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Yellow Pages Ltd
Symbol Y
Shares Issued 28,075,308
Close 2020-02-13 C$ 12.93
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Yellow Pages earns $94.66M in 2019, to start dividend

2020-02-13 08:32 ET - News Release

Mr. David Eckert reports

YELLOW PAGES LIMITED REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2019 FINANCIAL AND OPERATING RESULTS AND ANNOUNCES INTENTION TO REPAY ALL REMAINING DEBT AND INITIATE REGULAR STOCK DIVIDEND

Yellow Pages Ltd. has released its operating and financial results for the quarter and year ended Dec. 31, 2019.

"We continued our strong adjusted EBITDA less capex margin in the fourth quarter and for the full year 2019. As we predicted last quarter, this allowed us to fully repay our notes on Dec. 2, 2019, three years ahead of maturity. And today we announce our intention to make an optional redemption payment of $107.1-million toward the principal amount to fully repay all of our remaining debt, our exchangeable debentures, on or shortly after May 31, 2021, at par.

"We also intend to initiate a regular quarterly dividend of 11 cents per common share per quarter, beginning in the second quarter of 2020.

"In addition, we continue to invest appropriately in our business, including significant expansion of our tele-sales force to support further 'bending of the revenue curve.' We are heartened that, including this most recent quarter, we produced an improved year-on-year rate of revenue change in our YP segment for four consecutive quarters, as our various initiatives to bend the revenue curve continued to bear fruit," said David A. Eckert, president and chief executive officer of Yellow Pages.

  
                                      FINANCIAL HIGHLIGHTS
       (thousands of dollars, except percentage information and per share information)

                                            Three months ended Dec. 31,      Years ended Dec. 31,
                                                  2019            2018         2019         2018    

YP revenues                                      $93,507      $110,782     $401,939     $485,602
Other revenues and intersegment eliminations           -        13,737        1,274       91,593  
Total revenues                                   $93,507      $124,519     $403,213     $577,195
Adjusted EBITDA                                  $34,756       $41,149     $161,345     $192,565
Adjusted EBITDA margin                             37.2%         33.0%        40.0%        33.4%   
Net earnings                                     $53,597       $39,957      $94,669      $82,809 
Basic earnings per share                           $2.02         $1.51        $3.57        $3.13   
Diluted earnings per share                         $1.70         $1.28        $3.16        $2.78   
Capex                                             $1,981        $4,040       $9,738      $12,036 
Adjusted EBITDA less capex                       $32,775       $37,109     $151,607     $180,529
Adjusted EBITDA less capex margin                  35.1%         29.8%        37.6%        31.3%   
Cash flow from operating activities              $32,025       $41,782     $144,759     $134,659


  

Fourth quarter 2019 results

Despite revenue pressures, the adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) less capex (capital expenditures) margin increased to 35.1 per cent as compared with 29.8 per cent for the same period last year as a result of the divestiture of unprofitable or non-synergistic businesses and revenues as well as cost reductions in the YP segment. Adjusted EBITDA less capex decreased by $4.3-million year over year and amounted to $32.8-million.

Net earnings increased by $13.6-million to $53.6-million, or $1.70 per diluted share.

On Dec. 2, 2019, as previously announced, the company made a mandatory redemption payment of $50.3-million toward the principal amount on its senior secured notes. With this payment the company has repaid the notes in full.

Segmented information

The company's operations are categorized into two reportable segments:

  • The YP segment provides small and medium-sized businesses across Canada digital and traditional marketing solutions, including on-line and mobile priority placement on Yellow Pages' owned and operated media, content syndication, search engine solutions, website fulfilment, social media campaign management, digital display advertising, video production and print advertising. This segment also includes the 411 website digital directory service helping users find and connect with people and local businesses.
  • The other segment includes YP Dine and Bookenda until their sale on April 30, 2019, and the Mediative division until its liquidation on Jan. 31, 2019. The operations of the businesses sold in 2018 are also included in this segment until their respective disposal dates, namely: JUICE Mobile, RedFlagDeals.com, Yellow Pages NextHome, ComFree/DuProprio, Totem and Western Media Group.

