Yellow Media Limited (TSX:Y) (the "Company") released its
operational and financial results today for the second quarter
ended June 30, 2013. The Company continues to invest in its digital
transformation, and remains focused on becoming the leading digital
media and marketing solutions provider for small and medium sized
businesses nationwide.
Revenues for the second quarter ended June 30, 2013 were $243.2
million compared to $286.5 million for the second quarter in 2012.
The 15.1% decline is due principally to lower print revenues and
the discontinuation of duplicate directories published by Canpages.
On a comparable basis, excluding Canpages, revenues decreased by
11.2% versus last year's results.
Digital revenues for the second quarter of 2013 grew to $98.4
million compared to $89.7 million the year prior, representing
growth of 9.7%. On a comparable basis, excluding Canpages, digital
revenues grew 12.8% versus the same period last year. Digital
revenues represented approximately 40.5% of total revenues during
the second quarter of 2013, compared to 31.3% for the same period
in 2012.
Digital revenue growth is currently unable to offset print
revenue declines. This is principally due to a decline in the
acquisition of valuable advertisers, and challenges associated with
migrating print revenues from larger advertisers towards digital
products.
EBITDA declined to $107.2 million during the second quarter of
2013, as compared to $144.9 million last year. This decline is due
to continued print revenue pressure and a lower EBITDA margin. The
EBITDA margin declined from 50.6% in the second quarter of 2012 to
44.1% in 2013, and continues to be impacted by investments required
to advance the Company's digital transformation and product mix
changes.
Free cash flow for the second quarter of 2013 declined to $68.5
million compared to $96.2 million last year, mainly due to lower
EBITDA. The Company continues to generate adequate free cash flow
to service its financial obligations and invest in its digital
transformation.
For the quarter ending June 30, 2013, the Company recorded net
earnings of $50.3 million compared to $65.7 million last year. The
decrease is due primarily to lower EBITDA and a higher provision
for income taxes, partly offset by lower financial charges and a
lower depreciation and amortization expense. The provision for
income taxes in 2012 was lower compared to 2013 due to the impact
of the impairment of goodwill.
For the quarter ending June 30, 2013, the Company recorded basic
net earnings per share of $1.81, which compares to basic net
earnings per share of $2.15 the year prior.
Delivering Value to Advertisers through the Yellow Pages 360
degrees Solution
The Yellow Pages(TM) 360 degrees Solution is the most
comprehensive full-serve digital and traditional media and
marketing solution in Canada. Backed by a national team of
marketing experts, the Yellow Pages 360 degrees Solution helps
advertisers generate valuable business leads through online, mobile
and print media advertising, website services, customized search
engine marketing and search engine optimization, and performance
reporting tools.
As at June 30, 2013, the penetration of our 360 degrees Solution
offering among our advertiser base, which we define as advertisers
who purchase three product categories or more, grew to 21.1%. This
compares to 11.2% at the end of the same period last year.
Online priority placement is the Company's highest penetrated
digital offering. Online priority placement penetration increased
to 40% as at June 30, 2013, compared to 28% last year.
Mobile priority placement and digital services (which includes
websites and search engine solutions) are the fastest growing
components of the Yellow Pages 360 degrees Solution. Advertiser
penetration of mobile priority placement and digital services each
grew from 5% last year to 10% and 8%, respectively, as at June 30,
2013.
Increased advertiser penetration across online priority
placement products, mobile priority placement products and digital
services is due to the continued migration of print revenues
towards digital products and services, the successful execution of
the Yellow Pages 360 degrees Solution sales approach across our
sales channels, and the introduction of mobile and premium digital
products throughout 2012.
Growing the Acquisition of Valuable Advertisers
The Company had 291,000 advertisers as at June 30, 2013. This
compares to 326,000 advertisers, excluding Canpages, at the same
period last year. Over the last twelve months, the advertiser
renewal rate fell slightly from 87% last year to 85% for the period
ending June 30, 2013. Advertiser acquisition declined from
approximately 20,000 last year to 12,400 for the twelve month
period ending June 30, 2013.
"Our advertiser renewal rate remains among the strongest in the
industry, however, we are working to address challenges in
advertiser acquisition. We've implemented effective strategies to
attract and retain valuable advertisers, as well as help small
businesses better understand the importance of digital marketing in
today's multi-channel society," said Marc P. Tellier, President and
Chief Executive Officer of Yellow Media.
