Yellow Pages Ltd
TSX:Y
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Yellow Pages Ltd
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Good morning, ladies and gentlemen. Welcome to Yellow Pages First Quarter 2021 Earnings Release Call. Today's conference call contains forward-looking information about Yellow Pages' outlook, objectives and strategy. These statements are based on assumptions and are subject to important risks and uncertainties. Yellow Pages actual results could differ materially from expectations discussed.
The details of Yellow Pages discussion regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages management discussion and analysis for the first quarter of 2024. This call is being recorded and webcast, and all of the disclosure documents are available on the company's website and on SEDAR. I would now like to turn the meeting over to Mr. David Eckert, President and Chief Executive Officer. Please go ahead, sir.
Thank you very much. Good morning, everyone. Thank you for joining us today on our quarter 1 analyst call. As usual, today, I am joined by Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Service; and by Franco Sciannamblo, our Senior Vice President and Chief Financial Officer.
We'll start -- I'll make a few comments, and then Franco will provide some additional detail on our results for the quarter, and then we'll be happy to take any questions you might have. First, I'm actually very pleased with our results of the quarter. We resumed -- this quarter, we resumed our march toward stability of revenue, as our rate of change in revenue was better than the rate of change reported for the previous quarter, fourth quarter 2023.
And this is despite continued headwinds in the Canadian economy. Also pleased with our strong earnings. As usual, we produced a good result there. Our adjusted EBITDA for the quarter was 27.8% of revenue even with our continued significant investments in various revenue initiatives, including the steady further expansion of our sales force, which we think is key and we know is key to our long-term success.
As a result, we finished the quarter and actually finished the month of April with a healthy cash balance even after some typical seasonal quarterly cash disbursements during the first quarter. Cash on hand at the end of April was about $27 million. I also continue to be pleased with our progress on our revenue initiatives, and a lot of underlying metrics there. We have a good result in the rate of gaining new accounts, size of our sales force, our rate of customer churn and in particular, the first those gain new accounts was 20% higher than what we had in the previous year.
And that is the result of our continued investments toward reaching and then going beyond stability of revenue. Also, as usual, our pension plan funding remains on track, consistent with our deficit reduction plan that we announced 3 years ago. In the first quarter of 2024, we made a $1.5 million voluntary set of incremental payments toward our defined benefit plans, pension plans wind-up deficit.
And finally, as we have consistently -- yesterday, our Board of Directors declared a dividend of $0.25 per common share to be paid on June 17, 2024. One reason I'm particularly pleased and gratified this quarter is because we've been able to return to our favorable, what we call favorable bending of the revenue curve despite the magnitude of the headwinds in the Canadian economy in the sector that we sell into, small and medium-sized businesses.
It is noteworthy, I think, that as reported in the Globe and Mail just a few days ago, business insolvencies in Canada have risen to levels I'm quoting them now, "not seen since Great Recession" and that Globe and Mail reported have surged 87% -- over 87% year-over-year in the first quarter. This is something that may be unique to Canada, and we certainly are seeing the effects of that. The good news from my point of view is this is obviously something that's not going to continue forever, and we think we're doing a good job working through it.
So all in all, a good quarter, and let me pass the baton here to Franco, he will provide some additional details for you. Thank you.
Thanks, David, and good morning, everyone. Let me take you through our financial results for the first quarter ended March 31, 2024. And let me start with revenues. They decreased by $7.7 million or 12.3% year-over-year, and amounted to $55 million for the quarter, an improvement from the decrease of 13.4% reported last quarter, as David just mentioned. The 12% year-over-year decrease in revenues is mainly due to the decline of our higher-margin digital media and print products and to a lesser extent, to our lower-margin digital services products, thereby creating pressure on our gross profit margins.
Digital revenues decreased 11.9% year-over-year and amounted to $43.7 million for the 3-month period ended March 31, 2024, an improvement from the decrease of 12.1% reported last quarter. The year-over-year decline was mainly attributable to a decrease in digital customer count and, to a lesser extent, the decrease in spend per customer.
Print revenues decreased 13.9% year-over-year and amounted to $11.3 million for the quarter. The decline in revenue was mainly attributable to the decrease in the number of print customers while the spend per customer has improved year-over-year driven by price increases.
The decline rate of total revenues increased year-over-year. The higher decline rate is attributable in part to the headwinds in the global economy, as David alluded to, and whereby customer renewal rates decreased slightly but remained strong, while the average spend per customer slowed as customers look to optimize their spend. In addition, customer claims rate remained stable in the first quarter of 2024, while the first quarter of 2023 benefited from a substantial improvement. These factors were partially offset by an increase in the number of accounts and increases in pricing.
On adjusted EBITDA for the quarter, it was impacted by the pressures from lower revenue, change in product mix and continued investments in our telesales capacity, partially offset by price increases, the efficiencies from optimization of cost of sales and reductions in other operating costs, including reductions in our workforce and associated employee expenses.
As a result, adjusted EBITDA decreased year-over-year by $5.5 million or 26.3% to $15.3 million. Adjusted EBITDA margin decreased to 27.8% compared to 33.1% for the same period last year. Revenue pressures partially offset by continued optimization will continue to cause pressure on margins in the upcoming quarters.
Adjusted EBITDA for the first quarter decreased by $5.5 million year-over-year to $14.3 million, mainly due to the decrease in adjusted EBITDA. On net income, it decreased to $8.4 million for the first quarter of 2024 compared to $12.4 million for the same period last year due to lower adjusted EBITDA.
