Mr. David Eckert reports

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

Yellow Pages Ltd. has released its operating and financial results today for the quarter and nine months ended Sept. 30, 2023.

"In the third quarter, we continued to produce strong profitability and cash generation, despite headwinds in the global economy hindering 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:

• Healthy earnings. "Our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] for the quarter was 30.9 per cent of revenue, despite our continued investments in revenue initiatives, including the expansion of our sales force."
• Growing cash balance. "Our steady, strong cash generation has grown cash on hand to approximately $76-million at the end of October."
• Continued progress on revenue initiatives. "The headwinds in the global economy contributed to a challenging quarter for revenue. 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. We believe these fundamentals bode well for our medium- and long-term future."
• Quarterly dividend declared. "Our board has declared a dividend of 20 cents per common share, to be paid on Dec. 15, 2023, to shareholders of record as of Nov. 24, 2023."
• Quarterly financing of pension plan on track. "Consistent with our deficit-reduction plan announced in May, 2021, in the third quarter of 2023 we made $1.5-million of voluntary incremental payments toward our defined benefit pension plan's wind-up deficit."
• Cash to shareholders and to pension plan by year-end. "As previously announced on Oct. 19, 2023, our board approved the use of discretionary cash of $50-million to buy back the company's shares and $12-million to accelerate our planned voluntary contributions to the defined benefit pension plan, as part of a plan of arrangement. We remain on track to complete the plan of arrangement by the end of the year."

Third quarter of 2023 results:

• Total revenues decreased 12.4 per cent year-over-year and amounted to $58.1-million for the three-month period ended Sept. 30, 2023, compared with the decrease of 6.5 per cent reported for the same period last year.
• Adjusted EBITDA less capital expenditure (capex) totalled $17.2-million and the EBITDA less capex margin was 29.7 per cent.
• Net income amounted to $10.1-million, or to 56 cents per diluted share.

Financial results for the third quarter of 2023

Total revenues for the third quarter ended Sept. 30, 2023, decreased by 12.4 per cent to $58.1-million, as compared with $66.3-million for the same period last year.

Total digital revenues decreased 10.6 per cent year-over-year and amounted to $46.7-million for the three-month period ended Sept. 30, 2023, as compared with $52.2-million for the same period last year. The revenue decline for the three-month period ended Sept. 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 19.1 per cent year-over-year and amounted to $11.4-million for three-month period ended Sept. 30, 2023. The revenue decline for the three-month period ended Sept. 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 has 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 Sept. 30, 2023, adjusted EBITDA decreased by $8.5-million or 32.1 per cent to $17.9-million, compared with $26.4-million for the same period last year. The adjusted EBITDA margin decreased for the third quarter of 2023 to 30.9 per cent, compared with 39.8 per cent for the same period last year. The decrease in adjusted EBITDA and adjusted EBITDA margin for the three-month period ended Sept. 30, 2023, is the result of pressures from lower revenues, change in product mix, the continuing investments in the company's tele-sales force capacity as well as the impact of the company's share price on cash-settled stock-based compensation expense, partially offset by price increases, the efficiencies from optimization in cost of sales and reductions in other operating costs, including reductions in the company's work force and associated employee expenses, a decrease in bad debt expense, and lower variable compensation expense. Revenue pressures, coupled with increased head count in the company's sales force, partially offset by continued optimization, will continue to cause pressure on margins in coming quarters.

For the three-month period ended Sept. 30, 2023, adjusted EBITDA less capex decreased by $7.9-million or 31.4 per cent to $17.2-million, compared with $25.1-million for the same period last year. The decrease in adjusted EBITDA less capex and adjusted EBITDA less capex margin is driven by the decrease in adjusted EBITDA, partially offset by the decrease in capex spend. The decrease in capex spend is partly due to the nature of information technology spend whereby more of the spend was classified as operating versus capital in nature.

Net income decreased to $10.1-million for the three-month period ended Sept. 30, 2023, compared with $16.7-million for the same period last year.

Cash flows from operating activities decreased by $10.6-million to $10.3-million for the three-month period ended Sept. 30, 2023. The decrease is mainly due to lower adjusted EBITDA of $8.5-million, the increase in stock-based compensation cash settlements of $2.1-million and higher income taxes paid of $1-million, partially offset by an increase of $1.4-million from changes in operating assets and liabilities. 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 Sept. 30, 2023, the company had $69.8-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 Nov. 9, 2023, to discuss third 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.

The conference call will be archived in the investors section of the site.

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 the YP, Canada411 and 411 website. The company also holds the YP, Canada411 and 411 mobile applications and Yellow Pages print directories.

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