Yellow Media Limited (TSX:Y) (the "Company") released its operational and
financial results today for the third quarter ended September 30, 2013. The
Company continues to invest in its digital transformation, providing advertisers
with the right value, products, customer experience and audiences to manage and
grow their business.
Third Quarter 2013 Financial Results
Revenues for the third quarter ended September 30, 2013 were $237.4 million
compared to $267.7 million last year. The 11.3% decline results from a decline
in advertisers, alongside a decrease in spending amongst the Company's larger
advertisers as they migrate towards digital products.
Digital revenues for the third quarter of 2013 grew to $101.6 million compared
to $92 million for the prior year, representing growth of 10.5%. Growth in
digital revenues is due to the execution of the Yellow Pages 360 degrees
Solution sales approach across our sales channels, continued migration of print
revenues towards digital products and services, and the launch of new mobile and
premium digital products in 2012. Digital revenues represented approximately
42.8% of total revenues during the third quarter of 2013, compared to 34.3% for
the same period last year. As anticipated, print revenues for the third quarter
of 2013 continued to face steady declines, decreasing 22.8% year-over-year to
reach $135.8 million.
EBITDA declined to $102.1 million during the third quarter of 2013, as compared
to $137.9 million last year. The decrease in EBITDA is due principally to print
revenue pressure, alongside a decline in the EBITDA margin. The EBITDA margin
fell from 51.5% last year to 43.0% in the third quarter of 2013, a result of a
change in product mix and investments required to advance the Company's digital
transformation.
"As we further transform the business and grow digital revenues, protecting
profitability remains a key priority," said Ginette Maille, Chief Financial
Officer of Yellow Media. "The Company will invest in projects aimed at improving
the efficiency of the organization in order to realign the Company's cost
structure and optimize digital contribution margins."
Free cash flow for the third quarter of 2013 increased to $64.3 million compared
to $39.9 million last year, mainly due to lower utilized restructuring and
special charges, lower interest and income taxes paid, and favourable changes in
working capital, partly offset by lower EBITDA. The Company continues to
generate sufficient free cash flow to service all financial obligations and
invest in its digital transformation.
For the quarter ending September 30, 2013, the Company recorded net earnings of
$41.8 million and basic earnings per share of $1.51. This compares to $22.2
million of net earnings and $0.59 of basic earnings per share for the same
period last year. The increase in net earnings and basic earnings per share is
due primarily to a lower depreciation and amortization expense, lower
restructuring and special charges, lower financial charges and a loss on
settlement of debt recorded in the third quarter of 2012, partly offset by lower
EBITDA.
Delivering Value to Advertisers through the Yellow Pages 360 degrees Solution
The Yellow Pages(TM) 360 degrees Solution remains one of the most comprehensive
full-serve digital and traditional media and marketing solutions in Canada. This
value proposition is directly aligned with small to medium-sized advertisers'
key needs, offering them a single relationship to effectively manage their print
and digital marketing programs. Through products and services such as placement
on YPG's owned and operated properties, website development, search engine
optimization, search engine marketing, and Yellow Pages Analytics, the Yellow
Pages 360 degrees Solution helps advertisers generate value via enhanced digital
exposure within their local neighborhoods.
As at September 30, 2013, the penetration of the Yellow Pages 360 degrees
Solution offering among YPG's advertiser base, which is defined as advertisers
who purchase three product categories or more, grew to 24%. This compares to
13.9% at the end of the same period last year.
Mobile priority placement and digital services such as search engine
optimization and search engine solutions are currently the fastest growing
components of the Yellow Pages 360 degrees Solution. Advertiser penetration of
mobile priority placement products increased to 12.2% as at September 30, 2013
compared to 6.8% in 2012. Advertiser penetration of digital services also grew
from 5.9% last year to 8.3% as at September 30, 2013.
