MONTREAL, Feb. 14, 2017 /CNW Telbec/ - Yellow Pages Limited
(TSX: Y) (the "Company") released its operational and financial
results today for the year and quarter ended December 31, 2016.
Highlights
- Digital revenues in 2016 grew 14% year-over-year to
$556 million, representing 68% of
total revenues. In the fourth quarter, digital revenues grew 11%
over the fourth quarter 2015 to $143
million, representing 71% of total revenues. On a pro forma
basis, digital revenues in 2016 increased 5%.
- Yellow Pages acquired 41,100 new customers in 2016, exceeding
the 2016 target of 38,000. This compares to 30,800 new customers
acquired in 2015. At year-end, the Company's total customer count
was over 241,500, compared to 245,000 customers at year-end
2015.
- EBITDA adjusted for restructuring and special charges and
impairment of intangible assets ("Adjusted EBITDA") totalled
$235 million in 2016, compared to
$261 million in 2015. Adjusted EBITDA
margin reached 29% in 2016. Adjusted EBITDA for the fourth quarter
2016 was $57 million, compared to
$65 million for the same period last
year.
- Yellow Pages repaid $97 million
on its senior secured notes in 2016, bringing the total repayment
to $490 million since their inception
on December 20, 2012 and reducing the
balance of the Notes outstanding to $309.7
million as at December 31,
2016.
- During the fourth quarter, Yellow Pages recorded an impairment
loss of $600 million on certain of
its intangible assets, namely, its trademarks and non-competition
agreements. This impairment charge is a non-cash item.
As previously communicated, the Company has initiated a review
of the business strategy and its management outlook with the
purpose of supporting the continued long-term success of a
digital-first business. The areas of focus include marketing
offers, customer journey, sales structure, operational platforms,
and subsequent effects on long-term revenue, Adjusted EBITDA growth
and capital allocation policy. The Company anticipates
communicating the outcome of this exercise and the accompanying
strategy in May 2017.
Full Year 2016 Financial Results
Revenues in 2016
declined 1.4% year-over-year to total $818
million due to lower print revenues. Included in 2016
revenues were revenues generated by ComFree/DuProprio ("CFDP") and
JUICE, acquired on July 1, 2015 and
March 17, 2016, respectively. On a
pro forma basis, adjusting revenues for the inclusion of both CFDP
and JUICE for the full years 2015 and 2016, revenues decreased 6.2%
year-over-year in 2016.
Digital revenues grew 14.3% to reach $555.8 million in 2016, representing 67.9% of
total revenues, up from 58.6% in 2015.
On a pro forma basis, digital revenues in 2016 increased
approximately 5% year-over-year. Yellow Pages' local operations
contributed favourably to pro forma digital revenue growth, a
result of accelerated customer acquisition and an increase in
digital spending among the Company's renewing customer base. Pro
forma digital revenue growth was also favourably impacted by CFDP's
growing network of home sellers and buyers in Quebec and Ontario, as well as by revenue growth in our
national advertising operations (JUICE and Mediative), despite a
softer than anticipated performance. For the year ended
December 31, 2016, 47% of renewing
customers increased their annual spend, as compared to 44% of
customers in 2015.
In 2016, digital-only customers grew to 76,800 or 32% of the
Company's customer base. This compares to 54,500 digital-only
customers, or 22% of the customer base in 2015.
Print revenues in 2016 decreased 23.6% to $262.2 million due to a decline in the number of
print customers and a migration of print marketing spending to
digital.
Adjusted EBITDA totalled $235.2
million in 2016, as compared to $260.7 million in 2015. The Adjusted EBITDA
margin for the year ended December 31,
2016 reached 28.8%, as compared to 31.4% in 2015. The
decrease in Adjusted EBITDA and Adjusted EBITDA margin was due to
lower print revenues and a change in product mix, partly offset by
cost saving initiatives. The decline in the Adjusted EBITDA margin
was also impacted by the acquisitions of CFDP and JUICE, which
operate at a lower Adjusted EBITDA margin relative to Yellow Pages
prior to the acquisitions.
In the context of its annual impairment testing, and as a result
of a marked acceleration in an unfavourable change in the product
mix during the fourth quarter of 2016, the Company determined that
the recoverability of certain of its assets had to be reviewed for
impairment purposes. Consequently, the Company recorded an
impairment loss of $600 million
during the fourth quarter related to certain of its intangible
assets, namely its trademarks and non-competition agreements. In
addition, the Company recorded a recovery of income taxes of
$161 million associated with the
impairment charge. The impairment charge and recovery of income
taxes are non-cash items and do not affect the Company's debt
covenants. In this context, the Company anticipates additional
pressure on Adjusted EBITDA in 2017, and as it works to address the
mix issue, the Company expects stabilization in Adjusted EBITDA in
the short to mid-term, post-2017. However, not at the levels
previously anticipated.