An overview of each segment and the performance of each segment for the three-month periods and years ended Dec. 31, 2019, and 2018 can be found in the Feb. 12, 2020, management's discussion and analysis.

Financial results for the fourth quarter of 2019

Revenues for the YP segment for the fourth quarter of 2019 decreased by $17.3-million or 15.6 per cent year over year and amounted to $93.5-million compared with $110.8-million for the same period last year. This compares with a decrease of $26.4-million or 19.2 per cent for the fourth quarter of 2018 compared with the same period in 2017. The decrease for the quarter ended Dec. 31, 2019, is mainly due to the decline of the company's higher-margin YP 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.

Adjusted EBITDA for the YP segment for the fourth quarter of 2019 totalled $34.8-million compared with $38.9-million for the same period last year. The decrease in adjusted EBITDA is a result of lower overall revenues, pressures from the change in product mix, and investments in customer care and investments in new customer acquisition. The adjusted EBITDA margin for the YP segment for the fourth quarter of 2019 was 37.2 per cent compared with 35.1 per cent for the same period last year. The increase in adjusted EBITDA margin for the fourth quarter is due to the revenue pressures, investments in customer care and investments in new customer acquisition being more than offset by an increased focus on the profitability of the company's products and services and reductions in both its cost of sales and other operating costs.

Total revenues for the three-month period ended Dec. 31, 2019, decreased by $31.0-million or 24.9 per cent year over year and amounted to $93.5-million as compared with $124.5-million for the same period last year. The decline in total revenues for the quarter ended Dec. 31, 2019, was due to lower digital and print revenues in the YP segment as well as the divestitures in the other segment.

Adjusted EBITDA decreased by $6.4-million to $34.8-million during the fourth quarter of 2019, compared with $41.1-million during the same period last year. The company's adjusted EBITDA margin for the three-month period ended Dec. 31, 2019, was 37.2 per cent compared with 33.0 per cent for the same period last year. The decrease in adjusted EBITDA for the three-month period ended Dec. 31, 2019, is the result of revenue pressures in the YP segment as well as the divestitures in the other segment. The increase in adjusted EBITDA margin is mainly due to reductions in both the company's cost of sales and other operating costs which fully offset the revenue pressures in the YP segment as well as the dilutive effect on profitability of the lower-margin other segment in 2018.

Adjusted EBITDA less capex decreased by $4.3-million or 11.7 per cent to $32.8-million during the fourth quarter of 2019 compared with $37.1-million during the same period in 2018. Adjusted EBITDA less capex for the three-month period ended Dec. 31, 2019, was mainly impacted by lower adjusted EBITDA partially offset by decreased spending on software development.

The company recorded net earnings of $53.6-million and $40.0-million during the three-month periods ended Dec. 31, 2019, and 2018, respectively. The improvement in net earnings is mainly due to decreased depreciation and amortization expenses due to lower software development expenditures, lower financial charges from a reduced level of indebtedness and higher recovery of income taxes partially offset by lower adjusted EBITDA and an increase in restructuring and other charges.

Cash flows from operating activities decreased by $9.8-million to $32.0-million for the three-month period ended Dec. 31, 2019, from $41.8-million for the same period last year mainly due to a $17.1-million decrease in the change in operating assets and liabilities mainly from reduced receivables due to the divestitures.

As at Dec. 31, 2019, the company had $156.4-million of total debt, compared with $339.0-million as at Dec. 31, 2018. As at Dec. 31, 2019, the company had $54.1-million of net debt excluding lease obligations, compared with $182.2-million as at Dec. 31, 2018.

Financial results for the year ended Dec. 31, 2019

Revenues for the YP segment for the year ended Dec. 31, 2019, decreased by $83.7-million or 17.2 per cent year over year and amounted to $401.9-million compared with $485.6-million for the same period last year. The decrease for the year ended Dec. 31, 2019, is mainly due to the decline of the company's higher-margin YP 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.