"The strategy to deliver Yellow Media's transformation is working and we are
pleased with the progress," said Robert MacLellan, Chairman of the Board of
Directors of Yellow Media. "Although print revenues remain challenged by
negative trends, investments in the digital transformation have led to better
experiences for our advertisers and users, growing advertiser adoption of
digital solutions, and digital revenue growth."
Promoting Revenue Growth by Attracting Valuable Advertisers and Enhancing the
Customer Experience
The Company had 283,000 advertisers as at September 30, 2013. This compares to
319,000 advertisers at the same period last year. Over the last twelve months,
the advertiser renewal rate fell slightly from 86% last year to 85% for the
period ending September 30, 2013. Advertiser acquisition declined from
approximately 18,300 last year to 11,900 for the twelve month period ending
September 30, 2013.
Deployed during the second quarter of 2013, the Company's acquisition strategy
is aimed at increasing advertiser leads and conversions through the creation of
specialized inbound and outbound call centers and a face-to-face network of over
100 sales advisors. In conjunction with this initiative, the Company launched
two new entry-level product packages (Business Builder Bundle and Booster Packs)
designed exclusively to help new, prospective advertisers gain a digital media
presence at entry-level pricing.
The PriorityPlus program provides high-spend advertisers with priority treatment
and service, regular meetings with sales advisors, and increased attention,
analysis and advice to ensure effective execution of their marketing strategy.
In conjunction with PriorityPlus, the Company also offers customizable premium
digital products, and access to dedicated professionals and creative services
specializing in search engine optimization, search engine marketing and website
development.
Attracting and retaining valuable advertisers remains key in promoting long-term
revenue growth. In response, the Company will continue investing in increasing
the efficiency of its sales channels, improving customer service and product
fulfillment, evolving its digital product offerings, and further growing digital
audiences.
Promoting Return on Investment for Advertisers
Attracting valuable local audiences towards YPG's digital network of properties
is key in generating ROI for advertisers. The Company's online properties
reached 8.4 million unduplicated unique visitors during the third quarter of
2013, representing 30% of Canada's online population. Cumulative mobile
downloads increased to 6.2 million by the end of the third quarter of 2013, as
compared to 4.7 million at the same period last year.
In an effort to improve the mobile user experience through enhanced tools and
content, the Company recently launched a real time gas pricing and comparison
feature on its Yellow Pages mobile application. This feature is available across
Canada, and provides a comparison of stations' real time gas prices, service
station information, directions and mapping, as well as detailed pricing for
various grades of gas.
The YellowAPI continues to promote advertiser ROI by making advertisers'
business information visible outside YPG's network of owned and operated
properties. During the third quarter of 2013, YPG extended an existing
collaboration with CBC/Radio-Canada to allow CBC.ca users to access YPG's local
business listings via the YellowAPI. Leading properties such as Yahoo! Canada,
Google, Poynt, AOL, and Bell Sympatico also use the YellowAPI to power local
business searches across their platforms.
To promote the important role of local businesses in driving sustainable
communities as well as to encourage local shopping, YPG has launched the Shop
The Neighbourhood initiative within the Greater Toronto Area. As part of Shop
The Neighbourhood, merchants will be able to promote their business and attract
local consumers by posting deals across YPG's digital network of properties. The
event will take place on Saturday, November 30, 2013, during a weekend when
Canadians shop in the U.S. for Black Friday or online for Cyber Monday deals.
The initiative will build further awareness around the Yellow Pages brand and
its relevancy in advocating for small business growth and connecting local
consumers with valuable shopping information.
CEO Appointment
On October 21, 2013, Julien Billot was appointed President and CEO of Yellow
Media effective January 1, 2014. The appointment results from a global search
executed by the search committee of the Board of Directors.
"Mr. Billot is the ideal candidate to lead Yellow Media's digital
transformation," continued MacLellan. "Julien is a seasoned executive with
proven success in spearheading digital product growth, development and
profitability across some of Europe's largest media companies."
