Yellow Media Limited (TSX:Y)
-- The Company experiences a 10.6% year-over-year growth in digital
revenues across its core YPG operations during the first quarter of 2014
-- Customer penetration of the Yellow Pages 360 degrees Solution reaches
29.9% as at March 31, 2014, as compared to 18.9% last year
-- The Company records net earnings of $39.2 million during the first
quarter of 2014, as compared to $53.5 million for the same period last
year
-- A $73.5 million principal mandatory redemption payment on the 9.25%
Senior Secured Notes is anticipated to be made on June 2, 2014
-- Yellow Media develops a Return to Growth Plan to support its digital
transformation and return the Company to revenue growth and stable
profitability
Yellow Media Limited (TSX:Y) (the "Company" or "Yellow Media") released its
operational and financial results today for the first quarter ended March 31,
2014. The Company continues to advance the second phase of its digital
transformation, designed to bring Yellow Media closer to its long-term objective
of becoming Canada's leading local digital company.
"Supported by a healthier capital structure, the first phase of our
transformation established a solid digital foundation for us to build upon,"
said Julien Billot, President and Chief Executive Officer of Yellow Media. "We
are currently executing the second phase of our digital transformation, using
this strengthened foundation to gain a leadership position within Canada's local
digital advertising market while returning the Company to growth."
First Quarter 2014 Financial Results
Revenues for the first quarter of 2014 decreased 11.9% to $223.2 million, as
compared to $253.3 million for the same period last year.
For the first quarter of 2014, digital revenues across our core YPG operations,
which exclude the impact of Mediative and Wall2Wall, increased by 10.6%
year-over-year. Consolidated digital revenues reached $104 million in the first
quarter of 2014, representing a growth of 5.1%, and were negatively impacted by
the loss of a national account at Mediative during the second quarter of 2013.
During the first quarter of 2014, consolidated digital revenues represented
46.6% of total revenues, up from 39.1% during the same period in 2013.
Growth in digital revenues continues to result from the ongoing migration of
traditional media customers towards digital products and services, as well as
continued customer adoption of the Yellow Pages(TM) 360 degrees Solution. The
penetration of the Yellow Pages 360 degrees Solution offering amongst Yellow
Media's customer base, which is defined as customers who purchase three product
categories or more, grew to 29.9% as at March 31, 2014 compared to 18.9% the
year prior.
Print revenues continued to show stable declines during the first quarter of
2014, decreasing 22.7% year-over-year to reach $119.3 million.
EBITDA decreased to $94.6 million during the first quarter of 2014, as compared
to $115.5 million last year. EBITDA remains adversely impacted by print revenue
pressure and a lower EBITDA margin.
The EBITDA margin decreased to 42.4% for the three-month period ended March 31,
2014, as compared to 45.6% for the same period last year. The EBITDA margin for
the first quarter of 2014 was primarily affected by lower print revenues, a
change in product mix and investments required to advance the Company's digital
transformation. The EBITDA margin for the first quarter of 2014 was also
impacted by a non-recurring benefit associated with a litigation outcome.
Excluding this element, the EBITDA margin for the first quarter of 2014
decreased to 41%.
In an effort to promote long-term profitability, the Company continues to invest
in business efficiencies and the streamlining of operational processes. During
the first quarter of 2014, YPG enhanced its digital fulfillment processes by
automating the creation of Virtual Business Profiles. In addition, the Company
is presently standardizing its existing legacy architecture through
consolidation of print publishing systems and IT data centers.
For the first quarter ended March 31, 2014, the Company recorded net earnings of
$39.2 million and basic earnings per share of $1.43. This compares to net
earnings of $53.5 million and basic earnings per share of $1.91 for the same
period last year. The decrease is mainly explained by lower EBITDA.
The Company used free cash flow of $3.3 million for the first quarter of 2014,
as compared to free cash flow generation of $67.7 million last year. This
decline results mainly from higher income taxes paid in 2014, as the Company was
not required to pay income tax installments in 2013, lower EBITDA and higher
restructuring payments related to the November 2013 workforce realignment.
Yellow Media expects to generate sufficient cash flow from its operations to
invest in its digital transformation and service all future debt obligations. As
at March 31, 2014, net debt totaled $541.2 million, which compares to $533.1
million as at
December 31, 2013. On June 2, 2014, the Company anticipates making a $73.5
million mandatory redemption payment on its Senior Secured Notes.
"Yellow Media remains committed to delivering long-term, sustainable value to
its shareholders," said Ginette Maille, Chief Financial Officer of Yellow Media.
"We will increase shareholder value through execution of our digital
transformation, thereby investing in projects that promote revenue growth and
protect profitability. In addition, we will further strengthen and optimize our
capital structure by maintaining a focus on debt repayment."
