In their third-quarter earnings call, Yellow (OTC:YELLQ) Pages reported strong profitability and cash generation despite global economic challenges that have hindered revenue growth. The company's adjusted EBITDA was approximately 31% of revenue, despite ongoing investments in revenue initiatives, including sales force expansion. Yellow Pages' cash balance stood at approximately $76 million at the end of October, not the quarter's end.
Key takeaways from the call include:
- Yellow Pages' total revenues decreased by $8.2 million or 12.4% year-over-year, amounting to $58.1 million for the third quarter. The decline was attributed primarily to a decrease in digital customer count and a decrease in the number of print customers.
- Despite the revenue decline, the company's adjusted EBITDA for the quarter was $17.9 million, down 32.1% year-over-year, impacted by lower revenue, change in product mix, and ongoing investments in the telesales force.
- The company made $1.5 million in voluntary incremental cash contributions to the pension plan's wind-up deficit during the third quarter.
- The Board of Directors declared a cash dividend of $0.20 per common share payable on December 15 to shareholders of record as at November 2, 2023.
- As part of a plan of arrangement, the company is 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 to the defined benefit pension plan.
Yellow Pages' CEO, David Eckert, expressed satisfaction with the company's performance and progress on underlying metrics, including the size of their sales force and the rate of gaining new accounts, despite the challenging quarter for revenue. He also highlighted the company's increasing cash balance and ongoing good progress on their revenue initiatives.
The company's CFO, Franco Sciannamblo, provided more detail on the financial results, noting the impact of the global economic headwinds on customer renewal rates and average spend per customer. He also mentioned 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.
Despite these challenges, Yellow Pages remains on track with its plan of arrangement, which includes a share repurchase and the advancement of planned voluntary contributions to the defined benefit pension plan. The arrangement is expected to be completed by the end of 2023.
InvestingPro Insights
Drawing from real-time data and insights provided by InvestingPro, Yellow Pages (YLWDF (OTC:YLWDF)) exhibits noteworthy financial strength and potential for investors. According to InvestingPro data, Yellow Pages holds a market cap of 150.07M USD and a favorable P/E ratio of 3.11 as of Q3 2023. Despite revenue challenges, the company's return on assets remains robust at 25.01%, indicating efficient use of its resources.
InvestingPro Tips highlight that Yellow Pages yields a high return on invested capital and holds more cash than debt on its balance sheet. This financial stability, coupled with the fact that the company has raised its dividend for four consecutive years, underscores its commitment to shareholder returns. However, investors should note that the company's revenue has been declining at an accelerating rate, as reflected in the -8.88% revenue growth in the last twelve months as of Q3 2023.
With over 16 additional InvestingPro Tips available for Yellow Pages, investors can gain deeper insights into the company's financial health and potential investment opportunities. These tips, part of the comprehensive InvestingPro product suite, can provide valuable guidance in navigating the complexities of the investment landscape.
Full transcript - YLWDF Q3 2023:
Operator: 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 is cautioned 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 SEDAR. I would now like to turn the meeting over to Mr. David Eckert, President and Chief Executive Officer. Please go ahead, sir.
David Eckert: Thank you and good morning, everyone. Thank you for joining us today. From the company, I'm here with Franco Sciannamblo, our Senior Vice President, 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 continued 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, 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 at the end of the quarter but at 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 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 15 of $0.20 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 towards the wind-up deficit of our -- 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've had 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 Sciannamblo, our Chief Financial Officer, to make some more amplifying comments about our results for the quarter. Franco?
Franco Sciannamblo: 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 30, 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 3-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 3 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. On adjusted 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 deficit. 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 $0.20 per common share payable on December 15 to shareholders of record as at November 2, 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 at a purchase price of $11.26 per share which represents the volume-weighted average price for the 5 consecutive trading days ending the trading day nearly 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 at the pension plan's wind up deficit to $180 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 2/3% of the votes cast by the holders of shares of record as at 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 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.
Operator:
David Eckert: 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.
Operator: Thank you. Ladies and gentlemen, your conference has now ended. All callers are asked to disconnect our lines at this time and thank you for joining today's call.
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