Mr. Billot brings over 20 years of experience in executive level positions
within the global media industry, including Executive Vice-President and Head of
Media at Solocal Group (formerly PagesJaunes Groupe) and CEO of the digital and
new business group of Lagardere Active. Under his tenure at Solocal Group and
Lagardere Active, Mr. Billot led various initiatives which resulted in the
development and launch of mass market digital products and services, growth of
digital audiences, digital revenue growth and enhanced digital product
profitability.
Capital Structure
As at September 30, 2013, Yellow Media had reduced net debt to approximately
$601 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 September 30, 2013 was
1.3 times compared to 1.4 times as at December 31, 2012. The Company had
approximately $260 million of cash and cash equivalents as at November 4, 2013.
On October 29, 2013, Yellow Media exercised its option to redeem $27 million
aggregate principal amount of its 9.25% Senior Secured Notes (the "Notes"). The
Company also completed an $8 million principal open market purchase on the Notes
on September 25, 2013.
Pursuant to the indenture governing the Notes, 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 Notes at par.
The Company anticipates making a $92.3 million mandatory redemption payment on
December 2, 2013. The mandatory redemption payments for 2013 will total $118.4
million, surpassing the minimum requirement of $100 million.
Upon completion of the December 2, 2013 mandatory redemption payment, $646.6
million principal amount of Notes will remain outstanding. This compares to $800
million principal amount of Notes outstanding as at December 31, 2012.
Investor Conference Call
Yellow Media Limited will hold an analyst and media call at 1:00 p.m. (Eastern
Time) on November 5, 2013 to discuss the third 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/third-quarter-webcast
The conference call will be archived in the Investors section of the site at
www.ypg.com.
A playback of the call can also be accessed from November 5 to November 12, 2013
by dialing (905) 694-9451 within the Toronto area, or 1 800 408-3053 outside
Toronto.
The conference passcode is 1536381.
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 YellowPages.ca(TM), Canada411.ca and
RedFlagDeals.com(TM), the Yellow Pages, ShopWise and RedFlagDeals mobile
applications and Yellow Pages(TM) print directories. Its online destinations
reach 8.4 million unique visitors monthly and its mobile applications for
finding local businesses and deals have been downloaded 6.2 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 November 5, 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 November 5, 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 nine-month
periods ended September periods ended September
30, 30,
Yellow Media Limited 2013 2012 2013 2012
----------------------------------------------------------------------------
Revenues $237,350 $267,711 $733,810 $843,268
Income (loss) from
operations $82,547 $84,481 $270,597 ($2,647,854)
Net earnings (loss) $41,775 $22,236 $145,566 ($2,783,904)
Basic earnings (loss)
per share attributable
to common shareholders $1.51 $0.59 $5.22 ($100.19)
Cash flow from operating
activities $79,191 $49,640 $252,236 $176,824
----------------------------------------------------------------------------
EBITDA(1) $102,147 $137,890 $324,859 $427,703
EBITDA margin(1) 43.0% 51.5% 44.3% 50.7%
----------------------------------------------------------------------------
Weighted average number
of common shares
outstanding(2) 27,745,677 27,955,077 27,857,092 27,955,077
----------------------------------------------------------------------------
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 are therefore not likely to be comparable to similar
measures used by other publicly traded companies. Management believes EBITDA to
be an important measure.
(2)Pursuant to the closing of the recapitalization transaction on December 20,
2012, the common shares of Yellow Media Inc. were exchanged for new common
shares of Yellow Media Limited. As a result, the weighted average number of
common shares outstanding for prior periods has been adjusted to reflect the
recapitalization transaction.
FOR FURTHER INFORMATION PLEASE CONTACT:
Investor Relations
Amanda Di Gironimo
Senior Manager, Corporate Finance and Investor Relations
(514) 934-2680
Amanda.DiGironimo@ypg.com
Media
Fiona Story
Senior Manager, Public Relations
(514) 934-2672
Fiona.Story@ypg.com
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