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 2023 Earnings Release Call. Today's conference call contains forward-looking information about Yellow Pages' outlook, objective, and strategy. These statements are based on assumptions and they 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 first quarter 2023. This call is being recorded and webcast and all 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. Good morning everyone and welcome to our second quarter analyst call. I'm joined today by Franco Sciannamblo, our Chief Financial Officer; and Sherilyn King, our Senior Vice President and Head of Sales Marketing Customer Service.
As usual, I'd like to make a few comments first and then Franco will provide some additional details on our results from the second quarter. And then we'd be happy to take any questions that you may have.
In the second quarter, we continued to generate what I think are outstanding profitability and cash flow despite the headwinds in the general economy. In the second quarter, our adjusted EBITDA for the quarter was 35% of revenue, which is even higher than last year's second quarter profitability.
We also during the quarter made our $1.5 million voluntary incremental payment toward our Defined Benefit Pension Plan's windup deficit as we have been doing each quarter. And we still were able to grow our cash on hand to approximately $65 million at the end of July.
We also continued to make good progress on our revenue initiatives. We're very pleased with our progress on underlying metrics including the size of our sales force, the rate of churn of our customers, and our rate of gaining new accounts. And we again have declared a dividend of $0.20 per common share that Franco will detail in a moment.
So, as an overview while of course we'd rather not be facing the headwinds in the general global economy, we remain very pleased with where we are and we remain very bullish about our underlying progress towards reaching stability of revenue.
I'd like to ask Franco to provide some additional details. Now, Franco, could you do that? Thank you.
Thanks David and good morning everyone. Let me take you through our financial results for the second quarter ended June 30th, 2023. On revenues, total revenue decreased by $6.8 million or 9.8% year-over-year and amounted to $62.7 million for the second 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 7.6% year-over-year and amounted to $48.8 million for the three-month period ended June 30th, 2023. The decline was mainly attributable to a decrease in digital customer count, partially offset by an increase in spend per customer.
Print revenues decreased 16.8% year-over-year and amounted to $14 million for the quarter. The decline in revenues was mainly attributable to the decrease in the number of print customers and to a lesser extent, a decrease in spend per customer.
The decline rate of total revenues increased year-over-year and compared to prior quarter. The higher decline rate is attributable in part to the headwinds in the global economy whereby customer renewal rates have remained strong, but stable, while the improvements in average spend per customer has slowed as customers look to optimize their spend.
The increased decline is also attributable to a cybersecurity incident, which resulted in the company's operations and IT systems being suspended for approximately three weeks during the second quarter of 2023.
On adjusted EBITDA for the quarter, it was impacted by the revenue pressures, as well as ongoing investments in our tele sales force capacity, partially offset by reductions in other operating costs, including reductions in our workforce and associated employee expenses.
A decrease in bad debt expense, as well and lower variable compensation expense including the impact of the company's share price on cash-settled stock-based compensation expense. As a result, adjusted EBITDA decreased year-over-year by $1.9 million or 7.8% to $21.9 million, while EBITDA margin increased to 35% compared to 34.2% for the same period last year.
Revenue pressures coupled with increased head count in our sales force, partially offset by continued optimization will continue to cause some pressure on margins in upcoming quarters. Adjusted EBITDA less CapEx for the first quarter decreased by $2 million year-over-year to $20.6 million, mainly due to the decrease in adjusted EBITDA with CapEx spend remaining steady year-over-year.
On the workforce front, as at June 30, our total workforce increased to 639 employees compared to 628 at the same date last year. The sales force head count and digital fulfillment head count increased by 14 and 7 respectively, while all other head count decreased by 10.
Net income was stable at $12.7 million for the second quarter compared to the same period last year, while diluted income per share for the quarter increased by 41% to $0.69 from $0.49 for the same period last year due to the lower number of common shares outstanding.
Consistent with our Deficit Reduction Plan announced in May 2021 in the second quarter of 2023, the company made $1.5 million in voluntary incremental cash contributions to the planned windup deficit. As David mentioned, our cash on hand again in July stood at approximately $65 million. And finally, the Board of Directors declared a cash dividend of $0.20 per common share payable on September 15 to shareholders of record as at August 25, 2023.
This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions.
Thank you. We will now take questions from the telephone lines. [Operator Instructions] We have a question from Luc Troiani from the National Bank. Please go ahead. Your line is now open.
Good morning. I was just wondering, if you could possibly quantify the impact of the cybersecurity incident on top line and also EBITDA just for modeling purposes going forward.
Yeah. Thank you for your question. Roughly, the effect on bottom line was not much. Net of all things considered modest -- very modest shall we say and on the top line, a bit bigger than very modest. I don't think we're quantifying it for a number but it was secondary to the economic headwinds that we're seeing. Franco, would you like to add anything to that?
Yeah, it's -- net of the insurance proceeds on the bottom line it would be about $1 million in that vicinity would be the bottom line impact. And on revenues the majority of the effect is the headwinds that David alluded to.
Thanks for that appreciate it.
But it's not nil. It's -- it occurred and obviously was a bit disruptive for a modest period of time as we've disclosed. Are there any other questions? We'd be happy to take your questions.
Thank you. [Operator Instructions]
Okay. We don't see any further questions. We thank you all for your continued interest and support. We look forward to meeting with you again 90 days from now. Have a good day and thank you very much.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.