Yellow Pages Limited Reports Significantly Improved Second Quarter 2018 Financial Results
Montreal (Quebec), August 9, 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 six months ended June 30, 2018.
“This quarter’s financial results reflect our emphasis on aligning our spending with the realities of our revenue, shedding unprofitable or non-synergistic businesses and revenues, and setting the stage for profitable growth in the future. As a result, Adjusted EBITDA less CAPEX was 49% higher than last year. We are gratified that this is the first time in at least 6 years that our Company has reported increased Adjusted EBITDA less CAPEX for 2 quarters in a row,” said David A. Eckert, President and CEO of Yellow Pages Limited. “We will keep stakeholders up to date as we continue making the improvements to our Company that are necessary to build long-term value for all concerned.”
Second Quarter of 2018 Results
- Adjusted EBITDA less CAPEX1 increased by $18.7 million to $56.8 million despite a $30.3 million revenue decline relative to the second quarter of 2017.
- Net earnings increased by $14.2 million to $16.6 million, or $0.56 per diluted share.
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 and Juice, as well as Totem until its divestiture as of May 31, 2018.
- Real Estate – media and expertise to help Canadians buy and sell their homes. Fully divested in July 2018: ComFree/DuProprio (CFDP) as of July 6, 2018 for cash consideration of $51 million on a cash free debt free basis, subject to a working capital adjustment, and Yellow Pages NextHome as of July 23, 2018.
- Other – 411.ca. and included local lifestyles magazines specific to the Western Canadian market until the divestiture of Western Media Group as of May 31, 2018.
An overview of each segment and the performance of each segment for the three and six-month periods ended June 30, 2018 can be found in the August 9, 2018 Management’s Discussion and Analysis.
Financial Results for the Second Quarter of 2018
Total revenues for the three-month period ended June 30, 2018 decreased by $30.3 million or 15.7% year-over-year and amounted to $163.2 million as compared to $193.5 million for the same period last year. The decline in total revenues for the three-month period ended June 30, 2018 was due mainly to both digital and print revenue declines in all segments, with the exception of the Real Estate segment which gained 3.6% in the second quarter of 2018 and was stable over the six-month period.
Adjusted EBITDA increased by $7.3 million or 14.6% to $57.2 million during the second quarter of 2018, compared to $49.9 million during the second quarter of 2017. Our Adjusted EBITDA margin for the second quarter of 2018 was 35.1% compared to 25.8% for the second quarter of 2017. The increase in Adjusted EBITDA and Adjusted EBITDA margin for the second quarter ended June 30, 2018 was mainly the result of reductions in our cost structure including reductions in our workforce and associated employee costs, reductions in the Company’s office space footprint, and other spending reductions across the Company.
The Company recorded net earnings of $16.6 million during the second quarter of 2018 as compared to net earnings of $2.4 million during the second quarter of 2017. The improvement in net earnings is mainly due to higher Adjusted EBITDA, decreased depreciation and amortization expenses, and increased income taxes associated with the improvement in pre-tax earnings.
Adjusted EBITDA less CAPEX1 increased by $18.8 million or 49.3% to $56.8 million during the second quarter of 2018, compared to $38.1 million during the second quarter of 2017. The increase in Adjusted EBITDA less CAPEX1 for the three-month period ended June 30, 2018 was mainly impacted by the result of higher Adjusted EBITDA1 and decreased spending on software development, office and computer equipment and leasehold improvements associated with office relocations.
Cash flows from operating activities decreased by $13.1 million to $25.6 million from $38.6 million for the second quarter period ended June 30, 2018 mainly due to higher interest paid of $10.0 million, increased payments for restructuring and other charges of $3.4 million, and lower change in operating assets and liabilities of $6.4 million, partially offset by higher Adjusted EBITDA of $7.3 million. The higher interest paid is mainly due to the fact that the Company’s 10.00% Senior Secured Notes interest payments are semi-annual in the second and fourth quarter of 2017 whereas the 9.25% Senior Secured Notes they replaced had quarterly interest payments.
Conference Call & Webcast
Yellow Pages Limited will hold an analyst and media call and simultaneous webcast at 8:30 a.m. (Eastern Time) on August 9, 2018 to discuss second quarter 2018 results. The call may be accessed by dialing 416-340-2216 within the Toronto area, or 1-800-478-9326 outside of Toronto, with both the password #4291216. Be prepared to join the conference at least 5 minutes prior to the conference start time.
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/
About Yellow Pages Limited
Yellow Pages Limited (TSX: Y) is a Canadian digital media and marketing company that creates 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 and Bookenda.com. The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, 411, Bookenda, and 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 August 9, 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 5 of our August 9, 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.
Senior Vice-President, Chief Financial Officer
Senior Vice President, Organizational Effectiveness
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 (recovery), or revenues less operating costs, as shown in Yellow Pages Limited’s interim condensed consolidated statements of income (loss). Adjusted EBITDA margin is defined as the percentage of Adjusted EBITDA to revenues. Adjusted EBITDA and Adjusted EBITDA 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 income (loss), less CAPEX which we define as additions to intangible assets and additions to property and equipment less lease incentives received all as reported in the Investing Activities section of the Company’s interim condensed 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 August 9, 2018 MD&A for a reconciliation of CAPEX.
2 For the twelve-month periods ended June 30.