Mr. David Eckert reports

YELLOW PAGES LIMITED REPORTS SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS AND DECLARES A CASH DIVIDEND(1)

Yellow Pages Ltd. has released its operating and financial results for the quarter and six months ended June 30, 2023.

"Our second quarter results reflect continued strong profitability and cash generation despite headwinds in the global economy restricting our progress on the revenue front," said David A. Eckert, president and chief executive officer of Yellow Pages.

Mr. Eckert commented on the key developments:

• Strong quarterly earnings. "Our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] for the quarter was 35 per cent of revenue, even higher than last year's second quarter, despite our continued investments in revenue initiatives, including the expansion of our sales force."
• Pension plan financing on track. "Consistent with our deficit-reduction plan announced in May, 2021, in the second quarter of 2023 we made $1.5-million of voluntary incremental payments toward our defined benefit pension plan's wind-up deficit."
• Growing cash balance. "Our steady strong cash generation has grown cash on hand to approximately $65-million at the end of July."
• Continued progress on revenue initiatives. "Given the headwinds in the global economy, our change in revenue in the second quarter compared to prior year was lower than the same measure a year ago. However, we remain pleased with our progress on underlying metrics, including the size of our sales force, our rate of churn of customers and our rate of gaining new accounts."
• Quarterly dividend declared. "Our board has declared a dividend of 20 cents per common share, to be paid on Sept. 15, 2023, to shareholders of record as of Aug. 25, 2023."

Second quarter of 2023 results:

• Total revenues decreased 9.8 per cent year-over-year and amounted to $62.7-million for the three-month period ended June 30, 2023, compared with the decrease of 6.7 per cent reported for the same period last year.
• Adjusted EBITDA less capital expenditure totalled $20.6-million and the EBITDA less capex margin was 32.8 per cent.
• Net income amounted to $12.7-million, or to 69 cents per diluted share.

Financial results for the second quarter of 2023

Total revenues for the second quarter ended June 30, 2023 decreased by 9.8 per cent to $62.7-million, as compared with $69.6-million for the same period last year. The decrease in revenues is mainly due to the decline of the company's higher margin digital media and print products and to a lesser extent to its lower-margin digital services products, thereby creating pressure on its gross profit margins.

Total digital revenues decreased 7.6 per cent year-over-year and amounted to $48.8-million for the three-month period ended June 30, 2023, as compared with $52.8-million for the same period last year. The revenue decline for the three-month period ended June 30, 2023, was mainly attributable to a decrease in digital customer count partially offset by an increase in spend per customer.

Total print revenues decreased 16.8 per cent year-over-year and amounted to $14-million for three-month period ended June 30, 2023. The revenue decline for the three-month period ended June 30, 2023, is mainly attributable to the decrease in the number of print customers and to a lesser extent a decrease in spend per customer.

The decline rate of revenues increased year-over-year and compared with prior quarter. The higher decline rate is attributable, in part, to (a) the headwinds in the global economy, whereby customer renewal rates have remained strong but stable while the improvements in average spend per customer have slowed as customers look to optimize their spend, and (b) a cybersecurity incident which resulted in the company's operations and information technology systems being suspended for approximately three weeks of the second quarter of 2023.

For the three-month period ended June 30, 2023, adjusted EBITDA decreased by $1.9-million or 7.8 per cent to $21.9-million, compared with $23.8-million for the same period last year. The adjusted EBITDA margin increased for the second quarter of 2023 to 35 per cent, compared with 34.2 per cent for the same period last year. The decrease in adjusted EBITDA for the three-month period ended June 30, 2023, is the result of revenue pressures as well as continuing investments in the company's tele-sales force capacity, partially offset by reductions in other operating costs including reductions in its work force and associated employee expenses, a decrease in bad debt expense, and lower variable compensation expense including the impact of the company's share price on cash-settled stock-based compensation expense. Revenue pressures, coupled with increased headcount in the company's sales force partially offset by continued optimization, will continue to cause some pressure on margins in coming quarters.

For the three-month period ended June 30, 2023, adjusted EBITDA less capex decreased by $2-million or 8.8 per cent to $20.6-million, compared with $22.6-million for the same period last year. The adjusted EBITDA less capex margin remained relatively stable year-over-year. The decrease in adjusted EBITDA less capex is driven by the decrease in adjusted EBITDA, with capex spend remaining steady year-over-year.

Net income remained steady at $12.7-million for the three-month period ended June 30, 2023, compared with the prior year, while diluted income per share for the quarter increased 41 per cent to 69 cents, due to lower number of shares outstanding.

Cash flows from operating activities decreased by $4.8-million to $20-million for the three-month period ended June 30, 2023. The decrease is mainly due to lower adjusted EBITDA of $1.9-million and the change in operating assets and liabilities of $4-million, partially offset by lower income taxes paid of $600,000, the decrease in stock-based compensation cash settlements of $300,000, and lower restructuring and other charges paid of $200,000. The change in operating assets and liabilities is mainly due to the timing in the collection of trade receivables and the payment of trade receivables as well as the impact of the share price on the cash-settled stock-based compensation.

As at June 30, 2023, the company had $64.4-million of cash.

Conference call and webcast

Yellow Pages will hold an analyst and media call and simultaneous webcast at 8:30 a.m. Eastern Time on Aug. 9, 2023, to discuss second quarter 2023 results. The call may be accessed by dialling 416-695-6725 within the Toronto area, or 1-866-696-5910 outside of Toronto, passcode 2713953 followed by the pound key. Please be prepared to join the conference at least five minutes prior to the conference start time.

The call will be simultaneously webcast on the company's website.

About Yellow Pages Ltd.

Yellow Pages is a Canadian digital media and marketing company that creates opportunities for buyers and sellers to interact and transact in the local economy. Yellow Pages holds some of Canada's leading local on-line properties including YP.ca, Canada411 and 411.ca. The company also holds the YP, Canada411 and 411 mobile applications and Yellow Pages print directories.

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