The Company recently expanded its dedicated advertiser
acquisition strategy to increase the number of valuable advertisers
and protect its revenue base. The Company's acquisition strategy is
centered on increasing advertiser leads and conversions through the
following key initiatives:
-- Inbound: The Company is investing in traditional and digital advertising
campaigns to raise advertiser awareness around YPG's products and
services and increase traffic towards its Yellow Pages 360 degrees
Solution business-to-business website. An inbound call center was also
established to support all incoming leads.
-- Outbound: An outbound call center was created to target prospective,
smaller-spend advertisers.
-- Face-to-Face Network: A face-to-face network of over 100 media account
consultants was established to service larger-spend advertisers.
The Company also launched two new entry-level product packages
designed exclusively to help new, prospective advertisers gain a
media presence. These include Business Builder Bundle and Booster
Packs, two fully-integrated media solutions which allow new
advertisers to boost ROI through the development of content-rich
virtual business profiles, priority placement across YPG's network
of digital properties and access to print media products.
Differentiated Offering for Larger, High-Spend Advertisers
In order to support retention efforts, increase loyalty and
optimize revenue growth from larger advertisers, the Company
established the PriorityPlus program in early 2012. PriorityPlus
offers a more attentive and specialized service by providing
high-spend advertisers with dedicated account teams, a thorough
evaluation of account needs and opportunities, and effective
execution of their digital and traditional marketing strategy. The
Company also offers larger, high-spend advertisers a suite of
premium products designed to optimize their digital and traditional
media presence.
PriorityPlus is now deployed across Canada and is made up of
approximately 230 managers and media account consultants. Results
to date remain positive as the number of advertisers receiving the
PriorityPlus service and purchasing high-end products continues to
increase.
Enhancing the User Experience
Improving the user experience and building valuable traffic
towards our network of digital properties is key in promoting the
success of our advertisers. Our online properties reached 8.7
million unduplicated unique visitors during the second quarter of
2013, representing 31% of Canada's online population.
Total mobile downloads exceeded 5.9 million by the end of the
second quarter of 2013, as compared to 4.3 million downloads at the
same period last year. During the quarter, the Yellow Pages
application was also highlighted by the Apple Store as one of the
top 25 most downloaded applications of all time.
During the second quarter of 2013, the Company developed a new
search algorithm designed to optimize user performance on
YellowPages.ca (online and mobile) and promote merchant ROI. The
new algorithm provides more user-relevant search results, as
results are now dependant on features such as proximity of
location, business content, popularity, quality of reviews, etc.
YellowPages.ca is now also equipped with an enhanced auto-complete
service, which allows for quicker results and reduced failed
searches.
As part of its brand re-positioning ad campaign, the Company
launched a six-week advertising blitz in Toronto beginning in June
2013. The campaign was designed to build awareness of the Yellow
Pages brand amongst the key millennial generation demographic and
promote the download and use of the Yellow Pages mobile
application. Advertisements were placed in newspapers, transit
shelters and stations, restaurants, fitness centers, night
projections and outdoor billboards, alongside online, mobile and
social media sites. Brand takeovers were also staged at restaurant
and pub patios within the downtown area and highly trafficked
millennial hangouts. The volume of the campaign was designed to
expose individuals to the Yellow Pages brand, on a daily basis, in
and around areas they live, work and play.
Capital Structure
As at June 30, 2013, Yellow Media had reduced net debt to
approximately $664 million. This compares to $782 million of net
debt as at December 31, 2012.
The net debt to latest twelve month EBITDA ratio as at June 30,
2013 was 1.3 times compared to 1.4 times as at December 31, 2012.
The Company had approximately $213 million of cash and cash
equivalents as at August 7, 2013.
Pursuant to the indenture governing the 9.25% Senior Secured
Notes due November 30, 2018, the Company is required to use an
amount equivalent to 75% of its consolidated Excess Cash Flow for
the immediately preceding six-month period ending March 31 or
September 30 to redeem the Senior Secured Notes at par. These
mandatory redemption payments will be made on a semi-annual basis
on the last day of May and November of each year.
