Yellow Pages Limited (YLWDF) Q3 2022 Earnings Call Transcript

Yellow Pages Limited (OTCPK:YLWDF) Q3 2022 Earnings Conference Call November 10, 2022 8:30 a.m. ET

Participating companies

David Eckert – President and CEO

Franco Sciannamblo – Chief Financial Officer

Sherilyn King – Senior Vice President, Sales, Marketing and Customer Service

Operator

Good morning, ladies and gentlemen, and welcome to the Yellow Pages Third Quarter 2022 Earnings Call. Today’s conference call contains forward-looking information about Yellow Pages‘ outlook, goals and strategy. These statements are based on assumptions and are subject to significant risks and uncertainties.

Yellow Pages’ actual results could differ materially from the expectations discussed. Details of Yellow Pages’ cautionary statement regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages’ Third Quarter 2022 MD&A. This call is being recorded and webcast, and all disclosure documents are available on the Company’s website and on SEDAR.

I would now like to give the floor to Mr. David Eckert, President and Chief Executive Officer. Please continue, sir.

David Eckert

Thanks a lot. Hello everyone. Thank you all for joining us today. As usual, we would first like to briefly comment on our third quarter results and then answer any questions you may have. Today, I am accompanied by Franco Sciannamblo, our financial director; and by Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Service.

Our results for the third quarter of this year continue to be encouraging in my view. From a revenue perspective, we have moved ever closer to revenue stability this quarter. In fact, for the – almost tired of counting for the 8th consecutive quarter since COVID-19 hit and the 13th of the past 15 quarters overall, even including the COVID period, we are reporting a favorable dip in the revenue curve during this quarter where we report a better rate of revenue change than we reported for the prior quarter. So we’re pretty happy with the revenue results.

From the point of view of profitability, a quarter with very strong profitability. Our adjusted EBITDA for the quarter was 39.8% of our reported revenues, which is a very high number. From a cash perspective, after – immediately or shortly after the end of the quarter, we executed our previously announced plan of arrangement, under which we used $100 million of our discretionary cash to repurchase shares of the society. And we have also – and we have also, at that time, already contributed $12 million of the planned $24 million in voluntary contributions to our company’s defined benefit pension plan.

Also during the quarter, we made an additional $1 million in voluntary additional contribution payments for our pension plan wind-up deficit, as we previously announced, so that even after these disbursements, our balance of cash at the end of October was still around $39 million and unsurprisingly we also declared a dividend in line with past previous quarters of $0.15 per common share. So we’re very happy with the revenue, the profitability, the money. And we’re also pretty optimistic about the future, just in general, as we get closer and closer to stable earnings. Lots of good things are happening. Most of them one inch at a time, every day, every minute and we’re very happy with where we are.

Now Franco Sciannamblo, our CFO, will provide some additional details. Then we will all be happy to answer any questions you may have. Thanks a lot.

Franco Sciannamblo

Thank you, David, and good morning everyone. Let me now present to you our financial results for the third quarter ended September 30, 2022. With respect to revenue, it decreased by $4.6 million or 6.5% year over year and were $66.3 million for the third quarter, an improvement from last quarter’s 6.7% decline. The decline in revenue for the quarter was driven by declines in our higher-margin digital and print products and, to a lesser extent, in our lower-margin digital services and resale products. This change in the product mix continues to weigh on our margins. Total revenue decline rates – digital revenue as well as print revenue have all improved significantly year over year.

Total revenues down 6.5% this quarter, compared to an 11.7% drop recorded for the same period last year. Digital revenue down 5% this quarter, compared to a 10.3% drop recorded for the same period last year. And the decline in printing revenues of 11.7% this quarter compares to a decline of 16.0% recorded for the same period last year. These improvements are due to better spend per customer, increased renewal rates as well as improved customer complaints. The improvement in customer spend per customer is partly due to price increases.

Adjusted EBITDA for the quarter was impacted by revenue pressure, partially offset by price increases, efficiencies resulting from continued cost of sales optimization, reductions in other operating costs, including reductions in our headcount and employee-related expenses, decreases in bad debts and the impact of the Company’s share price on cash-settled stock-based compensation expense. As a result, Adjusted EBITDA decreased year over year by $0.2 million or 0.9% to $26.4 million, while EBITDA margin increased by 2 .3% to 39.8%, compared to 37.5% for the same period last year.

Revenue pressures, coupled with new investments in the capacity of our telesales team, partially offset by continued optimization, will continue to put pressure on margins in the coming quarters. Adjusted EBITDA less CapEx for the third quarter decreased $0.2 million or 0.9% year-over-year to $25.1 million, primarily due to lower adjusted EBITDA, while Adjusted EBITDA less CapEx margin increased from 35.7% to 37.9%.

Our workforce as of September 30 decreased to 631 employees compared to 652 on the same date last year. Sales force headcount increased by 13, while all other headcount decreased by 34. Our net income for the third quarter increased to $16.7 million from $13.7 million for the same period last year. The increase in net earnings for the third quarter is mainly explained by the decrease in adjusted EBITDA which is more than offset by the decrease in amortization, restructuring and other charges and financial charges.

On October 4, 2022, we completed the previously announced plan of arrangement and repurchased from shareholders, on a pro rata basis, a total of 7,949,125 common shares for cash consideration of $100 million. During the month of October, also pursuant to the plan of arrangement, the company contributed $12 million to the pension plan wind-up deficit and will advance the remaining $12 million by December 31, 2022.

Also consistent with our previously announced deficit reduction plan in the third quarter of 2022, the Company made an additional $1 million voluntary cash contribution to the plan’s wind-up deficit, bringing the year-to-date total to 3 millions of dollars. And as David mentioned earlier, our cash flow after all of that was about $39 million at the end of October. And finally, the board declared a cash dividend of $0.15 per common share payable on December 15 to shareholders of record from November 30 to, sorry, November 24, 2022.

This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now answer your questions.

Q&A session

Operator

David Eckert

OK. Thanks a lot. Thank you all for joining us today. We appreciate your interest in our business and support for what we do and look forward to speaking with you again in 90 days. Thank you very much and good day. Bye now.

Operator

Thanks. Your conference is now over. Please disconnect your lines at this time, and we thank you for your participation.

Calvin W. Soper