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 Fourth Quarter 2022 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 [third] quarter of 2022. This call is being recorded and webcast and all of the disclosure documents are available on the company's Web site and on SEDAR. I would 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. Welcome to our fourth quarter and year end analyst call. Today, as usual, we'd like to first provide you with an overview of our quarterly and year end results, which I will do. And then Franco Sciannamblo, our Chief Financial Officer, will provide some additional details. And then Franco who and I and Sherilyn King, our Senior Vice President of Sales Marketing and Customer Service, will be available to take any questions that you may have. I'd like [Technical difficulty] we are pretty pleased with the results of our fourth quarter and our full year 2022 for both the quarter and the year, we show good strong sustained profitability in cash generation and more steady progress towards revenue stability. On the earnings front, our adjusted EBITDA for the quarter was a full 32.5% of revenue and for the full year was a full 36% of revenue in spite of the fact that we continue to make all the investments we feel are appropriate in our revenue initiatives as we go forward. Also during the fourth quarter, as I think everyone knows, under a previously announced so called plan of arrangement, we distributed $100 million of cash to our shareholders and $24 million of voluntary contributions into our Defined Benefit Pension Plan toward its wind up deficit in addition to the $1 million previously announced voluntary incremental payments into the Defined Benefit Pension Plan, all that during the fourth quarter.
In spite of those significant cash distributions, we still have a very healthy cash balance. At the end of January, our cash on hand was approximately $50 million. We are also today announcing our regular quarterly cash dividend on our common shares, as in previous quarters. During the fourth quarter, we continued our steady march, getting ever closer to stability of revenue. That represented the 14th of the last 16 quarters overall reporting a favorable, what I like to call, bending of the revenue curve, with a better rate of change in revenue compared to the prior year than we had reported in the previous quarter. So continuation of our very steady march toward the stability of our revenue. I would say, overall, we have growing optimism as we look to the future. We feel good about the company and its prospects and we are delighted with the overall progress.
Franco, would you like to fill in a few details underneath that?
Sure. Thanks, David, and good morning, everybody. Let me take you through our financial results for the fourth quarter ended December 31, 2022. Starting with revenues. They decreased by $4 million or 5.9% year-over-year and amounted to $64.6 million for the fourth quarter, an improvement from the decrease of 6.5% 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 resell products. This change in product mix continues to put pressure on our margins. The declined rates for total revenues, digital revenues and print revenues, all improved significantly year-over-year. The total revenue of 5.9% this quarter compares to a decline of 10.5% reported for the same period last year. For digital revenue, the decline of 4.3% this quarter compares to a decline of 8.7% reported for the same period last year. And on print revenue, the decline of 11.7% this quarter compares to a decline of 16.5% reported for the same period last year. These improvements were due to better spend per customer in digital, increased renewal rates as well as improvement in customer claims. The improved spend per customer is due in part to increased pricing.
Total revenues for the full year 2022 totaled $268.3 million, a decrease of 6.7% year-over-year and an improvement from the decrease of 13.8% reported in 2021. On adjusted EBITDA, for the quarter, it was impacted by revenue pressures, ongoing investments in our telesales force capacity, the increase in cash settled stock based compensation expense due to movements in YP’s share price and lower wage subsidies received, partially offset by the price increases, the efficiencies from continued optimization and cost of sales, reductions in other operating costs, including reductions in our workforce and associate employee expenses and the decrease in bad debt expense. As a result, adjusted EBITDA decreased year-over-year by $3.4 million or 13.9% to $21 million. EBITDA margin decreased to 32.5% compared to 35.5% for the same period last year. Revenue pressures, coupled with ongoing investments in our telesales work capacity partially offset by continued optimization will continue to cause some pressure on our margins in upcoming quarters. One last comment on EBITDA. For the full year 2022, it was $96.6 million or 36% of revenues. On adjusted EBITDA less CapEx for the fourth quarter decreased by $3.1 million year-over-year to $20 million, mainly due to the decrease in adjusted EBITDA, partially offset by lower capital expenditures. And adjusted EBITDA less CapEx for the full year 2022 was $91.6 million or 34.1% of revenues. Our workforce stood at 629 employees compared to 651 at the same date last year. As for net income, for the fourth quarter, it amounted to $29.4 million compared to $38.7 million for the same period last year. The decrease in net income for the fourth quarter is mainly attributable to higher recognition of previously unrecognized tax attributes and temporary differences in 2021.
