increased decline is also attributable to a cyber incident, which resulted in the company's operations and IT systems being suspended for approximately 3 weeks of the Q2 of 2023. Adjusted EBITDA for the quarter was impacted by pressures from lower revenue, change in product mix, ongoing investments in our telesales Forest capacity as well as the impact of the company's share price on cash settled stock based compensation expense, partially offset by reductions in other operating Costs including reductions in our workforce and associated employee expenses, a decrease in bad debt expense and lower variable compensation expense.

Speaker 2

As a result, adjusted EBITDA decreased year over year by $8,500,000 or 32.1 percent to 17,900,000 Adjusted EBITDA margin decreased to 30.9% compared to 39.8% for the same period last year. Revenue pressures coupled with increased headcount in our sales force partially offset by continued optimization will continue to cause pressure on margins in upcoming quarters. On adjusted EBITDA less CapEx for the 3rd quarter decreased by $7,900,000 year over year to 17 point $2,000,000 mainly due to the decrease in adjusted EBITDA, partially offset by the decrease in CapEx spend. The decrease in CapEx spend And CapEx spend is partly due to the nature of the IT spend whereby more of the spend was classified as operating versus capital in nature. Net income decreased to $10,100,000 for the Q3 of 2023 compared to $16,700,000 for the same period last year.

Speaker 2

The decrease in net income is mainly due to lower adjusted EBITDA, partially offset by the decrease in restructuring and other charges, financial charges and income taxes. Consistent with our deficit reduction plan announced in May 2021 during the Q3 of 20 As David mentioned earlier, the company made $1,500,000 in voluntary incremental cash contributions to the plans wind up deficit. And as David mentioned earlier, our cash on hand at the end of October is now approximately $76,000,000 The Board of Directors declared a cash dividend of $0.20 per common share payable on December 15 to shareholders of record as of November 24, 2023. And finally, on the plan of arrangement, here are some details related to the distribution of cash to shareholders of approximately $50,000,000 by way of a share repurchase and the advancement of $12,000,000 of planned voluntary contributions to the defined benefit pension plan by the end of the year. This will be effected pursuant to a plan of arrangement, which provides that the company We'll repurchase from shareholders pro rata an aggregate of 4,440,497 common shares at a purchase price of $11.26 per share, which represents the volume weighted average price for the 5 consecutive trading days ending the trading day immediately prior to October 19, 2023.

Speaker 2

Under this plan of arrangement, the company will also advance the previously announced voluntary incremental cash contributions to the pension plans wind up deficit by an amount of $12,000,000 during the year ending December 31, 2023, bringing 2023 cash payments Pension plans wind up deficit to $18,000,000 by the end of the year. The incremental voluntary cash infusion of $12,000,000 during the year ended December 31, 2020 represents advancing the voluntary $6,000,000 contributions intended in the years 20252026 that were part of the reduction plan announced in May of 2021. The arrangement is subject to the approval of at least 66.2 thirds Percent of the votes cast by the holders of shares of record as at October 23, 2023 at a special meeting of shareholders scheduled to be held virtually on November 30, 2023. Shareholders holding in excess of 77% of the outstanding shares have agreed with the company to vote in favor of the arrangement. The arrangement is also subject to the receipt of the approval of the Supreme Court of British Columbia.

Speaker 2

The 2023 arrangement is expected to be completed by the end of 2023 and is on track. This concludes our formal remarks.

Operator

There are no questions at the moment, sir.

Speaker 1

Thank you. Thank you all for joining us today. We look forward to talking with you again in 90 days and have a good holiday season. Take care.

Operator

Thank you. Ladies and gentlemen, your conference has now ended. All callers are asked to disconnect their lines at this time. And thank you for joining today's call.

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Yellow Pages Q3 2023
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