The Company made a $26.1 million mandatory redemption payment on
May 31, 2013, and has sufficient financial liquidity to meet the
minimum annual aggregate mandatory redemption payment of $100
million in 2013.
In August 2013, the Company entered into a five-year, $50
million asset-based loan (ABL) expiring in August 2018. The ABL has
a first priority lien over the receivables of the Company and will
be used for general corporate purposes.
As at August 7, 2013, the ABL was fully available and was
undrawn.
Investor Conference Call
Yellow Media Limited will hold an analyst and media call at
10:00 a.m. (Eastern Time) on August 8, 2013 to discuss the second
quarter 2013 results. The call may be accessed by dialing (416)
340-8427 within the Toronto area, or 1 866 225-6564 outside of
Toronto.
The call will be simultaneously webcast on the Company's website
at
http://www.ypg.com/en/investors/financial-reports/2013/quarterly-reports/second-quarter-webcast
The conference call will be archived in the Investor Center of
the site at www.ypg.com.
A playback of the call can also be accessed from August 8 to
August 15, 2013 by dialing (905) 694-9451 within the Toronto area,
or 1 800 408-3053 outside Toronto.
The conference passcode is 4799718.
About Yellow Media Limited
Yellow Media Limited (TSX:Y) is a leading media and marketing
solutions company in Canada. The Company owns and operates some of
Canada's leading properties and publications including Yellow
Pages(TM) print directories, Yellow Pages.ca(TM), Canada411.ca and
RedFlagDeals.com(TM). Its online destinations reach 8.7 million
unique visitors monthly and its mobile applications for finding
local businesses and deals have been downloaded over 5.9 million
times. Yellow Media Limited is also a leader in national digital
advertising through Mediative, a division of Yellow Pages Group
devoted to digital marketing and performance media services for
national agencies and advertisers. For more information, visit
www.ypg.com.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements about the
objectives, strategies, financial conditions, results of operations
and businesses of the Company.
These statements are forward-looking as they are based on our
current expectations, as at August 8, 2013, about our business and
the markets we operate in, and on various estimates and
assumptions. Our actual results could materially differ from our
expectations if known or unknown risks affect our business, or if
our estimates or assumptions turn out to be inaccurate. As a
result, there is no assurance that any forward-looking statements
will materialize. Risks that could cause our results to differ
materially from our current expectations are discussed in section 6
of our August 8, 2013 Management's Discussion and Analysis. We
disclaim any intention or obligation to update any forward-looking
statements, except as required by law, even if new information
becomes available, as a result of future events or for any other
reason.
Financial Highlights
(in thousands of Canadian dollars - except share information)
----------------------------------------------------------------------------
For the three-month For the six-month periods
periods ended June 30, ended June 30,
Yellow Media Limited 2013 2012 2013 2012
----------------------------------------------------------------------------
Revenues $243,183 $286,484 $496,460 $575,557
Income (loss) from
operations $92,455 $120,719 $188,050 ($2,732,335)
Net earnings (loss) $50,326 $65,681 $103,791 ($2,806,140)
Basic earnings (loss)
per share
attributable to
common shareholders $1.81 $2.15 $3.71 ($100.78)
Cash flow from
operating activities $86,457 $104,777 $173,045 $127,184
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EBITDA(1) $107,234 $144,939 $222,712 $289,813
EBITDA margin(1) 44.1% 50.6% 44.9% 50.4%
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Weighted average
number of common
shares outstanding 27,872,822 27,955,077 27,913,722 27,955,077
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Non-IFRS Measures(1 )
In order to provide a better understanding of the results, the
Company uses the term EBITDA, defined as income from operations
before depreciation and amortization, impairment of goodwill and
restructuring and special charges. Management believes this measure
is reflective of ongoing operations. This term is not a performance
measure defined under IFRS. EBITDA does not have any standardized
meaning and is therefore not likely to be comparable to similar
measures used by other publicly traded companies. Management
believes EBITDA to be an important measure.
Contacts: Investor Relations Amanda Di Gironimo Senior Manager,
Corporate Finance and Investor Relations (514)
934-2680Amanda.DiGironimo@ypg.com Media Fiona Story Senior Manager,
Public Relations (514) 934-2672Fiona.Story@ypg.com
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