Yellow Media Inc. Reports Second-Quarter 2012 Financial Results
- Company proposes a recapitalization transaction to reduce total debt, improving its maturity profile and allowing the Company to pursue its business transformation
- Continued progress on Yellow Media’s 360° Solution strategy, with digital revenues now representing 31% of total revenues
- Company reports net earnings of $67.7 million for the quarter
Montreal (Quebec), August 9, 2012 — Yellow Media Inc. (TSX: YLO) released its financial results today for the second quarter ended June 30, 2012. The Company continues to make progress towards its ongoing business transformation, and has proposed a recapitalization transaction (the “Recapitalization”) to address the Company’s capital structure and liquidity needs.
For the quarter ended June 30, 2012, the Company recorded net earnings of $67.7 million compared to a net loss from continuing operations of $20.7 million in 2011.
Net earnings per share for the second quarter ending June 30, 2012 were $0.12 compared to a net loss per share from continuing operations of $0.05 in 2011. Adjusted earnings per common share for the quarter were $0.18 versus $0.20 of adjusted earnings per common share from continuing operations in 2011. The decline is mainly due to lower EBITDA, partially offset by lower cash taxes.
Revenues for the second quarter ended June 30, 2012 were $286.5 million compared to $342.7 million for the second quarter in 2011. The 16.4% decrease is due principally to lower print revenues, the discontinuation of duplicate directories published by Canpages, the divestiture of LesPAC on November 14, 2011 and lower revenues associated with the Company’s U.S. operations. Online revenues for the quarter were $89.7 million compared to $85.9 million last year, representing growth of 4.4%. On a comparable basis, excluding the impact of the changes to the Canpages business and the LesPAC divestiture, online revenues grew 11% during the quarter compared to the second quarter of 2011.
Income from operations for the quarter was $115.5 million compared to $110.6 million for the same quarter in 2011. EBITDA for the quarter declined from $176.5 million last year to $145.2 million. The EBITDA margin in the quarter decreased to 50.7% compared to 51.5% last year. The decrease is mainly attributable to print revenue pressure.
“Our customers’ needs have not changed. They continue to require the expertise of a trusted advisor who understands the dynamics of today’s increasingly digital marketplace” said Marc P. Tellier, President and Chief Executive Officer of Yellow Pages Group. “We have the right products, services and expertise to ensure Canadian businesses generate valuable business leads in today’s digital world.”
Continued Progress on Yellow Pages’ Digital Strategy
Launched in 2011, Yellow Pages 360° Solution offers advertisers single point access to a comprehensive suite of products and services. These solutions are tailored to the needs of the individual advertiser and include online, mobile and print media platforms, managed website services, customized search engine marketing and search engine optimization, and Yellow Pages Analytics™.
Alongside its dedicated sales force, the Yellow Pages 360° Solution helps businesses across Canada succeed in this new digital space, providing them with the right services and products to manage and grow their businesses.
As of June 30, 2012, the advertiser penetration of YPG’s 360º Solution (defined as advertisers who subscribe to three product categories or more) was 11.2% compared to 2.9% as at June 30, 2011. The Company has sold approximately 13,000 websites to SMEs over the last twelve months, making it one of the leading website providers in Canada.
Mobile also continues to be a key component of the Yellow Pages 360º Solution. As at June 30, 2012, the Company had over 16,800 Canadian SMEs subscribed to mobile products, representing approximately 29,700 mobile units.
Enhancing the User Experience
YPG’s network of sites currently reaches approximately 9 million unique visitors, representing approximately 32% of Canada’s online population. During the second quarter of 2012, YPG launched a redesigned Canpages.ca website. The website proposes a new user experience based on the concept of “Life Around Me,” focusing on the user’s geographic location and life needs within the context of a local search. The Canpages.ca “Life Around Me” website complements YPG’s digital portfolio, offering consumers timely and relevant information on local merchants, and providing local advertisers greater visibility on their marketplace alongside opportunities to help grow their business.
YPG’s business transformation also revolves around the continued improvement of the mobile user experience. Our mobile applications have been downloaded 4.3 million times, compared to 2.2 million times as at June 30, 2011.
During the second quarter of 2012, the Company enhanced its ShopWise mobile application. The ShopWise mobile application uses geolocalisation to pinpoint deals on products and services within a given location. ShopWise, first launched in the last quarter of 2011, is now available on all major smartphone platforms in Canada in both English and French.
The Company’s public application programming interface, YellowAPI.com , continues to be popular with over 2,000 software developers enrolled. These developers have created numerous digital applications using YPG’s database of 1.5 million business listings. A notable addition of applications powered by YellowAPI.com includes Wikitude, one of the leading innovators in mobile location-based services and augmented reality experiences for smartphones and tablets.
