Yellow Pages Q2 2023 Earnings Call Transcript

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August 9, 2023

There are 3 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to the Yellow Pages Second Quarter 2023 Earnings Release Call. Today's conference call contains forward looking information about Yellow Pages' outlook, objective and strategy. These statements are based on assumptions and they 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 This call is being recorded and Webcast and all the disclosure documents are available on the company's website and on SEDAR. I would now like to turn the meeting Mr. David Eckert, President and Chief Executive Officer. Please go ahead, sir.

Speaker 1

Thank you. Good morning, everyone, and welcome to our Q2 analyst call. I'm joined today by Franco Chenamblo, our Chief Financial Officer And Cherilyn King, our Senior Vice President and Head of Sales, Marketing and Customer Service. As usual, I'd like to make a few comments first, And then Frank will provide some additional details on our results from the Q2. And then we'd be happy to take Any questions that you may have.

Speaker 1

In the Q2, we continued to generate what I think are outstanding Profitability and cash flow, despite the headwinds in the general economy, in the second quarter, our adjusted EBITDA for The quarter was 35% of revenue, which is even higher than last year's 2nd quarter profitability. We also during the quarter made our $1,500,000 voluntary incremental payment Toward our defined benefit pension plans, wind up deficit as we have been doing each quarter. And we still were able to grow our cash on hand to approximately $65,000,000 at the end of July. We also continued to make good progress on our revenue initiatives. We're very pleased with Our progress on underlying metrics, including the size of our sales force, the rate of churn of our customers and our rate of gaining new accounts.

Speaker 1

And we again have declared a dividend of $0.20 per common share that Franco will detail in a moment. So as an overview, while of course, we'd rather not be facing the headwinds in the general global economy. We remain very pleased with where we are And we remain very bullish about our underlying progress towards reaching stability of revenue. I'd like to ask Franco to provide some additional details. Now Franco, could you do that?

Speaker 1

Thank you.

Speaker 2

Thanks, David, and good morning, everyone. Let me take you through our financial results for the Q2 ended June 30, 2023. On revenues, total revenue decreased by $6,800,000 or 9.8 percent year over year and amounted to $262,700,000 for the 2nd quarter. The decrease in revenues for the quarter is due to the decline of our higher margin digital and print products and to a lesser extent our lower margin digital service and resale products. This change in product mix continues to put pressure on our margins.

Speaker 2

Digital revenues decreased 7.6% year over year and amounted to 48.8 for the 3 month period ended June 30, 2023. The decline was mainly attributable to a decrease in digital customer count, partially offset by an increase in spend per customer. Print revenues decreased 16.8% year over year and amounted to $14,000,000 for the quarter. The decline in revenues was mainly attributable to the decrease in the 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.

Speaker 2

The higher decline rate is attributable in parts 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 cybersecurity incident, which resulted in the company's operations and IT systems being suspended for approximately 3 weeks during Q2 of 2023. On adjusted EBITDA for the quarter, it was impacted by the revenue pressures as well as ongoing investments in our telesales Forest capacity, partially offset by reductions in other operating costs, including reductions in our workforce and associated employee expenses. A decrease in bad debt expense as well and lower variable compensation expense, including the impact of the company's share price on cash settled stock based compensation expense. As a result, adjusted EBITDA decreased year over year by $1,900,000 or 7.8 percent to $21,900,000 While EBITDA margin increased to 35% compared to 34.2% for the same period last year.

Speaker 2

Revenue pressures coupled with increased headcount in our sales force, partially offset by continued optimization will continue to cause some pressure on margins in upcoming quarters. Adjusted EBITDA less CapEx for the Q1 decreased by $2,000,000 year over year to $20,600,000 mainly due to the decrease in adjusted EBITDA with CapEx spend remaining steady year over year. On the workforce front, as at June 30, our total workforce increased 639 employees compared to 628 at the same date last year. The sales force headcount and digital fulfillment Headcount increased by 14 and 7 respectively, while all other headcount decreased by 10. Net income was stable at $12,700,000 for the Q2 compared to the same period last year, while diluted income per share for the quarter increased by 41% to $0.69 from $0.49 for the same period last year due to the lower number of common shares outstanding.

Speaker 2

Consistent with our deficit reduction plan announced in May 2021, in the Q2 of 2023, The company made $1,500,000 in voluntary incremental cash contributions to the planned wind up deficit. As Dave mentioned, our cash on hand at the end of July stood at approximately $65,000,000 And finally, the Board of Directors declared a cash dividend of $0.20 This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions.

Operator

Thank you. We will now take questions from our telephone Thank you for your patience. We have a question from Luke Troiani from the National Bank. Please go ahead. Your line is now open.

Speaker 2

Good morning. I was just wondering if you could Possibly quantify the impact of the cybersecurity incident on top line and also EBITDA, just for modeling purposes Going forward.

Speaker 1

Yes. Thank you for your question. Roughly, the Modest, shall we very modest, shall we stay? And on the top line, a bit bigger than Very modest. I don't think we're quantifying it for a number, but it was secondary to the economic headwinds that we're seeing.

Speaker 1

Franco, would you like to add anything to that?

Speaker 2

Yes. It's net of the insurance proceeds on the bottom line, it would About $1,000,000 in that vicinity would be the bottom line impact. And on revenues, The majority of the effect is the headwinds as David alluded to. All right. Thanks for that.

Speaker 2

Appreciate it.

Speaker 1

But it's not nil. It's It occurred and obviously was a bit disruptive for a modest period of time As we've disclosed. Are there any other questions? We'd be happy to take your questions.

Operator

Thank you.

Speaker 1

Okay. We don't see any further questions. We thank you all for your continued interest and support. We look forward to meeting with you again 90 days from now. Have a good day and thank you very much.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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Earnings Conference Call
Yellow Pages Q2 2023
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