Yellow Pages Limited

All participants, please stand by. Your conference is about to begin. Good morning, ladies and gentlemen. Welcome to Yellow Pages' third quarter 2023 earnings release call. Today's conference call contains forward-looking information about Yellow Pages' outlook, objectives and strategy. These statements are based on assumptions and are subject to important risks and uncertainties. Yellow Pages' actual results could differ materially from expectations discussed. The details of Yellow Pages' caution regarding forward-looking information, including key assumptions and risks, can be found in Yellow Pages' management discussion and analysis for the third quarter of 2023. This call is being recorded and webcast, and all of the disclosure documents are available on the company's website and on CDAR. I would now like to turn the meeting over to Mr. David Eckert, President and Chief Executive Officer. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us today. From the company, I'm here with Franco Shinombolo, our Senior Vice President and Chief Financial Officer, and Sherilyn King, our Senior Vice President of Sales, Marketing, and Customer Service. As usual today, we'll make a few introductory comments. and then we will be available to answer your questions. In the third quarter this year, we continue to produce what I think is very strong profitability and generate very good cash in spite of the headwinds that we all face in the global economy that, of course, are hindering our progress somewhat on the revenue front. Our earnings this quarter, this third quarter, are adjusted EBITDA, was approximately 31% of revenue. And that's in spite of the fact that we have continued unabated our investments in our revenue initiatives, including expanding our sales force. Our cash generation has led to a very increasing cash balance at the end of October. not the end of the quarter, but the end of October, our cash balance stood at approximately $76 million. We've made continued good progress on our revenue initiatives. Of course, the headwinds have contributed to a somewhat challenging quarter for revenue, but we remain very pleased with our progress on underlying metrics, including the size of our sales force, And our rate of churn of customers, our rate of gaining new accounts are all fundamentals that we think bode very well for our medium and long-term future. Again, our board has declared a dividend for the quarter payable on December 15th of 20 cents per common share. Our funding of the pension plan continues on track, consistent with our voluntary deficit reduction plan. and we made in the quarter $1.5 million of voluntary incremental payments toward the wind-up deficit of that plan. As we announced a little while ago, we are planning to spend $50 million of cash to buy back some of the company's shares and $12 million of cash to accelerate some already planned voluntary contributions further than what I just referred to above to our defined benefit pension plan as part of a plan of arrangement. And we remain on track to make those transactions. So in summary, despite the economic headwinds, I think in the third quarter we have very good performance and we feel very good about the building that we're doing for the long term. I'd like to ask Franco Ciannoblo, our Chief Financial Officer, to make some more amplifying comments about our results for the quarter. Franco.

Thanks, David. And good morning, everyone. Let me take you through our financial results in a little bit more detail for the quarter ended September 30th, 2023. On revenues, our total revenues decreased by 8.2 million or 12.4% year over year and amounted to 58.1 million for the third quarter. Digital revenues decreased 10.6% year-over-year and amounted to $46.7 million for the three-month period ended September 30, 2023. The decline was mainly attributable to a decrease in digital customer count, partially offset by an increase in spend per customer. Print revenues decreased 19.1% year-over-year and amounted to $11.4 million for the quarter. The decline in revenues was mainly attributable to the decrease in number of print customers and, to a lesser extent, a decrease in spend per customer. The decline rate of total revenues increased year-over-year and compared to prior quarter. The higher decline rate is attributable in part to 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. The increased decline is also attributable to a cyber incident which resulted in the company's operations and IT systems being suspended for approximately three weeks of the second quarter of 2023. Adjusted EBITDA for the quarter was impacted by pressures from lower revenue, change in product mix, ongoing investments in our telesales force capacity, as well as the impact of the company's share price on cash-settled stock-based compensation expense, 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. As a result, adjusted EBITDA decreased year over year by 8.5 million or 32.1% to 17.9 million. Adjusted EBITDA margin decreased to 30.9% compared to 39.8% for the same period last year. Revenue pressures coupled with increased headcount in our sales force partially offset by continued optimization will continue to cause pressure on margins in upcoming quarters. Unadjusted EBITDA less capex for the third quarter decreased by 7.9 million year-over-year to 17.2 million, mainly due to 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 the IT spend, whereby more of the spend was classified as operating versus capital in nature. Net income decreased to 10.1 million for the third quarter of 2023, compared to 16.7 million for the same period last year. The decrease in net income is mainly due to lower adjusted EBITDA, partially offset by the decrease in restructuring and other charges, financial charges, and income taxes. Consistent with our deficit reduction plan announced in May 2021, during the third quarter of 2023, as David mentioned earlier, the company made $1.5 million in voluntary incremental cash contributions to the plan's wind-up deficits. And as David mentioned earlier, our cash on hand at the end of October is now approximately $76 million. The Board of Directors declared a cash dividend of 20 cents per common share payable on December 15 to shareholders of record as of November 24, 2023. And finally, on the plan of arrangement, here are some details related to the distribution of cash to shareholders of approximately $50 million by way of a share repurchase and the advancement of $12 million of planned voluntary contributions to the defined benefit pension plan by the end of the year. This will be effected pursuant to a plan of arrangement, which provides that the company will repurchase from shareholders pro rata an aggregate of 4,440,497 common shares a purchase price of $11.26 per share, which represents the volume weighted average price for the five consecutive trading days ending the trading day immediately prior to October 19, 2023. Under this plan of arrangement, the company will also advance the previously announced voluntary incremental cash contributions to the pension plan's wind-up deficit by an amount of $12 million during the year ending December 31, 2023, bringing 2023 cash payments to the pension plan's wind-up deficit to $18 million by the end of the year. The incremental voluntary cash infusion of $12 million during the year ended December 31, 2023, represents advancing the voluntary $6 million contributions intended in the years 2025 and 2026 that were part of the deficit reduction plan announced in May of 2021. The arrangement is subject to the approval of at least 66.2% of the votes cast by the holders of shares of record as of October 23, 2023, at a special meeting of shareholders scheduled to be held virtually on November 30, 2023. Shareholders holding in excess of 77% of the outstanding shares have agreed with the company to vote in favor of the arrangement. The arrangement is also subject to the receipt of the approval of the Supreme Court. Court of British Columbia. The 2023 arrangement is expected to be completed by the end of 2023 and is on track. This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions. Over to you, Michael.

Ladies and gentlemen, we will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before dialing your selections. If you have a question, you can register by dialing star 1 on your device keypad, and you can cancel the question if you wish by dialing star 2. Please dial star 1 at this time if you have a question, and there will be a brief delay while participants register. Once again, please press star 1 on your device keypad if you have a question at this time. There are no questions at the moment, sir.

Thank you. Thank you all for joining us today. We look forward to talking with you again in 90 days. And have a good holiday season. Take care.

Thank you. Ladies and gentlemen, your conference has now ended. All callers are asked to disconnect their lines at this time. And thank you for joining today's call.