Yellow Pages Ltd

TSX:Y

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to Yellow Pages Third 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 the Yellow Pages caution regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages' management discussion and analysis for the third 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.

[David Alan Eckert, President, CEO & Director]

Thank you. Good morning, everyone. Welcome to our third quarter analyst call. Today, as usual, we'd like to make some brief comments about our progress and then take your questions. I am joined here today by Franco Sciannamblo, our Senior Vice President and Chief Financial Officer; Treena Cooper, our Senior Vice President and Corporate General Counsel; and Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Service.Today, we report for the third quarter, I think, quite strong results and including a big step forward on our steady march toward revenue stability. From a revenue standpoint, for the fourth consecutive quarter since COVID-19 hit, we report a favorable bending of the revenue curve in the third quarter with a markedly better rate of change in revenue than reported in the previous quarter. In fact, the improvement there in just 1 quarter is approximately 4 percentage points, which we're very, very pleased about.Also, although we don't report our bookings in detail, I can tell you that the trends in our bookings, which are the leading indicator of our reported revenue, those trends continue to be quite strong as we continue our revenue march. And as -- all of that is while we continue to make good progress on executing our programs to expand our sales force and to add to our strong product portfolio.From an earnings standpoint, we report a very strong 37.5% of revenue as adjusted EBITDA, a good quarter there again. And from a cash standpoint, we have as of the end of October, 1 month beyond the end of the quarter, our cash balance has grown to approximately $113 million. And that is in spite of the fact that we have also, as we said we would, so far this year by the end of the quarter, made between $2 million and $3 million of voluntary incremental payments toward our Defined Benefit Pension Plan's wind-up deficit, and we've continued making our quarterly dividend. Yesterday, our Board has declared a $0.15 per common share dividend to be paid in the middle of December.And finally, from a cash standpoint, we are continuing our current NCIB program. So from a high level, we're very gratified by the results and particularly the accelerating progress on revenue while holding profit and cash generation still at very high levels and consistent.Now I'd like to turn it over to Franco Sciannamblo, Chief Financial Officer, who will provide a few more details on this, and then we'll be happy to take your questions. Thank you.

[Franco Sciannamblo, Senior VP & CFO]

Thanks, David, and good morning, everyone. Let me take you through our financial results for the third quarter ended September 30, 2021, starting with our revenues. Our revenue decreased by $9.4 million or 11.7% year-over-year and amounted to $70.9 million for the third quarter. That's a significant improvement from the decrease of 15.5% 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 some pressure on our margins. On the digital revenues front, it decreased by 10.3% year-over-year to $55 million for the third quarter, an improvement from the decrease of 13.6% reported last quarter. The decrease in revenues for the quarter was mainly due to the decline in the number of customers, partially offset by an increase in spend per customer. Print revenue decreased by 16% to $15.9 million, resulting from a decline in both the customer count and spend per customer. On adjusted EBITDA for the quarter, it was impacted by the pressure from revenues and investments in our telesales force capacity, partially offset by efficiencies and various cost reductions. The efficiencies and cost reductions continue to be from continued optimization in 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. As a result, adjusted EBITDA decreased year-over-year by only $0.7 million or 2.5% to $26.6 million, while EBITDA margin increased to 37.5% from 34.0% for the same period last year. Revenue pressures, coupled with investments in our telesales force capacity, partially offset by continued optimization, will continue to create some pressure on our margins in upcoming quarters. Adjusted EBITDA less CapEx decreased by $0.6 million or 2.4% to $25.3 million, while adjusted EBITDA less CapEx margin increased from 32.4% to 35.7%. This decrease in adjusted EBITDA less CapEx was driven by the slight decrease -- by the slight decrease in adjusted EBITDA as the CapEx spend was stable year-over-year. Our workforce as at September 30 decreased to 652 employees compared to 698 at the same date last year. Sales headcount increased by 27%, while all other headcount decreased by a total of 73%. Net earnings increased by $4.7 million year-over-year to $13.7 million compared to $9 million for the same period last year. The increase in net earnings is explained mainly by the decrease in adjusted EBITDA and higher provision for income taxes being more than offset by decreases in depreciation and amortization, restructuring and other charges and financial charges. As you may recall, in August of 2021, we entered into a normal course issuer bid to purchase up to $16 million of common shares in the open market for cancellation over a 12-month period. By the end of the third quarter, the company had purchased 28,357 common shares for a cash of $0.4 million under this program. And as previously announced as well, the Board approved a 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. During the third quarter, the company made payments totaling $1.7 million, bringing our year-to-date total to $2.3 million in voluntary incremental cash contributions to the plan's wind-up deficit. And also, as David mentioned earlier, our strong cash generation has grown cash on hand to approximately $113 million at the end of October. And the Board of Directors approved a cash dividend of $0.15 per common share payable on December 15 to shareholders of record as of November 26. This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions.

[Operator]

[Operator Instructions] There are no questions registered at this time. I would like to turn the meeting back over to Mr. Eckert.

[David Alan Eckert, President, CEO & Director]

We thank you all for joining us. We've actually received very good feedback about the efficiency of these meetings. So we're happy to see you here, and we're happy to be efficient in our comments, and we're always delighted to communicate with you. So we wish you a good day, and we thank you for joining us.

[Operator]

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.