As at June 30, 2012, the Company had approximately $1.4 billion of net debt, or $2 billion including preferred shares, Series 1 and 2, and convertible debt instruments. The net debt to Latest Twelve Month EBITDA ratio as of June 30, 2012 was 2.7 times compared to 2.5 times as of December 31, 2011. On July 2, 2012 the company made its third quarterly mandatory repayment of $25 million on its non-revolving credit facility.
On July 23, 2012, Yellow Media announced a Recapitalization aimed at significantly reducing the Company’s debt and improving its maturity profile, with debt first coming due in 2018. The Recapitalization will allow the Company to pursue its business transformation. Closing of the Recapitalization is anticipated by the end of September 2012.
The Recapitalization will exchange the Company’s credit facilities and medium term notes, representing $1.8 billion of the Company’s debt, for a combination of:
- $750 million of 9% Senior Secured Notes due in 2018;
- $100 million of Subordinated Unsecured Exchangeable Debentures due in 2022, with interest payable in cash at 8% or in additional debentures at 12%;
- 82.5% of the New Common Shares; and
- $250 million of cash.
Holders of existing convertible debentures, preferred shares and common shares of the Company to receive in exchange for their securities a combination of:
- 17.5% of the New Common Shares; and
- Warrants, representing in the aggregate 10% of the New Common Shares.
Noteholders holding 33.5% of the medium term notes, and representing 26.6% of the Company's credit facilities and medium term notes, have executed support agreements committing them to vote in favour of the Recapitalization.
The Company proposed this Recapitalization initiative to align its capital structure with its operating strategy. The Recapitalization will ensure the necessary financial flexibility to pursue the Company’s ongoing transformation in order to enhance long-term value for stakeholders. Upon completion of the Recapitalization, the Company will have debt of approximately $850 million consisting of $750 million of Senior Secured Notes and $100 million of Subordinated Unsecured Exchangeable Debentures. Annual interest expense will also be reduced by approximately $45 million.
The implementation of the Recapitalization is subject to a number of conditions and uncertainties including the receipt of the final approval of the court.
Details of the Recapitalization are provided in a Management Proxy Circular, which is being distributed to credit facility lenders, noteholders, convertible debenture holders and shareholders. The debtholders' and shareholders' meetings are expected to be held at 11:00 a.m. Eastern Time and 11:30 a.m. Eastern Time, respectively, on September 6, 2012 at the Palais des congrès de Montréal, 1001 Place Jean-Paul-Riopelle, Room 510, Montréal, Québec, H2Z 1H5.
A Questions & Answers document specific to the Recapitalization has also been made available on the Company’s website.
New Board of Directors
A search committee of up to five members has been established to select the new Board of Directors of Yellow Media Inc. The search committee consists of two directors of Yellow Media, one of whom is Marc P. Tellier, and two members designated by the initial consenting noteholders.
The new Board of Directors will consist of nine members, one of whom shall be Marc P. Tellier. The new Board of Directors will also include a minimum of two members of the existing Board of Directors of the Company. The candidates selected will be announced via press release prior to the debtholders’ and shareholders’ meetings.
Investor Conference Call
Yellow Media Inc. will hold an analyst and media call at 9:30 a.m. (Eastern Time) on August 9, 2012 to discuss the second quarter results. The call may be accessed by dialing (416) 340-8061 within the Toronto area, or 1 866 225-0198 outside of Toronto. The call will be simultaneously webcast on the Company’s website at
The conference call will be archived in the Investor Center of the site at corporate.yp.ca . A playback of the call can also be accessed from August 9 to August 16, 2012 by dialing (905) 694-9451 from within the Toronto area, or 1 800 408-3053 outside Toronto. The conference passcode is 6245552 .
About Yellow Media Inc.
Yellow Media Inc. (TSX: YLO) is a leading media and marketing solutions company in Canada. The Company owns and operates some of Canada’s leading properties and publications including Yellow Pages™ print directories, YellowPages.ca™ , Canada411.ca and RedFlagDeals.com™ . Its online destinations reach approximately 9 million unique visitors monthly and its mobile applications for finding local businesses and deals have been downloaded 4.3 million times. Yellow Media Inc. is also a leader in national digital advertising through Mediative , a digital advertising and marketing solutions provider to national agencies and advertisers. For more information, visit 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 9, 2012, 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 7 of our August 9, 2012 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.
Amanda Di Gironimo
Senior Analyst, Corporate Finance and Investor Relations
Tel.: (514) 934-2680