Yellow Pages Ltd
TSX:Y
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
8.7
11.92
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Yellow Pages Ltd
Earnings Call Analysis
Summary
Q4-2023
Yellow Pages faced a challenging year with headwinds in the Canadian small business sector but managed to produce solid earnings, announcing a dividend increase to $0.25 per share. Total revenues declined by $8.7 million, a 13.4% drop from the previous year, mainly due to fewer customers for its digital media and print offerings. Despite this, the company bolstered its sales force and improved its customer acquisition rate by 28.5%. The adjusted EBITDA margin was 29.1% for the quarter, down from 32.5% the prior year. The company remains positive about its medium to long-term future, expecting a climb toward revenue stability in the first quarter of 2024.
You don't have any saved screeners yet
Good morning, ladies and gentlemen. Welcome to Yellow Pages Limited Fourth Quarter 2023 Earnings Conference 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 Page is cautioned regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages management discussion and analysis for the fourth quarter of 2023. 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. Welcome to our fourth quarter 2023 analyst call. I'm joined here today by Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Service; and by Franco Sciannamblo, our Senior Vice President and Chief Financial Officer.
As usual, we'll start out, Franco and I will make some introductory comments, and then we will be available to answer questions.
Looking at the fourth quarter and the full year 2023, we are very pleased with the results of the quarter and the year and especially considering the strong headwinds that have existed through or did exist through the year in the Canadian small business sector of the economy. We continue to generate strong earnings.
Our adjusted EBITDA for the quarter was 29.1% and for the full year, 32.1% of revenue. As we have announced previously, during the fourth quarter, we completed a plan of arrangement under which we distributed $62 million of cash to our shareholders and voluntarily to our defined benefit pension plan. Even after those cash distributions, we have a good, healthy cash balance on hand, which at the end of January after continuing to generate cash stood at approximately $27 million.
We feel good about the progress we've continued to make on our initiatives to support bending our revenue curve, including importantly, continuing to expand our sales force in spite of the headwinds in the economy. We have made really good progress, we think, on a number of our underlying metrics, including the current size of the sales force, our rate of churn of customers and our rate of gaining new accounts, those all bode well for the future. In particular, our rate of gaining new accounts was 28.5% higher than it was in the previous year and we are firmly convinced that these fundamentals bode very well for our medium-term and long-term future.
In fact, as we look at the quarter that we're now in, the first quarter of 2024, after looking back at 4 quarters of declining rate of change of revenue compared to the prior year, we expect this quarter to resume our climb toward revenue stability, what we call our revenue curve bending in the right direction.
Reflecting all of this, yesterday, our Board of Directors voted to increase our dividend to change our dividend policy to pay a cash dividend to common shareholders of $0.25 per common share per quarter, increased from $0.20 and did indeed declare a dividend of $0.25 per common share per quarter to be paid on March 15.
So all in all, we are continuing to realize that there remains some headwinds in the economy but we feel we're doing very well, and we're very bullish about the future. And we're very pleased about the continued strong cash and profitability performance of the company.
I would like to pass the baton to Franco Sciannamblo, Chief Financial Officer, who will provide some additional details on things that I've just mentioned, and then we'll be available to answer questions. Thank you.
Thanks, David, and good morning, everyone. Let me take you through our financial results for the fourth quarter ended December 31, 2023. And I'll start with revenues. Our total revenues decreased by $8.7 million or 13.4% year-over-year and amounted to $55.9 million for the fourth quarter. The decrease in revenues is mainly due to the decline of our higher-margin digital media and print products, and to a lesser extent, to our lower-margin digital services products, thereby creating pressure on our gross profit margins.
Digital revenues decreased by 12.1% year-over-year and amounted to $45.3 million for the 3-month period ended December 31, 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 by 18.7% year-over-year and amounted to $10.6 million for the quarter. The decline in revenues was mainly attributable to the decrease in 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. Total revenue decline of 13.4% this year compares to a decline of 5.9% reported for the same period last year.
Digital revenues declined of 12.1% this quarter compared to a decline of 4.3% reported for the same period last year. And print revenue decline of 18.7% this quarter compares to a decline of 11.7% reported for the same period last year. The higher decline rates are attributable to a decrease in customer count in both digital and print, and to customer claims rates remaining stable in 2023, while 2022 benefited from a substantial improvement. These pressures augmented by the economic headwinds were partially offset by higher spend per customer in digital, driven in part by increased pricing.
Total revenues for the full year 2023 totaled $239.4 million, a decrease of 10.8% year-over-year. On adjusted EBITDA for the quarter, it was impacted by pressures from lower revenue and ongoing investments in our telesales force capacity, partially offset by the impact of the company's share price, on cash settled stock-based compensation expense, price increases, the efficiencies from optimization, 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 $4.7 million or 22.6% to $16.2 million. Adjusted EBITDA margin decreased to 29.1% compared to 32.5% for the same period last year. Revenue pressures coupled with increased headcount in our sales force, partially offset by continued optimization will continue to cause some pressure on margins in upcoming quarters. Adjusted EBITDA for the full year 2023 was $76.9 million or 32.1% of revenues.
On net income, it decreased to $12.2 million for the fourth quarter of 2023 compared to $29.4 million for the same period last year. The decrease is mainly attributable to a higher recognition of previously unrecognized tax attributes and temporary differences in 2022.
Income before taxes decreased from $16.7 million for the fourth quarter of 2022 to $12.4 million for the same period in 2023, mainly due to lower adjusted EBITDA. For the full year 2023 net income totaled $47.4 million.
On our workforce as of December 31, it decreased to 627 employees compared to 629 at the same date last year. Sales force headcount increased by 15, while all other head count decreased by 17.
On the plan of arrangement, as David mentioned, during the fourth quarter, we completed the previously announced plan of arrangement whereby the company repurchased from shareholders pro rata, an aggregate of 4,440,497 common shares, including 207,717 shares held by trustee at a purchase price of $11.26 per share for a total of $50.5 million, including $0.5 million of transaction costs.
The $50.5 million cash outlay was reduced by $2.3 million for the cancellation of 207,717 of YP's shares held by the trustee for net cash outlay of $48.2 million. Also pursuant to the plan of arrangement, the company advanced $12 million of voluntary incremental cash contribution to the pension plans wind up deficit during the fourth quarter.
In addition, consistent with our deficit reduction plan announced in May 2021, during the fourth quarter of 2023, the company made $1.5 million in voluntary incremental cash contribution to the pension plans wind up deficit, including the amounts pursuant to the plan of arrangement. This brings the full year total of voluntary incremental payments to $18 million towards the pension plans wind-up deficit. And after all that, our cash on hand at the end of January stood at approximately $27 million.
Also, as David announced, the Board of Directors has modified the dividend policy and approved an increase in the quarterly cash dividend from $0.20 to $0.25 per common share, up 25% from previously -- from previous quarterly dividends. Consequently, the Board also declared a cash dividend of $0.25 per common share payable on March 15 to shareholders of record as at February 27, 2024.
This concludes our formal remarks. Thank you for taking the time to join us this morning. We'll now take your questions.
Back over to you, Mo.
[Operator Instructions]
And we have no questions registered at this time. I would now like to turn the meeting back over to Mr. Eckert.
Thank all of you for joining us today. We appreciate your interest. We appreciate your support, and we look forward to chatting with you again in a quarter from now in May. Thank you very much, and have a great day. Bye now.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
Thank you, Mo.