Yellow (OTC:YELLQ) Pages Limited (Ticker: Y) has reported its financial results for the fourth quarter of 2023, revealing a mixed performance with strong earnings and a decline in revenue. Despite the challenging economic environment, particularly in the Canadian small business sector, the company managed to maintain a healthy cash balance and increase its dividend payout.
The adjusted EBITDA for the quarter was 29.1%, and for the full year, it stood at 32.1% of revenue. Yellow Pages also completed a plan of arrangement, returning $62 million of cash to shareholders and its pension plan. The company expressed optimism about its medium-term and long-term future, citing improved sales force expansion and new account acquisition rates.
Key Takeaways
- Yellow Pages Limited reported a decrease in total revenue by $8.7 million or 13.4% year-over-year for Q4 2023.
- Adjusted EBITDA for Q4 was down 22.6% to $16.2 million, with a margin of 29.1%.
- The company completed a plan of arrangement, distributing $62 million to shareholders and the pension plan.
- The Board of Directors increased the quarterly cash dividend from $0.20 to $0.25 per common share.
- Yellow Pages remains bullish on its future, citing a 28.5% increase in the rate of gaining new accounts.
Company Outlook
- Yellow Pages anticipates a positive shift towards revenue stability in the first quarter of 2024.
- The company expects continued pressure on margins due to revenue pressures and increased sales force headcount.
Bearish Highlights
- Revenues declined across both digital and print segments, with digital revenues down 12.1% and print revenues down 18.7% year-over-year.
- The decline in revenue is mainly due to a decrease in the number of digital and print customers.
Bullish Highlights
- The rate of gaining new accounts has increased significantly, up 28.5% from the previous year.
- The company has a robust cash balance of approximately $27 million after distributions.
Misses
- The total revenue decline of 13.4% this year compares to a decline of 5.9% for the same period last year.
- Net income for Q4 decreased to $12.2 million, compared to $29.4 million for the same period last year.
Q&A Highlights
- The company addressed questions regarding its financial results, the impact of the economic climate, and its strategic initiatives.
- Yellow Pages' management expressed confidence in their strategies to support revenue growth and profitability.
Yellow Pages Limited's fourth quarter results reflect the company's resilience in the face of economic challenges. While the decline in revenue highlights the impact of the tough market conditions, the company's strategic initiatives and the increase in new accounts are positive indicators for its future performance. The company's leadership remains confident in their ability to navigate through these headwinds and continue on a path towards revenue stability and growth.
InvestingPro Insights
Yellow Pages Limited (Ticker: YLWDF) has showcased a mixed financial landscape in the recent quarter, but there are key factors that investors should consider when assessing the company's value and potential. Here are some insights based on real-time data and InvestingPro Tips:
InvestingPro Data highlights that Yellow Pages Limited has a market capitalization of $106.93 million and trades at a compelling P/E ratio of 2.91. This valuation becomes even more attractive when considering the adjusted P/E ratio for the last twelve months as of Q3 2023, which stands at 2.03. Additionally, the company has a strong dividend yield of 7.52%, reflecting a commitment to returning value to shareholders.
Two InvestingPro Tips that are particularly relevant to Yellow Pages Limited's current financial situation are:
1. The company holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability and provides a cushion against market volatility.
2. Yellow Pages Limited has raised its dividend for 4 consecutive years, demonstrating a consistent and investor-friendly approach to capital allocation.
These tips, coupled with the company's low valuation multiples, such as a P/E ratio that reflects a discount to near-term earnings growth, suggest that the stock may be undervalued. Investors can access more in-depth analysis and additional tips on Yellow Pages Limited by visiting https://www.investing.com/pro/YLWDF. For those interested in a yearly or biyearly Pro and Pro+ subscription, use the coupon code PRONEWS24 to get an additional 10% off. There are 13 more InvestingPro Tips available, which could provide further insights into the company's financial health and stock performance.
Full transcript - Yellow Media (OTC:YLWDF) Q4 2023:
Operator: Good morning, ladies and gentlemen. Welcome to Yellow Pages Limited Fourth Quarter 2023 Earnings Conference 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 fourth 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 very much. Good morning, everyone. Welcome to our fourth quarter 2023 analyst call. I'm joined here today by Sherilyn King, our Senior Vice President of Sales, Marketing, and Customer Service; and by Franco Sciannamblo, our Senior Vice President and Chief Financial Officer. As usual, we'll start out. Franco and I will make some introductory comments, and then we will be available to answer questions. Looking at the fourth quarter and the full year 2023, we are very pleased with the results of the quarter and the year, and especially considering the strong headwinds that have existed through, or did exist through the year in the Canadian small business sector of the economy. We continue to generate strong earnings. Our adjusted EBITDA for the quarter was 29.1%, and for the full year, 32.1% of revenue. As we have announced previously during the fourth quarter, we completed a plan of arrangement under which we distributed $62 million of cash to our shareholders and voluntarily to our defined benefit pension plan. Even after those cash distributions, we have a good, healthy cash balance on hand, which at the end of January, after continuing to generate cash, stood at approximately $27 billion. We feel good about the progress we've continued to make on our initiatives to support bending our revenue curve, including, importantly, continuing to expand our sales force in spite of the headwinds in the economy. We have made really good progress, we think on a number of our underlying metrics, including the current size of the sales force, our rate of turn of customers, and our rate of gaining new accounts. Those all bode well for the future. In particular, our rate of gaining new accounts was 28.5% higher than it was in the previous year, and we are firmly convinced that these fundamentals bode very well for our medium-term and long-term future. In fact, as we look at the quarter that we're now in, the first quarter of 2024, after looking back at four quarters of declining rate of change of revenue compared to the prior year, we expect this quarter to resume our climb toward revenue stability, what we call our revenue curve bending in the right direction. Reflecting all of this, yesterday our Board of Directors voted to increase our dividends, to change our dividend policy, to pay a cash dividend to common shareholders of $0.25 per common share per quarter, increased from $0.20 and did indeed declare a dividend of $0.25 per common share per quarter to be paid on March 15. So all in all, we are continuing to realize that there's remained some headwinds in the economy, but we feel we're doing very well, and we're very bullish about the future, and we're very pleased about the continued strong cash and profitability performance of the company. We'd like to pass the baton to Franco Sciannamblo, Chief Financial Officer, who will provide some additional details on the things that I've just mentioned, and then we'll be available to answer questions. Thank you.