Operational Update
"Yellow Media's long-term objective remains unchanged, and we strive to develop
into Canada's leading local digital company," said Billot. "The realization of
this objective will come in multiple, distinct phases to be executed over the
medium-to-long-term. As part of our second phase of transformation and Return to
Growth Plan, we have focused our investments in projects that enhance our brand,
media assets and go-to-market strategy, and, ultimately, improve our positioning
within the local digital advertising market."
Extending our Brand Promise
-- The Company repositioned its flagship local search property from
"yellowpages.ca" to "YP.ca" to boost brand recognition and strengthen
the Company's digital identity.
-- A television and digital advertising campaign was launched across Canada
to grow usage and traffic on the YP mobile application. The campaign
introduces Canadians to the new YP brand, while also highlighting the
enhancements made on the mobile application to provide shoppers with an
improved search experience.
Strengthening our Media Assets
-- Total digital visits, which measures the number of visits made across
the YP, RedFlagDeals and ShopWise desktop and mobile properties, grew to
94.1 million. This compares to 93.8 million visits for the same period
last year.
-- The Company launched its redesigned YP online and mobile properties to
provide users with more relevant search results, quick access to
trending local search themes, an improved ability to discover local
deals and popular merchants in and around their neighborhoods, as well
as faster response times.
-- Yellow Media expanded its database of business information by creating
250,000 new, more targeted business categories and adding richer
information to its national and local merchant pages. The Company also
continued the rollout of Merchant Content Collection Applications across
its sales force to promote the real-time collection and publishing of
customer information.
Enhancing our Go-to-Market Strategy
a) Promoting Customer Acquisition
-- Total customer count was 270,000 as at March 31, 2014, compared to
300,000 at the end of the same period last year.
-- Customer acquisition for the twelve-month period ended March 31, 2014
stood at 16,500. The rate of customer acquisition continued to improve,
with customer acquisition for the twelve month periods ended March 31,
2013 and December 31, 2013 having totaled 16,400 and 15,200,
respectively.
-- A new Customer Relationship Management platform was implemented across
the Company's acquisition call centers, automating the routing and
assignment of incoming leads to promote effective leads management and
nurturing.
b) Promoting Customer Retention
-- The customer renewal rate declined slightly to reach 85% as at
March 31, 2014, as compared to 86% for the same period last year.
-- The Company remains committed to providing local businesses with the
industry's most valuable, diversified and comprehensive digital
services. Yellow Media recently launched Smart Digital Display across
its sales channels, a display advertising solution that helps small and
medium enterprises ("SMEs") build an online presence by exposing their
digital banner ads to local online audiences.
-- Yellow Media also introduced a social media solution to help SMEs
establish and maintain visibility on Facebook. Currently being rolled
out to customers in Ontario and Western Canada and anticipated to be
launched nationally by June 2014, this solution provides customers with
professional Facebook Page creation, optimization of their social media
presence and Facebook Ad campaign management.
The Return to Growth Plan
Following the Company's progress in the first quarter of 2014, the Return to
Growth Plan (the "Plan") has been established to efficiently guide the Company
as it continues to execute upon its second phase of digital transformation. The
Plan serves to leverage investments made in 2013, as well as the Company's
strengthened digital foundation, to gain a leadership position within Canada's
local digital advertising market.
Successful implementation of the Plan will be promoted through ongoing focus on
the following pillars of transformation:
-- Extending the Brand Promise - Investments will be made to evolve legacy
perceptions of the brand and boost awareness of the Company's platforms
and solutions. A simplified brand architecture will be implemented,
positioning Yellow Media as a differentiated, unique digital player
within the local neighborhood economy. National multi-media campaigns
will also be deployed to increase usage of its properties and promote
customer acquisition.
-- Strengthening its Media Assets - Investments will be made across the
Company's owned and operated digital media to attract and grow
audiences. Improved content and functionalities will be added onto the
YP properties to help users best fulfill their daily needs. In addition,
the Company will develop new verticals to deliver a more targeted search
experience and expand Yellow Media's share of business search in
underpenetrated categories such as shopping, restaurants, real-estate
and leisure. An enhanced focus will also be maintained on evolving the
Company's mobile and tablet properties and providing an upgraded on-the-
go local search experience.
-- Enhancing its Go-to-Market Strategy - The Company will evolve its suite
of digital products and services by introducing simplified and more
verticalized offerings, as well as performance-based solutions that best
leverage the power of its owned and operated digital properties and
protect profitability. In conjunction with improved customer acquisition
and retention efforts, Yellow Media anticipates returning to a growth in
customer count by 2017. An expanded sales force, as well as new
technologies, processes and training programs, will be developed to
promote an acquisition-centric sales culture throughout the
organization. Furthermore, Yellow Media will enhance customer
satisfaction by improving basic service levels and introducing more
personalized levels of customer service to its clients. Lastly,
Meditative will invest to strengthen its offerings to national agencies,
customers and retailers. They will also engage in research, development
and innovation within digital marketing to help support Yellow Media's
ongoing transformation.
