Yellow Pages Ltd
TSX:Y
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Yellow Pages Ltd
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Good morning, ladies and gentlemen. Welcome to the Yellow Pages' Second 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' caution regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages' management discussion and analysis for the second quarter of 2021. 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.
Good morning, everyone. Thank you for joining our call this quarter. Today, we're reporting continued very good progress for the second quarter of 2021. As usual, what we'd like to do is I'd like to start by commenting a little bit on that and pointing out some highlights, and then Franco Sciannamblo, our Chief Financial Officer, will provide you some more details. And then Franco; and Sherilyn King, our Senior Vice President of Sales and Marketing and Customer Service; and I will be happy to answer any questions you might have today. We had a very good quarter in the second quarter of this year. First, on the revenue side, we're very pleased that for the third quarter in a row since COVID hit, we had a favorable bending of our revenue curve. In other words, the rate of change of our revenue is better than it was the previous quarter. Our bookings, which we don't release the details on, but I can tell you that our bookings, which are the very firm leading indicator of the revenue that we report in future quarters, are showing a very good promise for further bending of that revenue curve in those future quarters, and we continue to make good progress on expanding our telesales team to land more new accounts and on developing and growing the new products in our product line. On the profit -- from the profit standpoint, another very good quarter. Our EBITDA, as a percent of revenue, was a very healthy 32.8%, and that's even after the investments we're making and after a charge of 4.5 percentage points due -- related to stock-based compensation, which is due to the increase during the quarter in our stock price. So that number would be 4.5 percentage points higher were it not for that. So we're very happy with the strong profitability for the quarter. And third, from a cash standpoint, we've now completely paid off all of our interest-bearing debt. It's gone as of the end of the quarter. We -- as we said last quarter that we would do, we have begun making increased voluntary payments into our Defined Benefit Pension Plan in order to help reduce that deficit on a shorter time line. Even after all of that, our cash at the end of July -- now this isn't at the end of the quarter, but the end of July, was more than $95 million of cash on -- in the bank on the books. Yesterday at the regular quarterly meeting of our Board of Directors, the Board declared a regular quarterly dividend. Franco will detail that. And also, as we said a quarter ago we would do, our Board has voted to proceed with a new normal course issuer bid, NCIB, for some of our common stock. So good results, good progress and strong momentum going forward. We're very happy with where we are. Franco, would you like to provide some more detail on that?
Sure. Thanks, David, and good morning, everybody. Let me take you through our financial results for the second quarter ended June 30, 2021, starting with our revenues. They decreased by $13.7 million or 15.5% year-over-year and amounted to $74.6 million for the second quarter, an improvement from the decrease of 16.8% reported last quarter. The decrease in revenues for the quarter is due to the decline of our higher-margin digital and print products and, to a lesser extent, our lower-margin digital service and resale products. This change in product mix continues to put pressure on our margins. Digital revenues decreased by 13.6% year-over-year to $55.7 million for the second quarter, an improvement from the decrease of 15.7% reported last quarter. The decrease in revenues for the quarter is mainly due to the decline in the number of customers, partially offset by increase in spend per customer. Print revenues decreased by 20.8% to $18.9 million, resulting from a decline in both the customer count and spend per customer. Adjusted EBITDA for the quarter was negatively impacted by the pressure from revenues, investments in our telesales force capacity, the impact of the increase in the company's share price on cash-settled, stock-based compensation as well as lower wage subsidy received, partially offset by efficiencies and various cost reductions across the company. The increase in YP share price resulted in an incremental charge of $3.4 million in the second quarter of 2021 compared to a charge of $0.8 million for the comparative 3-month period ended June 30, 2020. During the quarter, the company received a $2.3 million emergency wage subsidy compared to $4.8 million for the same period last year. The efficiencies and cost reductions were from continued optimization in sales and operations and reductions in other operating costs, including reductions in our workforce and associated employee expenses, our office space footprint and other spending across the company. Furthermore, the second quarter of 2020 had benefited from positive spending and the delayed revenue impacts related to the COVID-19 pandemic. As a result, adjusted EBITDA decreased year-over-year by $17.5 million or 41.7% to $24.4 million, while EBITDA margin decreased to 32.8% from 47.5% for the same period last year. Revenue pressures coupled with investments in our telesales force capacity, partially offset by continued optimizations, will continue to create some pressure on margin in upcoming quarters. Adjusted EBITDA less CapEx decreased by $17.3 million or 42.8% to $23.1 million, while adjusted EBITDA less CapEx margin decreased from 45.8% to 31%. This decrease was driven by the decrease in adjusted EBITDA as the CapEx spend was relatively stable year-over-year. On our workforce, as at June 30, our total workforce was stable year-over-year at 671 employees compared to 672 at the same date last year. However, the sales head count increased by 43 while all other head count reduced by 44. We recorded this quarter an accounting loss on the early repayment of debt of $7.8 million in the second quarter. Net earnings decreased by $16 million year-over-year to $6 million compared to $22 million for the same period last year. The decrease in net earnings is explained mainly by the decrease in adjusted EBITDA, the loss on early repayment of debt, partially offset by lower depreciation and amortization, lower financial charges and lower provision for income taxes. As David mentioned earlier, on May 31, 2021, we paid off the principal amount of our exchangeable debentures of $107 million at par plus any related interest only, which were our only remaining debt excluding lease obligations, and we have continued our strong cash generation, resulting in cash on hand of approximately $95 million at the end of July. The Board of Directors approved a cash dividend of $0.15 per common share payable on September 15 to shareholders of record as at August 25. You'll recall in August 2020, we entered into a normal course issuer bid or NCIB to purchase up to $5 million of common shares in the open market for cancellation on or before August 9, 2021. The company completed this NCIB program on July 16, 2021, after attaining the $5 million limit. As announced, our Board has approved the company entering into a new NCIB program commencing on August 10, 2021, to purchase up to 5% of the company's outstanding shares for cancellation during a 12-month period. The company intends to limit the aggregate purchases under the new NCIB to $16 million. Also, as announced last quarter, the Board approved the voluntary incremental $4 million cash contribution to the company's Defined Benefit Pension Plan's wind-up deficit in 2021 as part of a deficit reduction plan to increase the probability that the plan will be fully funded on a wind-up basis by 2030. During the second quarter of 2021, the company made a payment of $0.6 million toward that voluntary incremental cash contribution. This concludes our formal remarks. Thank you for taking the time to join us this morning. We'll now take your questions.
[Operator Instructions] There are no questions registered at this time. I'll turn the meeting back over to Mr. Eckert.
Very good. We thank you for joining us today. We're very happy about our second quarter, very happy about the profitability results, very happy about the progress on revenue and bending the revenue curve on the promise that we see in our bookings of future further improvements on revenue performance and a very healthy cash that we continue to generate. Thank you very much. We look forward to talking with you again next quarter. Take care.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.