Adjusted EBITDA for the YP segment for the year ended Dec. 31, 2019, totalled $161.0-million compared with $185.0-million for the same period in 2018. The decrease in adjusted EBITDA is a result of lower overall revenues, pressures from the change in product mix and investments in customer care. The adjusted EBITDA margin for the YP segment for the year ended Dec. 31, 2019, increased to 40.1 per cent from 38.1 per cent for the same period last year. The increase in adjusted EBITDA margin for the year ended Dec. 31, 2019, is due to the revenue pressures and investments in customer care and investments in new customer acquisition being fully offset by an increased focus on the profitability of the company's products and services and reductions in both its costs of sales and other operating costs. The decrease in cost of sales was mainly due to work force reductions primarily in non-customer facing areas in the first quarter of 2018 and to call centre consolidations and optimization of its servicing model in the second quarter of 2018. The decrease in other operating costs included reductions in the company's work force and associated employee expenses, reductions in the company's office space footprint, other spending reductions across the segment as well as an adjustment to the variable compensation expense in the first quarter of 2019 mainly due to employee attrition and previous year performances.

Total revenues for the year ended Dec. 31, 2019, decreased by $174.0-million or 30.1 per cent year over year and amounted to $403.2-million as compared with $577.2-million for the same period last year. The decline in total revenues was due to the divestitures in the other segment as well as lower digital and print revenues in the YP segment.

For the year ended Dec. 31, 2019, adjusted EBITDA decreased by $31.2-million or 16.2 per cent to $161.3-million, compared with $192.6-million for the same period last year. The company's adjusted EBITDA margin amounted to 40.0 per cent for the year ended Dec. 31, 2019, compared with 33.4 per cent for the same period last year. The decrease in adjusted EBITDA was the result of revenue pressures in the YP segment as well as the divestitures in the other segment. The increase in adjusted EBITDA margin for the year ended Dec. 31, 2019, is mainly due to the dilutive effect on profitability of the lower margin other segment in 2018 and reductions in both the company's cost of sales and other operating costs. The reductions fully offset the revenue pressures in the YP segment for the year ended Dec. 31, 2019.

For the year ended Dec. 31, 2019, adjusted EBITDA less capex decreased by $28.9-million or 16.0 per cent to $151.6-million compared with $180.5-million for the same period last year. Adjusted EBITDA less capex for the year ended Dec. 31, 2019, was mainly impacted by lower adjusted EBITDA partially offset by decreased spending on software development and was further negatively impacted by lease incentives received in 2018.

The company recorded net earnings of $94.7-million for the year ended Dec. 31, 2019, as compared with $82.8-million for the same period last year. The increase in net earnings for the year ended Dec. 31, 2019, compared with the same period last year is mainly due to the lower depreciation and amortization expenses and lower financial charges from a reduced level of indebtedness due to repayment of the senior secured notes partially offset by lower adjusted EBITDA and lower recovery of income taxes.

The company recorded net earnings of $94.7-million for the year ended Dec. 31, 2019, as compared with $82.8-million for the same period last year. The increase in net earnings for the year ended Dec. 31, 2019, compared with the same period last year is mainly due to the lower depreciation and amortization expenses and lower financial charges from a reduced level of indebtedness due to repayment of the senior secured notes partially offset by lower adjusted EBITDA and lower recovery of income taxes.

Cash flows from operating activities increased by $10.1-million to $144.8-million from $134.7-million for the year ended Dec. 31, 2019, mainly due to lower payments for restructuring and other charges of $18.4-million, lower interest paid of $20.3-million due to a lower level of indebtedness due to repayments of the senior secured notes and lower financing of postemployment benefit plans of $1.4-million, mainly offset by lower adjusted EBITDA of $31.2-million.

Conference call and webcast

Yellow Pages will hold an analyst and media call and simultaneous webcast at 8:30 a.m. Eastern Time on Feb. 13, 2020, to discuss fourth quarter 2019 results. The call may be accessed by dialling 416-340-2216 within the Toronto area, or 1-800-273-9672 outside of Toronto. 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 company's 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 YP, Canada411 and 411. The company also holds the YP, Canada411 and 411 mobile applications and Yellow Pages print directories.

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