Yellow Pages Q2 2024 Earnings Report

Yellow Pages EPS Results

• Actual EPS: C$0.55
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Yellow Pages Revenue Results

• Actual Revenue: $55.84 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Yellow Pages Announcement Details

• Quarter: Q2 2024
• Date: 8/7/2024
• Time: N/A
• Conference Call Date: Wednesday, August 7, 2024
• Conference Call Time: 8:30AM ET

Yellow Pages (TSE:Y) Ltd is a media and marketing solutions company in Canada, offering small and medium-sized enterprises (SMEs) services to help them connect with local consumers. The company has two reportable segments namely Yellow Pages and Other. It generates maximum revenue from the Yellow Pages segment.

Yellow Pages Q2 2024 Earnings Call Transcript

Key Takeaways

• Yellow Pages reported Q2 revenue of $255.8 million, an 11% year-over-year decline but an improvement from the 12.3% drop in the prior quarter, demonstrating a “favorable bending of the revenue curve.”
• Digital revenues fell 10.2% to $243.8 million and print revenues dropped 13.6% to $12.1 million, driven primarily by fewer customers and lower spend per customer, partly offset by price increases.
• The company boosted its sales force headcount and saw new accounts grow 17% quarter-over-quarter, while maintaining solid customer churn rates—metrics management says validate its medium- and long-term strategy.
• Adjusted EBITDA was 26.5% of revenue (down from 35% a year ago) due to investments in telesales, IT operating expenses, bad debt increases and product-mix pressures, with continued margin headwinds expected.
• Cash on hand reached $34 million at July 31, the board declared a $0.25 per share dividend for September 16, and the company made a $1.5 million voluntary pension plan deficit payment in Q2.

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to Yellow Pages second quarter 2024 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. The details of Yellow Pages' caution regarding forward-looking information, including key assumptions and risk, can be found in Yellow Pages' management discussion and analysis for the second quarter of 2024. 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.

[David Eckert, President and CEO at Yellow Pages]

Thank you very much. Good morning, everyone. Thank you for joining our quarter two analyst call. I'm joined today by Franco Scianamblo, our Senior Vice President and Chief Financial Officer, and by Sherilyn King, our Senior Vice President, Sales, Marketing and Customer Service. As usual, I'd like to begin our meeting today with a few comments, then Franco will provide some additional details, and then we'll be happy to take any questions that you may have. We are quite pleased with our second quarter results, which reflect our continuing progress toward revenue stability, reflect good profitability, and reflect, as usual, a very healthy cash balance, all despite the continued headwinds in the global economy and in the, Canadian small business sector in particular.

[David Eckert, President and CEO at Yellow Pages]

For the second consecutive quarter, we today report a favorable bending of the revenue curve, as we call it, in the second quarter, as our rate of change in revenue was better than the change reported for the previous quarter, and we're particularly pleased with our progress on the metrics that underlie our revenue generation, including the size of our sales force and our rate of gaining new accounts, while still maintaining a very solid rate of customer churn. In the category of gaining new accounts, we're very pleased that for the quarter we are reporting it was 17% higher than the previous quarter. And the reason I mention these is because it's these fundamentals, given our strategy, that we think bode very well for our medium and long-term future. We're also reporting solid earnings for the quarter.

[David Eckert, President and CEO at Yellow Pages]

Our Adjusted EBITDA for the quarter was 26.5% of revenue, even with our continued intentional, sizable investments in initiatives to improve our revenue, including the steady continuation of our sales force. We, as I mentioned, have a very healthy cash balance. The strong cash generation that we continue to display has grown our cash on hand to approximately CAD 34 million at the end of July. That's the end of July. Even after we have kept our pension plan funding on track, consistent with our deficit reduction plan announced a few years ago, in the second quarter of 2024, we made a CAD 1.5 million voluntary incremental payment toward our defined benefit pension plan's wind-up deficit.