For the year ended December 31,
2016, the Company recorded a net loss of $403.7 million. Net earnings before the
impairment charge, net of income taxes, were $34.7 million for the year ended December 31, 2016 compared with net earnings of
$61.1 million for 2015. The decrease
is principally due to lower Adjusted EBITDA and higher depreciation
and amortization, mainly resulting from a higher level of capital
expenditures in the context of the Company's digital evolution and
amortization of intangible assets related to the acquisition of
JUICE. For the year ended December 31,
2016, the Company recorded basic loss per share of
$15.23. Basic earnings per share
before the impairment charge, net of income taxes, for the year
ended December 31, 2016 were
$1.31, compared to basic earnings per
share of $2.29 for the same period
last year.
2016 free cash flow decreased 22% to $94.6 million compared to $122.1 million the year prior due to lower cash
flows from operating activities resulting principally from income
taxes received in 2015 associated with a tax settlement covering
prior years, partially offset by lower capital expenditures in
2016.
Net debt amounted to $384.9
million as at December 31,
2016, down from $430.6 million
as at December 31, 2015. The Company
made $97.1 million in principal
mandatory redemption payments on the Notes in 2016, reducing the
balance of the Notes outstanding to $309.7
million as at December 31,
2016. Since their inception on December 20, 2012, the Company has made total
principal repayments of $490.3
million.
Fourth Quarter 2016 Financial Results
Revenues
declined 2.8% for the fourth quarter of 2016 to $202.7 million, as compared to $208.5 million for the same period last year, due
to lower print revenues. Included in revenues for the quarter were
revenues generated from JUICE. On a pro forma basis, adjusting for
the full inclusion of JUICE during the fourth quarter of 2015,
revenues decreased 7.1% year-over-year for the three-month period
ended December 31, 2016.
In the fourth quarter, digital revenues grew 10.8% to
$143.1 million, representing 70.6% of
total revenues. This compares to $129.2
million, or 62% of revenues, during the same period last
year. On a pro forma basis, digital revenues for the three-month
period ended December 31, 2016
increased approximately 3% year-over-year. Pro forma digital
revenue growth was favourably impacted by CFDP's growing network of
home sellers and buyers in Quebec
and Ontario, as well as by revenue
growth in our national advertising operations (JUICE and
Mediative), despite a softer performance than anticipated.
Print revenues decreased 24.8% year-over-year and amounted to
$59.6 million during the fourth
quarter ended December 31, 2016.
Print revenues were adversely impacted by a decline in print
customer numbers and a migration of print marketing spends to
digital.
Adjusted EBITDA totalled $57.4
million during the fourth quarter of 2016, compared to
$64.5 million for the same period in
2015. The Adjusted EBITDA margin for the fourth quarter of 2016 was
28.3% as compared to 30.9% for the same period last year. The
decrease in Adjusted EBITDA and Adjusted EBITDA margin for the
three-month period ended December 31,
2016 was mostly impacted by lower print revenues and a
change in product mix, partly offset by cost savings initiatives.
The decline in Adjusted EBITDA margin was also impacted by the
acquisition of JUICE which operates at a lower margin.
In the context of its annual impairment testing, and as a result
of a marked acceleration in an unfavourable change in the product
mix during the fourth quarter of 2016, the Company determined that
the recoverability of certain of its assets had to be reviewed for
impairment purposes. Consequently, the Company recorded an
impairment loss of $600 million
related to certain of its intangible assets, namely its trademarks
and non-competition agreements. In addition, the Company recorded a
recovery of income taxes of $161
million associated with the impairment charge. The
impairment charge and recovery of income taxes are non-cash items
and do not affect the Company's debt covenants. In this context,
the Company anticipates additional pressure on Adjusted EBITDA in
2017, and as it works to address the mix issue, the Company expects
stabilization in Adjusted EBITDA in the short to mid-term,
post-2017. However, not at the levels previously anticipated.