Our workforce as of March 31 stood at 613 employees compared to 656 at the same date last year. And consistent with our deficit reduction plan announced in May 2021, during the first quarter of 2024, the company made $1.5 million in voluntary incremental cash contribution to the pension plans wind up deficit.
And also, as David mentioned, even after certain seasonal cash disbursements during the first quarter, our cash on hand at the end of April stood at approximately $27 million. The Board has declared a cash dividend of $0.25 per common share payable on June 17 to shareholders of record as at May 28, 2024. This concludes our formal remarks. Thank you for taking the time to join us this morning.
We will now take your questions. Back to you, Gisel.
[Operator Instructions]
we'll take the first question from [ Tom Zhang ], Private Investor.
Under the current pension deficit reduction plan after making the $1.5 million payments, which I think will be made in Q2, Q3 and Q4 this year. Can you confirm that there would be no more payments that be required under the plan? And otherwise, do you expect that there will be further pension contributions that will have to be made under a new plan?
Or could the plan actually be in a surplus position. And if they should be no requirement to making further contributions, that would free up a lot of cash compared to how much you were paying in 2022 and 2023. Could you speak a little bit about what your plans for that cash would be?
Yes. First, we're already -- the relevant rules, regulations and laws and the health of that -- of our defined benefit plan already does not require us to be making any contributions to the plan. We have been making the contributions though that you referred to, a large amount of contributions in recent years on a voluntary basis. And consistent with the deficit reduction plan that we put in place and announced 3 years ago. So even the $1.5 million that you referred to and a lot of other contributions we made have been voluntarily put into the plan to strengthen the health of the plan.
It is true that once we wrap up this year's contributions, all of the contributions that we had planned to make as a part of that voluntary program will have been put in either on time or in many cases, many years sooner than we had said we would.
And we don't -- I don't know any reason now why that is -- why that won't continue to be the case. We believe the plan to be in a significantly stronger territory by a large margin than it ever has been in the reviewable past. The monies that have been going in there, then obviously will stay in the treasury and be available for whatever other uses we have.
Our strategy for using cash remains unchanged, and I don't see or foresee any change in our strategy, and our strategy has always been that our first priority, obviously is to meet whatever legal obligations there are, and we've always done that.
And our second priority is to invest whatever we think is reasonably needed to move ourselves forward on our strategy of making the company strong and well situated for the future. We've not -- we've been doing that completely to a full extent that we think reasonable.
And then beyond that, we always keep an eye out for what should be -- to the extent we have additional funds where those can best be deployed. I remind you that each of the last 2 calendar years, we have had under a court supervised plan of arrangement, very large distributions of cash to our shareholders through those plans of arrangement.
And just to clarify, said at the next actual review, there is a surplus in the client, you would be able to access that a surplus of cash?
So let me be very clear. I did not mean to say and I don't think I did say that there is a surplus. And we, of course, can make no prediction about what the status of the plan will be, but it is undeniably right now in much better condition than it was in the past. If my understanding of the -- I'm not the expert on the relevant laws, but we're not looking to any scenarios where we, the company, take money back out of the defined benefit pension plan. That's not something that we're looking at.
I'm not going to state what I think the law is, but just say that's not something that we have even contemplated nor do I anticipate that we'll be discussing. So -- but what probably will change is that in every recent year, we have made contributions into the defined benefit pension plan, cash contributions from the company, from our spare cash into that plan, and it looks like we will be finished making those both required ones and voluntary ones. It looks like we'll be finished making those by the end of this current calendar year.
Thanks for clarifying that. Just one more question. I noticed your Q1 revenues were almost essentially flat versus Q4 '23. Could you speak to what would be the cause of that? Is it due to the revenue initiatives and new accounts, higher pricing?
And is that something we could look forward to throughout the year because that would certainly look very good when it comes to what you call bending of the curve, the revenue curve decline.
Yes. I'm not sure I understood the first part of the question, let me see if I caught it. As we mentioned, the rate of change of our revenue in this quarter that we're reporting the first quarter is a -- it's still a decline, but it's a better rate of change than what we had in the previous quarter.
And frankly, for 4 quarters in a row, we had, had what I call the revenue curve bending in the wrong direction as we face the headwinds. We are very pleased and previous to that, we had, had, I think, 16 quarters in a row with only 2 quarters of exception right when COVID hit, what I call the revenue curve had been bending in the right direction.
In other words, each quarter, the change -- the rate of change of revenue had been better than that same measure the quarter before. What we see now is that this quarter, we're reporting on right now the first quarter of 2024, we have resumed the march in the proper direction, in a good direction towards stability of revenue. We make no firm predictions about the future, but we feel like we've resumed our march toward with the revenue curve going in the proper direction, in a good direction and towards stability of revenue in spite of still really strong headwinds, as I alluded to in talking about the business insolvency.
But -- and we -- I believe that the reason that we've been able to resume that upward march is because the -- we see strong results in the underlying metrics, some of which I referred to in my earlier comments, we see strong results in the underlying metrics, not just kind of onetime, any kind of onetime thing. So does that help answer your question?
Yes. Thank you for your answers. I'll turn it back.
[Operator Instructions] The next question is from, [ Simon Tai ], Private Investor.
My question on the pension plan was asked by the prior investor.
There are no further questions registered at this time. I would now like to turn the meeting back over to you, Mr. David Eckert.
Okay. We thank you all for joining us this quarter. We appreciate your continued interest and support, and we look forward to talking with you again in approximately 90 days. Take care, and we'll see you soon. Bye now.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.