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Yellow Pages Limited Reports Fourth Quarter and Full Year 2017 Financial and Operating Results

Montreal (Quebec), February 8, 2018 — Yellow Pages Limited (TSX: Y) (the “Company”), a leading Canadian digital media and marketing company, released its operational and financial results today for the quarter and year ended December 31, 2017.

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“Our new management team is demonstrating commitment to improving our financial performance, particularly Adjusted EBITDA less CAPEX, while building the foundation for profitable growth,” said David A. Eckert, President and CEO of Yellow Pages Limited.  “We achieved our 2017 guidance on this measure, and our recently announced workforce reductions are a first significant step in aligning our spending with our revenue.Our objective is to put declining profitability and write-downs behind us and move forward with an improved balance sheet and an efficient operation. As we are now in a period of identifying and implementing great change, we are briefly pausing on providing financial guidance.We will keep stakeholders up to date as we pursue our goal of building a great company that delights our customers and provides fair returns to investors.”

Highlights

  • On October 19, 2017, the Company solidified its capital structure with the refinancing of Senior Secured Notes and the amendment and restatement of its Asset Based Loan facility, giving the Company no material debt maturities prior to 2022.
  • On January 16, 2018, the Company announced a workforce reduction of approximately 500 employees as part of its program to reduce spending to drive improvement in its key operating measure of Adjusted EBITDA less CAPEX.  A restructuring charge of approximately $17 million associated with this restructuring will be recorded during the first quarter ending March 31, 2018.
  • In the fourth quarter of 2017:

 

  • Adjusted EBITDA less CAPEX decreased $13.9 million year-over-year and amounted to $31.1 million.
  • Total digital visits (“TDV”) to the Yellow Pages network of properties grew 10% year-over-year to 164 million.
  • Digital revenues decreased 4.3% year-over-year to $137.0 million.  Digital revenues now account for 74.6% of total revenues.
  • Customer count decreased 5.2% year-over-year.
  • The Company recorded a write-down of $507 million on certain of its intangible assets and goodwill. The write-down is a non-cash item.

 

Segmented Information

The Company’s operations are divided into the following four segments:

  • YP – digital and traditional marketing solutions, including owned and operated media, provided to small and medium sized enterprises (“SMEs”)
  • Agency – national advertising services to brands and publishers, primarily through Mediative, Juice and Totem subsidiaries
  • Real Estate – media and expertise to help Canadians buy and sell their homes, via ComFree/DuProprio (“CFDP”) and Yellow Pages NextHome subsidiaries
  • Other – diversified portfolio of media properties, including 411.ca and local lifestyles magazines specific to the Western Canadian market

An overview of each segment and the performance of each segment for the three-month periods and years ended December 31, 2017 can be found in the February 8, 2018 Management’s Discussion and Analysis.

Financial Results for the Fourth Quarter of 2017

Total revenues for the fourth quarter ended December 31, 2017 decreased 9.4% year-over-year to $183.8 million, mainly due to lower print revenues in the YP segment. Digital revenues totalled $137.0 million, down 4.3% from the same period last year due to declines in the YP segment. Print revenues decreased 21.6% year-over-year to $46.7 million due to a declining number of print customers as marketing spending shifts from print to digital.

Adjusted EBITDA totalled $46.9 million for the fourth quarter of 2017, compared to $57.4 million during the same period last year. Adjusted EBITDA margin was 25.5% compared to 28.3% for the same period last year.  The decrease in Adjusted EBITDA and Adjusted EBITDA margin was mainly impacted by lower overall revenues and unfavourable changes in product mix, partly offset by cost savings initiatives in the YP segment.

During the fourth quarter of 2017, in the context of its annual impairment testing and as a result of a shortfall in revenues compared to previous estimates, the Company revised estimates of future cash flows. In conjunction, the Company recorded a write-down of $500 million, which was applied to certain intangible assets and goodwill.  During the fourth quarter of 2017, the Company also wrote down $7 million of assets that were decommissioned, namely software.