The Company has put in place an internal Transformation Office to implement the
Return to Growth Plan. Reporting to the Chief Executive Officer, the
Transformation Office will be led by Stephen Port, Vice President -
Transformation Office, and assume full ownership and delivery of projects
supporting the Plan.
"Successful execution of our Return to Growth Plan will significantly improve
our relationship with Canadian businesses and audiences," said Billot. "Upon
completion of the Return to Growth Plan, Yellow Media will be equipped with a
strengthened platform onto which it can diversify, start new digital businesses
and, ultimately, meet its objective of becoming Canada's leading local digital
company."
The Plan is expected to allow the Company to achieve consolidated revenue growth
by 2018. Digital revenues are anticipated to surpass print revenues in 2015 and
grow at high single-digit annual rates thereafter. As print revenue
stabilization remains challenging to forecast, the Company will continue to
optimize the profitability of the print platform through redesigned offers,
targeted directory distribution, as well as the streamlining of operational
processes. Profitability will also be promoted through the automation of various
digital fulfillment processes and improved productivity across our sales
channels.
The Company will be required to make incremental operating and capital
expenditures over the short-to-medium term to promote proper execution of the
Return to Growth Plan. Consequently, EBITDA margins will remain under pressure
relative to 2013, as additional investments will be made during the remainder of
2014 and in 2015 to strengthen the brand promise, improve the user experience
and grow and maintain digital audiences.
Annual capital expenditures will increase to approximately $85 to $90 million in
2014 and $70 to $75 million in 2015 as the Company develops IT platforms to
support growth in digital audiences, customer acquisition, customer retention
and new product introduction.
By 2018, upon returning to revenue growth, the Company anticipates EBITDA
margins to stabilize between 30% and 35% and capital expenditures to be
maintained at approximately 5% of consolidated revenues.
"The Return to Growth Plan will significantly strengthen Yellow Media's
financial profile, allowing it to maintain a sustainable level of revenue growth
and profitability," said Maille. "In conjunction, the Company will continue to
maintain an enhanced focus on debt repayment and aim to significantly delever
its balance sheet by 2018."
The Company has made organizational changes to ensure it has the right expertise
in place to implement the Return to Growth Plan. Among these changes, Rene
Poirier, Chief Information Officer of Yellow Media, will lead the organization's
Information Services and Information Technology functions and direct the
end-to-end fulfillment of all related projects. Paul Ryan, previously Chief
Technology Officer of Yellow Media, will become Mediative's Chief Technology
Officer to support their growth in the Canadian national digital advertising
market as well as foster an environment of continued digital innovation.
Investor Conference Call
Yellow Media Limited will hold an analyst and media call at 2:00 p.m. (Eastern
Time) on May 8, 2014 to discuss the first quarter 2014 results. The call may be
accessed by dialing (416) 340-2218 within the Toronto area, or 1 866 225-2055
outside of Toronto.
The call will be simultaneously webcast on the Company's website at
http://www.ypg.com/en/investors/financial-reports/2014/quarterly-reports/first-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 May 8 to May 15, 2014 by
dialing (905) 694-9451 within the Toronto area, or 1 800 408-3053 outside
Toronto.
The conference passcode is 3237581.
About Yellow Media Limited
Yellow Media Limited (TSX:Y) is a Canadian digital and print media company,
offering businesses comprehensive media solutions to meet their key marketing
objectives and providing consumers with platforms to access reliable local
business information. By helping local businesses foster stronger relationships
with their consumers through its various media, the Company encourages the
growth of thriving neighbourhood economies. Yellow Media holds some of Canada's
leading local search properties and publications including YP.ca(TM),
Canada411.ca and RedFlagDeals.com(TM), the YP, ShopWise and RedFlagDeals mobile
applications and Yellow Pages(TM) print directories. Yellow Media 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-scale agencies and customers. 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 May 8, 2014, 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 7 of our May 8, 2014 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
periods ended March 31,
Yellow Media Limited 2014 2013
----------------------------------------------------------------------------
Revenues $223,203 $253,277
Income from operations $73,302 $95,595
Net earnings $39,222 $53,465
Basic earnings per share attributable to common
shareholders $1.43 $1.91
Cash flow from operating activities $10,910 $86,588
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EBITDA(1) $94,621 $115,478
EBITDA margin(1) 42.4% 45.6%
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Weighted average shares outstanding 27,419,026 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 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.
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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