Yellow Pages Ltd
TSX:Y
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Yellow Pages Ltd
Earnings Call Analysis
Summary
Q2-2024
Yellow Pages reported favorable revenue metrics in Q2 2024, with adjusted EBITDA at 26.5% of revenue despite a 11% year-over-year revenue drop to $55.8 million. Digital revenues fell by 10.2% and print revenues by 13.6%. Net income decreased to $7.6 million from $12.7 million last year. The company’s cash on hand grew to $34 million, supported by strong cash generation. The board declared a $0.25 dividend per share, payable on September 16, 2024. The workforce count decreased overall, while sales force headcount rose slightly. Yellow Pages remains confident in its long-term strategy.
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Good morning, ladies and gentlemen. Welcome to Yellow Pages Second Quarter 2024 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 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 our quarter 2 analyst call. I'm joined today by Franco Sciannamblo, our Senior Vice President and Chief Financial Officer; and by Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Care. As usual, I'd like to begin our meeting today with a few comments, and Franco will provide some additional details, and then we'll be happy to take any questions that you may have. We are quite pleased with our second quarter results, which reflect our continuing progress toward revenue stability, reflect good profitability and reflect as usual, a very healthy cash balance, all despite the continued headwinds in the global economy and in the Canadian small business sector, in particular.
For the second consecutive quarter, we today report a favorable bending of the revenue curve, as we call it, in the second quarter as our rate of change in revenue was better than the change reported for the previous quarter, and we're particularly pleased with our progress on the metrics that underlie our revenue generation, including the size of our sales force and our rate of gaining new accounts while still maintaining a very solid rate of customer churn in the category of gaining new accounts, we're very pleased that for the quarter, we are reporting it was 17% higher than the previous quarter. And the reason I mentioned these is because it's these fundamentals given our strategy that we think bode very well for our medium and long-term future.
We're also reporting solid earnings for the quarter. Our adjusted EBITDA for the quarter was 26.5% of revenue, even with our continued intentional sizable investments in initiatives to improve our revenue, including the steady continuation of our sales force. And we, as I mentioned, have a very healthy cash balance, the strong cash generation that we continue to display has grown our cash on hand to approximately $34 million at the end of July. That's the end of July. Even after we have kept our pension plan funding on track, consistent with our deficit reduction plan announced a few years ago in the second quarter of 2024, we made a $1.5 million voluntary incremental payment toward our defined benefit pension plans, wind up deficit.
So our Board has declared a dividend of $0.25 per common share to be paid on September 16 of this year to shareholders of record as of August 26. So in summary, we feel that we're very much on track. We are confident about the future and are pleased in particular with the underlying metrics that are -- we feel right on track given the strategy that we have.
Now Franco will provide some additional details, and then we'll be happy to take any questions you might have.
Thanks, David, and good morning, everyone. Let me take you through our financial results for the second quarter ended June 30, 2024, and I'm going to start with revenues. Our total revenues decreased by $6.9 million or 11% year-over-year and amounted to $55.8 million for the second quarter, an improvement from the decrease of 12.3% reported last quarter. 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, for our lower-margin digital services products, thereby creating some pressure on our gross profit margins.
Digital revenues decreased 10.2% year-over-year and amounted to $43.8 million for the 3-month period ended June 30, 2024, an improvement from the decrease of 11.9% 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. Total print revenues have decreased 13.6% year-over-year and amounted to $12.1 million for the quarter. The decline in revenue was mainly attributable to the decrease in the number of print customers while spend per customer has increased year-over-year, driven by price increases. The decline rate of revenues -- the decline rate of revenues increased year-over-year, and the higher decline rate is attributable in part to the headwinds in the global economy, as David mentioned earlier, whereby customer renewal rates decreased but remained strong, while average spend per customer slowed as customers look to optimize their spend. These factors were partially offset by an increase in the number of new accounts and increases in pricing.
Our adjusted EBITDA for the quarter, it was impacted by pressures from lower revenue change in product mix, continued investments in our telesales capacity, the impact of the change in the company's share price, increasing bad debt and IT expenses. In the latter case, in terms of IT expenses, it was the nature of the IT spend, which was classified as operating rather than capital. These factors were partially offset by price increases, efficiencies from optimization in 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 $7.2 million or 32.7% to $14.8 million. Adjusted EBITDA margin decreased to 26.5% compared to 35% for the same period last year. Revenue pressures and continued investments in our telesales force capacity, partially offset by continued optimization will continue to cause some pressure on margins in upcoming quarters.
Adjusted EBITDA less CapEx for the second quarter decreased by $6.5 million year-over-year to $14.1 million, mainly due to the decrease in adjusted EBITDA, partially offset by the decrease in CapEx spend year-over-year. The decrease in CapEx spend, as I mentioned earlier, was due to the nature of the IT spend, whereby more of the expenses was classified as operating rather than capital. Net income decreased to $7.6 million for the second quarter of 2024 compared to $12.7 million for the same period last year due to lower adjusted EBITDA. For our workforce, as at June 30, it decreased to 603 employees compared to 639 at the same date last year. Sales force headcount increased by 16, while all other head count decreased by 52.
And consistent with our deficit reduction plan announced in May 2021 during the second quarter of 2024, the company made $1.5 million involuntary incremental cash contributions to the pension plan's wind-up deficit. Also, as Dave mentioned earlier, our cash on hand at the end of July stood at a healthy $34 million. Finally, the Board has declared a cash dividend of $0.25 per common share, payable on September 16, 2024, to shareholders of record as at August 26, 2024.
This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions. So back over to you, [ Mo ].
[Operator Instructions]
So we have no questions.
Yes, this is David. I don't see any questions. If anybody's got a question, we'd be happy to take it. Well, we thank you all for joining us this morning, and I look forward to meeting with you again in 90 days. Thank you. Thank you all very much for all of your support as we continue to execute on our strategy, which we think is going quite well, and pleased to have a very nice day and a nice rest of the summer. Take care, everyone.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.