Chairman's message to Shareholders /

The past year saw many key milestones and achievements for Yellow Media. We continued to make progress on the digital transformation, as reflected by continued digital revenue growth, healthy free cash flow generation, and ongoing deleveraging. We also invested to strengthen our brand image, enhance our digital properties, grow our offering of products and services for our customer base, deploy our customer acquisition strategy, and further develop our workforce. The Board also appointed a new CEO with strong operational expertise and experience in the digital transformations of traditional media companies.


We ended 2013 with $406.3M in digital revenues. The 10.6% year-over-year growth continues to result from the successful sales execution of our unique value proposition, the Yellow Pages 360º Solution. For the fourth quarter of 2013, digital revenues represented 45% of total revenues.

Our Yellow Pages 360º Solution remains the most comprehensive, full-serve digital and traditional media and marketing solutions in Canada. This offering provides our customers with single point access to online and mobile placement, website fulfillment, social media and search engine solutions, alongside valuable performance reporting tools such as Yellow Pages Analytics.

In today’s fragmented digital search environment, our customer base needs to be as visible as possible to generate valuable leads. By providing access to multiple digital products and services, the Yellow Pages 360º Solution offers its customers a complete and diversified marketing portfolio as well as enhanced ROI on their digital marketing campaigns. Penetration of the Yellow Pages 360º Solution among our customer base, defined as those who purchase three product categories or more, has grown to 27.1% at year-end, compared to 16.5% last year.

Online and mobile placement products are currently the most adopted components of our digital solutions offering. Consequently, attracting local audiences towards our digital network of properties is key in generating valuable leads for customers and promoting customer renewal and revenue growth.

Our objective is to grow Yellow Media to become the leading local digital media company in Canada by fostering strong business relationships between Canadian businesses and local consumers, and by developing an unparalleled local media presence across the country. On the online front, the Company recently developed a new search engine, allowing for more user-relevant search results and an improved search response time. We also deployed the Online Merchant Management tool, which promotes a better search experience by eliminating duplicate listings and ensuring that all content available on a Canadian business is found via a unique and stable merchant identifier. The Company’s online properties reached 7.3 million unduplicated unique visitors during the fourth quarter of 2013, representing 26% of Canada’s online population.

Our network of mobile applications also continues to gain traction. The Yellow Pages application was recognized by the App Store as one of the top 25 most downloaded applications of all time, while ShopWise was selected by the Local Search Association as the New App Gold Award Winner at the 2013 Industry Excellence Awards. In 2013, we launched a real time gas pricing and comparison feature on our Yellow Pages mobile application, and updated our ShopWise application to now provide access to digital versions of flyers and shopping circulars from major retail chains across Canada. Cumulative mobile downloads across our family of applications increased to over 6.5 million at year-end, compared to 5 million last year.

In our commitment to increase traffic and leads to our customers, we continued to extend our partner eco-system to allow clients’ business information to be visible outside our network of owned and operated properties. Leading properties such as Yahoo! Canada, CBC, Google, Poynt, TripAdvisor and OpenTable currently use our business listings to populate business searches across their platforms. We also signed an agreement with Facebook, whereby Yellow Pages Group now has the capabilities to use clients’ basic business information to automatically generate and update basic Facebook Business Pages.

The past year also saw the launch of a new brand marketing and communications strategy to engage consumers, recapture awareness of the Yellow Pages brand and promote the download and use of the Yellow Pages mobile application. As part of this strategy, the Company launched a national advertising campaign in the spring followed by a six-week advertising blitz in Toronto in June 2013, both focusing on the Yellow Pages mobile application. Advertisements were placed in areas where consumers work, live and play. A second flight of this campaign was also launched in university campuses in Toronto, Montreal and Vancouver. These campaigns proved successful, leading to an increase in mobile downloads and visits alongside a significant lift in brand awareness and perception.


Aligned with the Company’s mission of contributing to healthy, thriving neighbourhoods through support of local businesses, Yellow Pages Group also launched a flagship event to promote local shopping called Shop The Neighbourhood. Held on November 30, 2013 in the Greater Toronto Area, the event involved over 1,800 participating businesses offering over 2,000 deals exclusive to event day to attract consumer participation. The initiative helped build further awareness around the Yellow Pages brand and its relevancy in advocating for small business growth and connecting local consumers with valuable shopping information.

Despite continued growth in digital revenues, consolidated revenues continued to be in decline. Among the challenges we faced in the past year, protecting customer spend remained one of them, as we saw challenges in fully migrating our larger customers’ print spend to digital products and services. We also experienced a decline in our customer count, primarily amongst low-spend clients.

To promote revenue growth, we’ve introduced in-demand premium products and services, alongside improved customer servicing initiatives such as PriorityPlus. We’ve also instilled an acquisition culture amongst our sales force, re-designed our dedicated acquisition channels and launched new product bundles aimed exclusively at attracting and retaining new customers.

In order to support funding of the digital transformation, the Company also took steps to improve the efficiency of the organization and align its cost structure. In 2013, we started consolidating and replacing legacy publishing systems and IT data centers. We also aligned our workforce with the realities of our digital transformation, transferring resources from legacy operations towards our digital platform, and hired approximately 200 professionals within the domains of information technology and digital media.

In an effort to deliver value to its shareholders, the Company remained active in deleveraging, reducing net debt by over $248 million to reach $533.1 million by year-end. Our healthier capital structure continues to offer us the required financial flexibility to invest in our transformation.


While we continue to face challenges in the year ahead, the Board believes Yellow Media has the right strategy and leadership to meet them head on and turn those challenges into opportunities.

To promote overall revenue growth, the Company will continue investing in extending its brand promise, attracting valuable audiences, responding to customer needs, further developing its employees, and improving efficiencies. With profitability in mind, the Company will focus on continued operational realignment, process streamlining and improved technologies.

We will also invest in developing a stronger digital culture, offering training programs, tools and resources to elevate digital literacy and promote change management across all facets of the organization.

Lastly, deleveraging remains a key priority, and the Company will continue using excess cash flow to lower the amount of debt outstanding and deliver additional value to its shareholders.

To lead the next phase of the Company’s strategic plan, we recently welcomed Julien Billot as President and Chief Executive Officer of Yellow Media. A veteran of the industry, hailing from Solocal Group (formerly PagesJaunes Groupe, the incumbent local search provider in France), Mr. Billot has a proven track record of successfully executing print to digital transformations in the global media industry. Both the Board and management teamlook forward to working closely with Mr. Billot on our ongoing transformation.


I would also like to say thank you to all Yellow Media employees for their tireless efforts during the year, in both good and trying times. And lastly, thank you to you, our shareholders, for your patience and support in our ongoing stages of digital transformation. We look forward to communicating with you our continued progress on our transformation as it develops.