Income before taxes increased from $15.9 million for the fourth quarter of 2021 to $16.7 million for the same period in 2022, explained principally by the decrease in adjusted EBITDA being more than offset by decreases in depreciation and amortization, restructuring and other charges and financial charges. For the full year ended 2022, net income totaled $73.4 million. As David mentioned earlier, during the fourth quarter, we completed the previously announced plan of arrangement whereby the company repurchased from shareholders pro rata an aggregate of 7,949,125 common shares, including 388,082 shares held in treasury for a total net cash outlay of $96.1 million that's net of the 388,082 of the corporation's shares held in treasury and includes $1 million of transaction costs. Also pursuant to the arrangement, the company advanced $24 million of voluntary contributions to our Defined Benefit Pension Plan wind up deficit. In addition, consistent with our previously announced deficit reduction plan, in the fourth quarter of 2022, the company made $1 million in voluntary incremental cash contributions to the plans wind up deficit. This brings the full year total of voluntary incremental payments, including the amounts pursuant to the plan of arrangement to $28 million. And as David also mentioned, despite the cash outlays mentioned, our cash on hand at the end of January stood at approximately $50 million. Finally, the Board of Directors declared a cash dividend of $0.15 per common share payable on March 15th to shareholders of record as at February 24, 2023.
This concludes our formal remarks. Thank you for taking the time to join us today. We will now take your questions.
And the first question is from Luc Troiani from National Bank.
Luc filling in for Adam here. Congrats on another quarter of execution towards your objective guys. In terms of revenue, do you see any key risks or opportunities given the macro headwinds that many are expecting in 2023?
I was a little garbled, on my end, and but I think the question was, can you see any risk to revenue given the economic climate. Is that the question?
Yes.
Look, of course, no company is immune to risk on the revenue side if there are major problems in the economy in Canada. But we are not particularly concerned. As you know, our revenue is very diversified. We have lots and lots of customers, so there is no sector or individual customers or anything that were concentrated in. It would need to be a broad based and pretty significantly negative change in the economy for us to have a major adverse effect from that. Like everybody, we might face some mild headwinds. But it's not something that we have a great worry about. Franco and Sherilyn, would you have any additional or different comments than that? It's just not something that I'm terribly worried about.
Nothing that I'm seeing…
No, nothing there.
And do you have any update on the relative size or contribution of higher margin digital products versus other digital products? Is that kind of an 80:20 split maybe a fair assumption?
It's more -- now it's more like 55:45. So 55 higher margin, 45 lower.
And then do you have any comment on overall EBITDA margin trajectory beyond the next few quarters, which you have kind of outlined in the release today. But that or maybe where you see it trending towards in the long term?
I think we are not in the business of making predictions. But I also think that our strategy, we tried to be very clear now for years about our strategy. I think we are very transparent in our reporting. I think our reporting is pretty uncluttered and unadjusted. And I think our trends are pretty clear and that's why I said that we are pretty confident about the future. If you take all the trends together, things are looking -- we think pretty good over the short, medium and long term.
And then maybe one final one. After the significant pension contributions and share buyback efforts in 2022, what are your capital allocation priorities going forward given your very strong free cash flow profile?
I think it continues to be what it has been in the past, which is our top priority always is to make every investment within the business that we think is warranted to provide great products and service to our customers, and to be well-positioned to meet the needs of our customer marketplace, that's always our top priority and we will spend there whatever it takes. As is obvious, we generate a lot more cash typically than that need and beyond that. I think our actions in the fourth quarter are illustrative of our priorities, which is we want to take great care of our other constituencies. And as we mentioned in the fourth quarter, we paid a $100 million of cash to the holders of our shares and we voluntarily injected $28 million additional cash into our defined benefit pension plan for the benefit of our pensioners. So we feel that we're very focused on the business strategy. We're bound and determined to make it successful. I think, there's no doubt that so far we've been doing a great job in making it successful. Not perfect -- nobody's perfect, but a great job and that will continue to be our top priority. But I don't see that. Given the strategy that we have, which I think is the winning strategy, it's not a big consumer, it doesn't consume nearly all the cash that we generate.
[Operator Instructions] And the next question is from Daniel [Marken], Self-Directed.
I've been trying to get a hold of your Board there for the last couple of months there, and I still haven't received a response.
I don't know what that pertains to, but I would suggest that you contact Treena Cooper, our Head of our Legal Department and who also handles all matters relating to our Board of Directors.
Because I guess, my question is that the shareholders just enjoyed a $100 million with your buyback. I was just wondering, this is regarding the warrant. Now I'm just wondering why that the Board did not give any consideration in article 5 -- 5.1 optional purchases by the corporation by any or all of the warrants. Can you talk about that?
I would refer you to Treena Cooper rather than getting into all that on in this forum, and I'm sure she'd be happy to answer your question.
And how would you get a hold of her please?
Why don't -- Treena is actually -- Treena, what would be the best way for this purpose?
Please refer to our corporate Web site, and you'll be able to see an email called legal@yp.ca.
Because right now, I've tried, and I've phoned your offices across Canada, and nobody seemed to know how to get a hold of you. So they…
We’ve just told you what to do. Send an email there and we will respond to this question.
There are no further questions registered at this time. I'll turn the call back over to you, Mr. Eckert.
All right. Thank you all for joining us today. We really appreciate your interest. We appreciate your support and we look forward to talking with you again in 90 days when hopefully we can again report a favorable quarter’s worth of results. Thanks very much. Have a good day.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.