Franco Sciannamblo: Thanks, David, and good morning, everyone. Let me take you through our financial results for the fourth quarter ended December 31, 2023. We'll start with revenues. Our total revenues decreased by $8.7 million, or 13.4% year-over-year, and amounted to $55.9 million for the fourth quarter. 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. Digital revenues decreased by 12.1% year-over-year and amounted to $45.3 million for the three-month period ended December 31, 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 by 18.7% year-over-year and amounted to $10.6 million for the quarter. The decline in revenues is 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. Total revenue decline of 13.4% this year compares to a decline of 5.9% reported for the same period last year. Digital revenues decline of 12.1% this quarter compares to a decline of 4.3% reported for the same period last year. And print revenue decline of 18.7% this quarter compares to a decline of 11.7% reported for the same period last year. The higher decline rates are attributable to a decrease in customer count in both digital and print and to customer claims rates remaining stable in 2023, while 2022 benefited from a substantial improvement. These pressures, augmented by the economic headwinds, were partially offset by higher spend per customer in digital, driven in part by increased pricing. Total revenues for the full year 2023 totaled $239.4 million, a decrease of 10.8% year-over-year. On adjusted EBITDA for the quarter, it was impacted by pressures from lower revenue and ongoing investments in our telesales force capacity, partially offset by the impact of the company's share price on cash settled stock-based compensation expense. Price increases, deficiencies from optimization, cost of sales and reductions in other operating costs, including reductions in our workforce and associated employee expenses. As a result, adjusted EBITDA decreased year-over-year by $4.7 million or 22.6% to $16.2 million. Adjusted EBITDA margin decreased to 29.1% compared to 32.5% 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 some pressure on margins in upcoming quarters. Adjusted EBITDA for the full year 2023 was $76.9 million or 32.1% of revenues. On net income, it decreased to $12.2 million for the fourth quarter of 2023 compared to $29.4 million for the same period last year. The decrease is mainly attributable to a higher recognition of previously unrecognized tax attributes and temporary differences in 2022. Income before taxes decreased from $16.7 million for the fourth quarter of 2022 to $12.4 million for the same period in 2023, mainly due to lower adjusted EBITDA. For the full year 2023, net income totaled $47.4 million. On our workforce, as of December 31, it decreased to 627 employees compared to 629 at the same date last year. Sales force headcount increased by 15 while all other headcount decreased by 17. On the plan of arrangement, as David mentioned during the fourth quarter, we completed the previously announced plan of arrangement whereby the company repurchased from shareholders pro rata and aggregate of 4,440,497 common shares, including 207,717 shares held by trustee at a purchase price of $11.26 per share for a total of $50.5 million, including $0.5 million of transaction costs. The $50.5 million cash outlay was reduced by $2.3 million for the cancellation of 207,717 of YPs shares held by the trustee for a net cash outlay of $48.2 million. Also pursuant to the plan of arrangement, the company advanced $12 million of voluntary incremental cash contribution to the pension plan's windup deficit during the fourth quarter. In addition, consistent with our deficit reduction plan announced in May 2021, during the fourth quarter of 2023, the company made $1.5 million in voluntary incremental cash contribution to the pension plan's windup deficit, including the amounts pursuant to the plan of arrangement. This brings the full year total of voluntary incremental payments to $18 million toward the pension plan's windup deficit. And after all that, our cash on hand at the end of January stood at approximately $27 million. Also, as David announced, the Board of Directors has modified the dividend policy and approved an increase in the quarterly cash dividend from $0.20 to $0.25 per common share, up 25% from previous quarterly dividends. Consequently, the Board also declared a cash dividend of $0.25 per common share payable on March 15 to shareholders of record as at February 27, 2024. This concludes our formal remarks. Thank you for taking the time to join us this morning. We'll now take your questions. Back over to you, Mo.
Operator:
David Eckert: Thank all of you for joining us today. We appreciate your interest. We appreciate your support. And we look forward to chatting with you again in a quarter from now in May. Thank you very much and have a great day. Bye now.
Operator: Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
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