[David Eckert, President and CEO at Yellow Pages]

So, our board has declared a dividend of CAD 0.25 per common share to be paid on September 16th of this year to shareholders of record as of August 26th. So in summary, we feel that we're very much on track. We are confident about the future and are pleased, in particular, with the underlying metrics that are, we feel, right on track, given the strategy that we have. Now, Franco will provide some additional details, and then we'll be happy to take any questions you might have.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

Thanks, David, and good morning, everyone. Let me take you through our financial results for the second quarter ended June 30, 2024, and I'm going to start with revenues. Our total revenues decreased by CAD 6.9 million or 11% year-over-year and amount to CAD 255 million for the second quarter, an improvement from the decrease of 12.3 reported last quarter. The year-over-year decrease in revenues is mainly due to the decline of our higher-margin digital media and print products, and to a lesser extent, to our lower-margin digital services products, thereby creating some pressure on our gross profit margins. Digital revenues decreased 10.2% year-over-year and amounted to CAD 43.8 million for the three-month period ended June 30th, 2024, an improvement from the decrease of 11.9% reported last quarter.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

The year-over-year decline was mainly attributable to a decrease in digital customer accounts and, to a lesser extent, the decrease in spend per customer. For print revenues, it decreased 13.6% year-over-year and amounted to CAD 12.1 million for the quarter. The decline in revenue was mainly attributable to the decrease in the number of print customers, while spend per customer has increased year-over-year, driven by price increases. The decline rate of revenues year-over-year increased year-over-year. The higher decline rate is attributable in part to the headwinds in the global economy, as David mentioned earlier, whereby customer renewal rates decreased but remained strong, while average spend per customer slowed as customers looked to optimize their spend.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

These factors were partially offset by an increase in the number of new accounts and increases in pricing. Our adjusted EBITDA for the quarter, it was impacted by pressures from lower revenue, change in product mix, continued investments in our telesales capacity, the impact of the change in the company's share price, increasing bad debt, and IT expenses. In the latter case, in terms of IT expenses, it was the nature of the IT spend, which was classified as operating rather than capital. These factors were partially offset by price increases, efficiencies from optimizations in cost of sales, and reductions in other operating costs, including reductions in our workforce and associated employee expenses. As a result, Adjusted EBITDA decreased year-over-year by CAD 7.2 million, or 32.7% to CAD 14.8 million.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

Adjusted EBITDA margin decreased to 26.5%, compared to 35% for the same period last year. Revenue pressures and continued investments in our telesalesforce capacity, partially offset by continued optimizations, will continue to cause some pressure on margins in upcoming quarters. Adjusted EBITDA less CapEx for the second quarter decreased by CAD 6.5 million year-over-year to CAD 14.1 million, mainly due to the decrease in adjusted EBITDA, partially offset by the decrease in CapEx spend year-over-year. The decrease in CapEx spend, as I mentioned earlier, was due to the nature of the IT spend, whereby more of the expenses was classified as operating rather than capital. Net income decreased to CAD 7.6 million for the second quarter of 2024, compared to CAD 12.7 million for the same period last year, due to lower adjusted EBITDA.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

For our workforce, as of June 30th, it decreased to 603 employees compared to 639 at the same date last year. Sales force headcount increased by 16, while all other headcount decreased by 52. And consistent with our deficit reduction plan announced in May 2021, during the second quarter of 2024, the company made CAD 1.5 million involuntary incremental cash contributions to the pension plan's wind-up deficit. Also, as Dave mentioned earlier, our cash on hand at the end of July stood at a healthy CAD 34 million. Finally, the board has declared a cash dividend of CAD 0.25 per common share, payable on September 16, 2024, to shareholders of record as at August 26, 2024. This concludes our formal remarks. Thank you for taking the time to join us this morning.

[Franco Sciannamblo, Senior VP and CFO at Yellow Pages]

We will now take your questions. So back over to you, Mo.

[Operator]

Thank you. We will now take questions from the telephone line. If you have a question, please press Star one on your device's keypad. You may cancel your question at any time by pressing Star two. Please press star one at this time if you have a question. There will be a brief pause while participants register for question. We thank you for your patience. Once again, please press Star one at this time if you have any questions or comments. We have no questions registered at this time.

[David Eckert, President and CEO at Yellow Pages]

Yep, this is David. I don't see any questions.

[Operator]

No.

[David Eckert, President and CEO at Yellow Pages]

If anybody's got a question, we'd be happy to take it. Well, we thank you all for joining us this morning, and look forward to meeting with you again in 90 days. Thank you. Thank you all very much for all of your support as we continue to execute on our strategy, which we think is going quite well. Please have a very nice day and a nice rest of the summer. Take care, everyone.

[Operator]

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

Participants

Executives

• David Eckert, President and CEO
• Franco Sciannamblo, Senior VP and CFO