For the quarter ended December 31,
2016, the Company recorded a net loss of $431.6 million. Net earnings before the
impairment charge, net of income taxes, were $6.8 million for the fourth quarter ended
December 31, 2016 compared with net
earnings of $5.9 million for the same
period in 2015. The increase is principally due to lower
restructuring and special charges and financial charges, offset by
lower Adjusted EBITDA and higher depreciation and amortization,
mainly resulting from a higher level of capital expenditures in the
context of the Company's digital evolution and amortization of
intangible assets related to the acquisition of JUICE. For the
fourth quarter ended December 31,
2016, the Company recorded basic loss per share of
$16.35. Basic earnings per share
before the impairment charge, net of income taxes, for the quarter
ended December 31, 2016 were
$0.26, compared to basic earnings per
share of $0.22 for the same period
last year.
In the fourth quarter, free cash flow was $7.8 million, compared to $25.2 million in the same period last year. The
decrease is primarily due to a tax settlement covering prior
periods received during the fourth quarter of 2015 as well as lower
cash Adjusted EBITDA, partially offset by lower pension
funding.
"Over the first half of our Return to Growth plan, we have
successfully built and developed our ability to acquire new digital
customers, expanded our digital product offering and media
properties as well as paid down debt. These accomplishments have
been possible through a diversification of our business that has
allowed us to continue to generate cash and deliver strong top line
revenues," said Julien Billot,
President and Chief Executive Officer at Yellow Pages. "However, at
this stage in our plan, we are now seeing that changes in our
product mix will be putting additional pressures on our bottom line
in the future. Resolving this will be our core area of focus as we
continue to evolve the business."
Operational Update
Enhancing Customer Value Proposition
- The Company's customer count was 241,500 customers as at
December 31, 2016, as compared to
245,000 customers as at December 31,
2015. This represents a net customer count decline of 3,500
year-over-year, a significant improvement when compared to 11,000
net customers lost during the same period last year;
- Yellow Pages successfully increased customer acquisition with
41,100 new customers acquired during the year ended December 31, 2016, as compared to 30,800 new
customers acquired during the same period last year, representing a
33 percent increase year-over-year. In 2016, the Company focused on
promoting lead generation and optimizing conversion rates within
the Company's sales force to grow customer acquisition and
stabilize the customer count. In conjunction, various initiatives
and tools were implemented throughout the year, including the
introduction of a dialer across Yellow Pages' call centers to
automate the qualification and assignment of incoming customer
leads. The dialer, which also acts as a leads management system,
enabled the sales force to target leads by segment, launch
meaningful campaigns at the optimal times of the year, and
ultimately contributed to overall improvements in the conversion
rate.
- The customer renewal rate was of 82% for the year ended
December 31, 2016, as compared to a
renewal rate of 85% during the same period last year. While this
continues to represent strong customer loyalty for the industry,
the customer renewal rate remains under pressure due to accelerated
levels of customer acquisition as new customer cohorts churn at
higher rates than older customer cohorts. In an effort to protect
customer renewal rates, Yellow Pages continues to grow specialized
onboarding teams and increase retention efforts across sales and
customer care channels.
Strengthening its Media Assets
- Total digital visits (TDV) totalled 464.7 million for the year
ended December 31, 2016, as compared
to 464 million visits in 2015. TDV measures the number of visits
made across the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411,
Bookenda, dine.TO online and mobile properties as well as the
visits derived from the Company's application syndication
partners.
- TDV for 2016 was stable year-over-year with a 26% increase in
traffic in the fourth quarter of 2016 compared to the same period
the year prior. This increase is attributable to the Company's
strong partnership network, syndicating Yellow Pages listings and
content.
Extending its Brand
Promise
- Yellow Pages launched a campaign comprised of digital mobile
and online advertising to promote the Company's NetSync product,
successfully generating quality leads for sales that ultimately
contributed to the customer acquisition target achievement and
underscored the need among Canadian small and medium-sized
businesses
- On the consumer front, Yellow Pages ran a digital advertising
campaign for YP Dine that can be viewed at the Company's dedicated
YP Dine Facebook page: https://www.facebook.com/ypdine/videos. The
company also specifically targeted ethnic markets in Toronto and Vancouver in this campaign to positive
results, demonstrating an interest in YP Dine products and services
across demographics.
Conference Call
Yellow Pages Limited will hold an
analyst call at 8:00 a.m. (Eastern
Time) on February 14, 2017 to
discuss full year and fourth quarter 2016 results. The call may be
accessed by dialing (416) 340-2218 within the Toronto area, or 1 866-225-0198 outside of
Toronto.