Net loss for the fourth quarter 2017 was $586.4 million, or $22.33 per diluted share as compared to a net loss of $431.6 million, or $16.35 per diluted share for the fourth quarter of 2016.  The net losses for the fourth quarter of 2017 and 2016 were primarily due to charges of $507 million and $600 million in the fourth quarter of 2017 and 2016, respectively, related to the write-down of intangible assets and goodwill.  The net loss for the three-month period ended December 31, 2017 was further impacted by write-down of tax attributes.  These elements are non-cash items.

Adjusted EBITDA less CAPEX amounted to $31.1 million for the fourth quarter ended December 31, 2017 compared to $45.0 million for the same period last year.  The decrease is due to lower Adjusted EBITDA as well as higher capital expenditures related primarily to leasehold improvements associated with office relocations.

The Company generated free cash flow of $5.9 million for the fourth quarter of 2017, down from $7.8 million the previous year.

Net debt decreased to $356.8 million at December 31, 2017 compared to $384.9 million at December 31, 2016.

Financial Results for the Year Ended December 31, 2017

Total revenues for the year ended December 31, 2017 decreased 8.8% year-over-year to
$745.9 million, mainly due to lower print revenues.  Digital revenues totalled $543.0 million, down 2.3% from the same period last year due to declines in all segments, with the exception of the Real Estate segment which gained 5.6% over 2016. Print revenues decreased 22.6% year-over-year to $202.9 million, mainly due to a decline in the number of print customers as marketing spending shifts from print to digital.

Adjusted EBITDA totalled $184.0 million for the year ended December 31, 2017, compared to $235.2 million during the same period last year.  Adjusted EBITDA margin was 24.7% compared to 28.8% for the same period last year.  The decrease in Adjusted EBITDA and Adjusted EBITDA margin was mainly impacted by lower overall revenues and unfavourable changes in product mix, offset by cost saving initiatives.

Net loss for the year ended December 31, 2017 was $589.3 million, or $22.32 per diluted share, as compared to a net loss of $403.7 million, or $15.23 per dilutes share for the same period last year.  The net losses for the years ended December 31, 2017 and 2016 were primarily due to charges of $507 million and $600 million, respectively, related to the write-down of intangible assets and goodwill.  The net loss for the year ended December 31, 2017 was further impacted by the reversal of tax attributes.  These elements are non-cash items.    

Adjusted EBITDA less CAPEX amounted to $125.4 million for the year ended December 31, 2017 compared to $179.3 million for the same period last year.  The decrease is due to lower Adjusted EBITDA as well as higher capital expenditures related primarily to leasehold improvements associated with office relocations.

The Company generated free cash flow of $47.6 million for the year ended December 31, 2017, down from $94.6 million the previous year.

Conference Call & Webcast

Yellow Pages Limited will hold an analyst and media call and simultaneous webcast at 8:30 a.m. (Eastern Time) on February 8, 2018 to discuss fourth quarter 2017 results.  The call may be accessed by dialing 416-340-2218 within the Toronto area, or 1-800-377-0758 outside of Toronto.

The call will be simultaneously webcast on the Company’s website at: https://corporate.yp.ca/en/investors/financial-reports/ 

The conference call will be archived in the Investors section of the site at: https://corporate.yp.ca/en/investors/financial-events-presentations/

A playback of the call can also be accessed between February 8 and March 8, 2018 by dialing 905-694-9451 within the Toronto area, or 1-800-408-3053 outside of Toronto and entering passcode 2805159#.

 

About Yellow Pages Limited
Yellow Pages Limited (TSX: Y) is a Canadian digital media and marketing company that creates local opportunities for buyers and sellers to interact and transact in the local economy. Yellow Pages holds some of Canada’s leading local online properties including YP.ca, RedFlagDeals.com, Canada411.ca, 411.ca, Bookenda.com, DuProprio.com, ComFree.com and NextHome. The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, 411, DuProprio, ComFree and NextHome mobile applications and Yellow Pages print directories. In addition, Yellow Pages is a leader in national advertising through its businesses devoted to servicing the marketing needs of large North American brands, including Mediative and JUICE. For more information visit www.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 February 8, 2018, 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 6 of our February 8, 2018 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.

