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Montreal (Quebec), August 9, 2023 — Yellow Pages Limited (TSX: Y) (the “Company”), a leading Canadian digital media and marketing company, released its operating and financial results today 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 CEO of Yellow Pages Limited.
Eckert commented on the key developments:
Strong quarterly earnings. “Our Adjusted EBITDA2 for the quarter was 35.0% 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 funding 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 $0.20 per common share, to be paid on September 15, 2023 to shareholders of record as of August 25, 2023.”
(In thousands of Canadian dollars, except percentage information and per share information)
(1) The dividend will be designated as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends.
(2) Adjusted EBITDA is equal to Income from operations before depreciation and amortization and restructuring and other charges (defined herein as Adjusted EBITDA), as shown in Yellow Pages Limited’s interim condensed consolidated statements of income. Adjusted EBITDA, Adjusted EBITDA margin, CAPEX, Adjusted EBITDA less CAPEX and Adjusted EBITDA less CAPEX margin are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other public companies. Refer to the section on Non-GAAP financial measures at the end of this document for more details.
Second Quarter of 2023 Results
Total revenues decreased 9.8% year-over-year and amounted to $62.7 million for the three-month period ended June 30, 2023 compared to the decrease of 6.7% reported for the same period last year.
Adjusted EBITDA less CAPEX1 totalled $20.6 million and the EBITDA less CAPEX margin1 was 32.8%.
Net income amounted to $12.7 million, or to $0.69 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% to $62.7 million, as compared to $69.6 million for the same period last year. The decrease in revenues is mainly due to the decline of our higher margin digital media and print products and to a lesser extent to our lower margin digital services products, thereby creating pressure on our gross profit margins.
Total digital revenues decreased 7.6% year-over-year and amounted to $48.8 million for the three-month period ended June 30, 2023, as compared to $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% year-over-year and amounted to $14.0 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 to 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 IT 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% to $21.9 million, compared to $23.8 million for the same period last year. The adjusted EBITDA margin increased for the second quarter of 2023 to 35.0%, compared to 34.2% 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 ongoing investments in our tele-sales force capacity, partially offset by reductions in other operating costs including reductions in our workforce 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 our salesforce partially offset by continued optimization, will continue to cause some pressure on margins in upcoming quarters.
For the three-month period ended June 30, 2023 Adjusted EBITDA less CAPEX decreased by $2.0 million or 8.8% to $20.6 million, compared to $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 to prior year, while diluted income per share for the quarter increased 41% to $0.69, due to lower number of shares outstanding.
Cash flows from operating activities decreased by $4.8 million to $20.0 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 $4.0 million, partially offset by lower income taxes paid of $0.6 million, the decrease in stock-based compensation cash settlements of $0.3 million and lower restructuring and other charges paid of $0.2 million. 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.
(1) Adjusted EBITDA is equal to Income from operations before depreciation and amortization and restructuring and other charges (defined herein as Adjusted EBITDA), as shown in Yellow Pages Limited’s interim condensed consolidated statements of income. Adjusted EBITDA, Adjusted EBITDA margin, CAPEX, Adjusted EBITDA less CAPEX, Adjusted EBITDA less CAPEX margin are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other public companies. Refer to the section on Non-GAAP financial measures at the end of this document for more details.
Conference Call & Webcast
Yellow Pages Limited will hold an analyst and media call and simultaneous webcast at 8:30 a.m. (Eastern Time) on August 9, 2023 to discuss second quarter 2023 results. The call may be accessed by dialing 416-695-6725 within the Toronto area, or 1-866-696-5910 outside of Toronto, Passcode 2713953#. Please be prepared to join the conference at least 5 minutes prior to the conference start time.
The call will be simultaneously webcast on the Company’s website at:
The conference call will be archived in the Investors section of the site at:
About Yellow Pages Limited
Yellow Pages Limited (TSX: Y) 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 online properties including YP.ca, Canada411 and 411.ca. The Company also holds the YP, Canada411 and 411 mobile applications and Yellow Pages print directories. 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 and results of operations and businesses of YP (including, without limitation, payment of a cash dividend per share per quarter to its common shareholders). These statements are forward-looking as they are based on our current expectations, as at August 8, 2023, 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 5 of our August 8, 2023 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.
Investors & Media
Senior Vice-President and Chief Financial Officer