The call will be simultaneously webcast on the Company's website
at
https://corporate.yp.ca/en/yellow-pages-news/events/release-q4-2016-financial-and-operational-results/
The conference call will be archived in the Investors section of
the site at
https://corporate.yp.ca/en/investors/financial-events-presentations/
A playback of the call can also be accessed from February 14 to March 17, 2017 by dialing (905)
694-9451 within the Toronto area,
or 1 800 408-3053 outside of Toronto.
The conference passcode is 9388914.
About Yellow Pages Limited
Yellow Pages Limited (TSX:
Y) is a Canadian digital media and marketing solutions company that
supports local economies by helping businesses reach new customers
and foster stronger relationships with existing clients through its
various media and products. Yellow Pages holds some of Canada's leading local online properties
including YP.ca™, RedFlagDeals.com™, Canada411.ca, 411.ca,
Bookenda.com, dine.TO, DuProprio.com, ComFree.com and YP NextHome.
The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals,
Canada411, 411, Bookenda, DuProprio, ComFree and YP NextHome mobile
applications and Yellow Pages™ print directories. Through
Mediative, Yellow Pages is a leader in national advertising through
its various channels and services devoted to North American
businesses. The Company also owns JUICE Mobile, a mobile
advertising technology company whose proprietary programmatic
platforms facilitate the automatic buying and selling of mobile
advertising between brands and publishers. For more information
visit www.corporate.yp.ca.
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 February 14, 2017, 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 February 14, 2017 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 percentage and per share
information)
|
|
|
|
|
For the
three-month periods
ended December 31,
|
For the years
ended December 31,
|
Yellow Pages
Limited
|
2016
|
|
2015
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Revenues
|
$202,723
|
|
$208,505
|
$817,979
|
|
$829,771
|
Adjusted
EBITDA1
|
$57,418
|
|
$64,498
|
$235,191
|
|
$260,687
|
Adjusted EBITDA
margin1
|
28.3%
|
|
30.9%
|
28.8%
|
|
31.4%
|
Impairment of
intangible assets
|
$600,000
|
|
-
|
$600,000
|
|
-
|
Net (loss)
earnings
|
$(431,583)
|
|
$5,866
|
$(403,705)
|
|
$61,055
|
Basic (loss) earnings
per share
|
$(16.35)
|
|
$0.22
|
$(15.23)
|
|
$2.29
|
Cash flow from
operating activities
|
$27,874
|
|
$42,417
|
$158,113
|
|
$197,566
|
Free cash
flow1
|
$7,838
|
|
$25,249
|
$94,607
|
|
$122,145
|
Non-IFRS Measures1
In order to provide a
better understanding of the results, the Company uses the term
Adjusted EBITDA, defined as income from operations before
depreciation and amortization, impairment of intangible assets and
restructuring and special charges. Adjusted EBITDA is not a
performance measure defined under IFRS and is not considered an
alternative to (loss) income from operations or net (loss) earnings
in the context of measuring Yellow Pages' performance. Adjusted
EBITDA does not have a standardized meaning and is therefore not
likely to be comparable to similar measures used by other publicly
traded companies. Management uses Adjusted EBITDA to evaluate the
performance of its business as it reflects its ongoing
profitability. Management believes that certain investors and
analysts use Adjusted EBITDA to measure a company's ability to
service debt and to meet other payment obligations or to value
companies in the media and marketing solutions industry as well as
to evaluate the performance of a business.
As well, free cash flow is a non-IFRS measure generally used as an
indicator of financial performance. It should not be seen as a
substitute for cash flow from operating activities. Free cash flow
is defined as cash flow from operating activities, as reported in
accordance with IFRS, less an adjustment for capital expenditures.
Free cash flow is not a standardized measure and is not comparable
with that of other public companies. Management considers free cash
flow to be an important indicator of the performance of its
business as it shows how much cash is available to repay debt and
to make sound investment decisions. Management believes that
certain investors and analysts use free cash flow to value a
business and its underlying assets as well as to evaluate a
company's performance.
Net debt is a non-IFRS measure and does not have any standardized
meaning under IFRS. Therefore, it is unlikely to comparable to
similar measures presented by other publicly traded companies. Net
debt is defined as current portion of long-term debt plus long-term
debt and exchangeable debentures, less cash. Management considers
net debt to be an important indicator of its financial leverage as
it represents the amount of debt that is not covered by available
cash. Management believes that certain investors and analysts use
net debt to determine a company's financial leverage.
SOURCE Yellow Pages Limited