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Yellow Pages Limited Reports Third Quarter 2017 Financial and Operating Results

Montreal (Quebec), November 7, 2017 — 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 nine months ended September 30, 2017.


Financial Highlights
(In thousands of Canadian dollars, except percentage, per share and customer count information)
Q3 2017 Financial Highlights.jpg

 

Highlights for the Third Quarter of 2017

  • Yellow Pages Board of Directors named David A. Eckert President and Chief Executive Officer, refreshing the Company’s leadership through the appointment of an executive with a keen understanding of the industry and a proven track record of improving business performance. 
  • 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.
  • Digital revenues decreased 4.2% year-over-year to $132.8 million. Digital revenues accounted for 73.2% of total revenues.
  • Total digit visits (“TDV”) to the Yellow Pages network of properties grew over 54% year-over-year to 169 million. This increase is a result of Yellow Pages syndicating listings and content across its owned and operated media properties and strong partnership network.
  • Customer count decreased 3.9% year-over-year. Yellow Pages will place increased emphasis on growing the customer base through the acquisition of high potential customers and the retention of existing customers to stabilize and grow the Company’s revenues.
  • Yellow Pages began piloting evergreen contracts and the MyTime solution with customers in Q3 2017. MyTime is a cloud-based all-in-one commerce platform for SMEs, providing online booking, messaging and payment capability to customers.3 
  • Yellow Pages expects to meet its 2017 guidance targets communicated on 
  • August 10, 2017 for adjusted EBITDA, free cash flow and customer count. The Company now expects full year revenue to be between $750 million and $760 million. 
  • As a result of weaker than expected performance in the Agency and YP segments, the Company no longer expects to report digital revenue growth this year.


“The team at Yellow Pages is focused on building a great company that delights our customers and provides fair returns to investors,” said David A. Eckert, President and CEO of Yellow Pages Limited. “Our recently completed debt refinancing is an important milestone on this journey, giving us greater flexibility and time to strengthen our performance. As we identify and take the steps required to build the great company we all want, I am committed to keeping our stakeholders up to date on our priorities and progress.”


Segmented Information
Following the announcement of its updated corporate strategy, the Company has made changes to how it manages, allocates capital and assesses performance of the business. The Company’s operations have been 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; and
  • 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 and nine-month periods ended September 30, 2017 can be found in the November 7, 2017 Management’s Discussion and Analysis. Yellow Pages will provide quarterly results on a segmented basis going forward.


Financial Results for the Third Quarter of 2017
Total revenues for the quarter ended September 30, 2017 decreased 9.8% year-over-year to $181.4 million, mainly due to lower print revenues. Digital revenues totalled $132.8 million, down 4.2% from the same period last year due to declines in the Agency and YP segments. Print revenues decreased 22.4% year-over-year to $48.5 million, mainly due to a decline in the number of print customers as marketing spending shifts from print to digital.

Adjusted EBITDA totalled $46.2 million for the third quarter 2017, compared to $56.9 million during the same period last year. Adjusted EBITDA margin was 25.5% compared to 28.3% in the prior year. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was mainly impacted by lower overall revenues and changes in product mix, offset by cost saving initiatives.

Net loss for the third quarter 2017 was $4.4 million, or $0.17 per diluted share, compared to net earnings of $3.8 million, or $0.14 per diluted share, for the same period last year. The decline in net earnings was primarily due to lower Adjusted EBITDA and the impairment of certain available-for-sale investments, as well as the write-off of an investment in a jointly controlled entity.

The Company generated free cash flow of $17.9 million for the third quarter of 2017, down from $28.9 million the previous year due to lower Adjusted EBITDA.

Net debt amounted to $354.2 million at September 30, 2017. 


2017 Guidance
For the year ending December 31, 2017, Yellow Pages anticipates:

  • Total revenues between $750 million and $760 million; 
  • Adjusted EBITDA between $170 million and $180 million;
  • Free cash flow between $50 million and $55 million; 
  • Customer count of approximately 230,000; and
  • Capital expenditures, net of related lease incentives, of less than $65 million.


As part of establishing the above guidance, the Company made the following assumptions:

  • Economic conditions in Canada will not deteriorate;
  • The decline in print revenues will remain at or below 25% per annum;
  • The Company will be able to introduce, sell and provision the new products and services that support our customer base and Average Revenue per Customer (“ARPC”) assumptions;
  • The revenue mix between the Company’s digital owned and operated, services and resale solutions will not materially change from anticipated levels;
  • Performance of the Agency segment will not differ materially from anticipated levels; 
  • Investments in marketing will evolve legacy perceptions and boost awareness of our digital media platforms and marketing solutions; 
  • The Company will be able to realize efficiency gains in its cost structure to support profitability and cash flow generation; and 
  • Guidance is based on current accounting standards and policies.


The Company cautions that the assumptions used to prepare the guidance provided above, although currently reasonable, may prove to be incorrect or inaccurate. Accordingly, actual results may differ materially from expectations as set forth above. The guidance provided above should be read in conjunction with, and is qualified by, the section Forward-Looking Information beginning on page 1 of the November 7, 2017 Management’s Discussion and Analysis.


Conference Call & Webcast
Yellow Pages Limited will hold an analyst and media call and simultaneous webcast at 8 a.m. (Eastern Time) on November 7, 2017 to discuss third quarter 2017 results. The call may be accessed by dialing 416-340-2219 within the Toronto area, or 1-800-478-9326 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 November 7 and December 8, 2017 by dialing 905-694-9451 within the Toronto area, or 1-800-408-3053 outside of Toronto and entering passcode 8773031.


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 YP NextHome. The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, 411, DuProprio, ComFree and YP 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 November 7, 2017, 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 November 7, 2017 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:

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


Media
Joëlle Langevin
Senior Manager, Communications
Tel.: (514) 934-6979
joelle.langevin@yp.ca 


 

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 restructuring and other charges. 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 EBIDTA 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.
 

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, adjusted for the change in operating assets and liabilities, less additions to intangible assets and additions to property and equipment. 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. Free cash flow for comparative periods presented has been restated to conform to this year's presentation, which includes an adjustment for the change in operating assets and liabilities. The change to this measure has been made to remove the movements in working capital items to better reflect the underlying performance of the business.
 

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.
 

2 For the twelve-month period ended September 30.
 

3 Yellow Pages entered into a Canada-wide exclusive licensing agreement with MyTime, as disclosed on July 5, 2017.

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