Contacts:

Kevin Chan
Senior Manager, Corporate Planning and Investor Relations
Tel.: (514) 938-6727
kevin.chan@yp.ca

 

Media

Marcie Baron
Manager, Communications
Tel.: (514) 934-7374
marcie.baron@yp.ca

 

1 Non-IFRS Measures In order to provide a better understanding of the results, the Company uses the terms Adjusted EBITDA and Adjusted EBITDA margin.  Adjusted EBITDA is defined as income from operations before depreciation and amortization, impairment of intangible assets and goodwill, and restructuring and other charges, or revenues less operating costs, as shown in Yellow Pages Limited’s consolidated statements of loss.  Adjusted EBITDA margin is defined as the percentage of Adjusted EBITDA to revenues.  Adjusted EBITDA and Adjusted EBITDA margin are not performance measures defined under IFRS and are not considered an alternative to income from operations or net earnings in the context of measuring Yellow Pages performance.  Adjusted EBITDA and Adjusted EBITDA margin do not have a standardized meaning and are therefore not likely to be comparable to similar measures used by other publicly traded companies.  Management uses Adjusted EBITDA and Adjusted EBITDA margin to evaluate the performance of its business as it reflects its ongoing profitability.  Management believes that certain investors and analysts use Adjusted EBITDA and Adjusted EBITDA margin to measure a company’s ability to service debt and to meet other payment obligations or to value companies in the media and marketing solutions industry as well as to evaluate the performance of a business. The Company also uses Adjusted EBITDA less CAPEX , which is defined as Adjusted EBITDA, or revenues less operating costs, as shown in Yellow Pages Limited’s consolidated statements of loss, less additions to intangible assets and additions to property and equipment as reported in the Investing Activities section of the Company’s consolidated statements of cash flows, net of lease incentives received, as reported in the Operating Activities section of the Company’s consolidated statements of cash flows.  Adjusted EBITDA less CAPEX is a non-IFRS financial measure and does not have any standardized meaning under IFRS.  Therefore, it is unlikely to be comparable to similar measures presented by other publicly traded companies.  We use Adjusted EBITDA less CAPEX to evaluate the performance of our business as it reflects its ongoing profitability.  We believe that certain investors and analysts use Adjusted EBITDA less CAPEX to evaluate the performance of a business. Refer to the February 8, 2018 MD&A for a reconciliation of CAPEX. As well, free cash flow is a non-IFRS measure generally used as an indicator of financial performance.  It should not be seen as a substitute for cash flows from operating activities.  Free cash flow is defined as cash flows from operating activities presented in the Operating Activities section of the Company’s consolidated statements of cash flows, less additions to intangible assets and additions to property and equipment as reported in the Investing Activities section of the Company’s consolidated statements of cash flows.  Free cash flow is not a standardized measure and is not comparable with that of other public companies.  Management considers free cash flow to be an important indicator of the performance of its business as it reflects the Company's ability to generate overall cash earnings and reflects the net cash generated available for debt repayment, acquisitions or other activities.  Management believes that certain investors and analysts use free cash flow to value a business and its underlying assets as well as to evaluate a company’s performance.  Refer to the February 8, 2018 MD&A for a reconciliation of free cash flow. Net debt is a non-IFRS measure and does not have any standardized meaning under IFRS.  Therefore, it is unlikely to comparable to similar measures presented by other publicly traded companies.  Net debt is defined as current portion of long-term debt plus long-term debt and exchangeable debentures, less cash.  Management considers net debt to be an important indicator of its financial leverage as it represents the amount of debt that is not covered by available cash. Management believes that certain investors and analysts use net debt to determine a company’s financial leverage.  Refer to the February 8, 2018 MD&A for a reconciliation of net debt.

2 For the years ended December 31.<.small>

 

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