MONTREAL, QUEBEC -- (Marketwire) -- 08/04/11 -- Yellow Media Inc. (TSX: YLO) released second quarter results today, further demonstrating management's commitment to invest in its business transformation and ensure it maintains its leadership position in Canada.
In order to improve the financial risk profile and capital position of the Company, the Board of Yellow Media Inc. (Yellow Media) has decided to reduce cash dividends to common shareholders from $0.65 to $0.15 annually.
In an effort to increase focus on its core business and strengthen its balance sheet, Yellow Media announced the sale of Trader Corporation to Apax Partners on March 25, 2011. This transaction was completed on July 28, 2011 for a purchase consideration of $708 million, net of expenses and estimated working capital, fees and other adjustments.
Proceeds from this divestiture combined with savings from the reduction in dividends on common shares will be used to pay down debt obligations and to reinvest in the business.
As a result of this divestiture, the Company has reclassified the results of the disposed business as discontinued operations. Accordingly, results of operations for the first six months ended June 30, 2011 exclude the results of the disposed business while the prior period income statement and cash flows have been restated to reflect this change.
For the quarter ended June 30, 2011, the Company recorded a net loss from continuing operations of $20.7 million compared to net earnings of $53.0 million for the same quarter in 2010, resulting primarily from a loss of $50.5 million related to the investment in Ziplocal. The Company reported a net loss of $14.3 million for the quarter compared to earnings of $52.0 million for the prior year.
Net loss per share from continuing operations was $0.05 compared to net earnings per share of $0.09 for the same quarter last year. Adjusted earnings per common share from continuing operations for the quarter was $0.17 versus $0.27 last year.
Revenues decreased 4.8% from $360.1 million to $342.7 million resulting from lower print revenues as well as lower revenues associated with our US operations. This was partly offset by higher organic online revenues and revenues generated from Mediative and Canpages. Online revenues for the second quarter of 2011 were $85.9 million or approximately $345 million on an annualized basis, representing growth of 33% versus last year. Online revenues now represent more than 25% of total revenues compared to 18% in the second quarter of 2010.
Income from operations was $110.6 million for the quarter compared to $143.8 million in the second quarter of 2010. EBITDA for the quarter declined from $204.0 million to $176.5 million and EBITDA margin for the second quarter was 51.5% compared to 56.6% for the same period last year. The decrease is mainly attributable to print revenue pressure, higher costs associated with Mediative and Canpages as well as investment in the launch of our 360 degrees Solution. The Company also recorded an unusual bad debt expense of $5 million during the quarter.
"We continue to make progress on YPG's digital transformation", said Marc P. Tellier, President and Chief Executive Officer of Yellow Media. "Our primary focus is now on the execution of our 360 degrees Solution, which is designed to deliver a better customer experience from the moment of sale through fulfillment of the actual product. We expect improving sales of our 360 degrees Solution to contribute to results in the fourth quarter."
YPG launched its new compelling value proposition to Canadian businesses during the first quarter of 2011. The Yellow Pages 360 degrees Solution (www.yellowpages.ca/360) integrates all of YPG's existing services (online, mobile and print) and offers a single-point access to Canada's largest local search networks. These solutions are tailored to the individual advertiser and include new high-demand services such as website creation and management, and search engine marketing and optimization.
The Company continues to invest in its business transformation, through traffic and distribution partnerships, a renewed commitment to branding and promotion, expanded capabilities to service advertisers, as well as enhancements to the online and mobile user experience.
During the quarter, YPG went live with a completely redesigned Canada411.ca. Canada411.ca is the most frequented and trusted source of information to Find People and now includes results aggregated from the leading social media networks of Facebook®, Twitter® and Linkedin®.
In July, the Company launched its first two mobile products: Brand Filter, enabling national businesses to showcase their brand in relevant commonly-searched categories and Sponsored Placement, allowing businesses to place themselves at the top of the list for any mobile search results generated by users.
YPG continues to develop partnerships and distribution agreements to increase traffic to advertisers, ensuring their businesses appear in major online and social networking destinations. This is done in several ways, notably through the YellowAPI Developer Program which funds the development of mobile applications or web properties driving back to local advertisers. The Company also entered into partnerships with Skype (Free Call service to connect Skype users to local business for free) and foursquare to generate more leads to online advertisers.
Wall2Wall Media
Following the sale of Trader, Yellow Media created a new division entirely focused on its real estate portfolio. The new division called Wall2Wall Media (W2W) manages publications and services related to the real estate, employment and hospital news print and online verticals. W2W produces over 75 print publications and four websites reaching over 23 million Canadians each year and covering the new homes, new condos, rentals, resale, as well as home and decor markets.
Normal Course Issuer Bid
In order to maximize funds available for debt paydown, the Company has decided to suspend activity under its normal course issuer bid for common shares. The Company will continue to be active in repurchasing its first preferred shares in order to manage the profile of its maturing obligations.
Baseline Dividend and Capital Structure
After careful consideration and analysis, in order to improve its financial risk profile and capital position, the Board of Yellow Media has decided it is in the long term best interest of the Company and its stakeholders to reduce cash dividends to common shareholders from $0.65 to $0.15 annually.
Yellow Media is now targeting a baseline dividend of $0.15 annually, which represents a prudent dividend level. This new level of payout should provide sufficient financial flexibility to Yellow Media while it transitions its business online.
The Company has decided to move from a monthly to a quarterly dividend payment. For the remaining two months of the third quarter of 2011, a dividend of $0.025 will be payable on October 17, 2011 to shareholders of record on September 30, 2011. A quarterly cash dividend of $0.0375 will be payable on January 16, 2012 to shareholders of record at the close of business on December 30, 2011.
"Given our focus on transitioning our business online, a reduction in cash dividends to shareholders is the right decision and in the best interest of the Company", said Marc P. Tellier, President and Chief Executive Officer of Yellow Media. "The recent closing of the sale of Trader Corporation combined with a reduction in cash dividends to shareholders will enable us to meaningfully reduce debt, augment our liquidity and capital resources to fund our business plan."
Yellow Media is committed to improving its financial profile through further debt reduction by pursuing a prudent financial policy and by maintaining a capital structure that provides flexibility through diverse funding sources and timing of its debt maturities.
Management's current focus is to ensure a strong financial foundation upon which to execute the Company's digital transformation. Yellow Media expects to achieve stronger credit protection measures through sustained cash flow generation and deleveraging of its balance sheet, and now targets net debt to EBITDA on a sustained basis of approximately 2 times compared with 2.8 to 3.2 times currently.
Outlook
The development and execution of Yellow Media's corporate strategy and operating plans continue to be guided by the Company's vision of being Canada's leading performance media and marketing solutions company, bringing local consumers and businesses together via its network of mobile, web and print properties.
In building a full-serve business model for SMEs, the Company continues to leverage its salesforce, brand and content. In addition, the Company continues to pursue investments in new product introduction aimed at accelerating its transition to online and mobile. The Company's new framework for the balance of 2011 and full-year 2012 requires a sharper focus on the provisioning of new services for its customers, renewed commitment to branding and promotion and additional investments in traffic and distribution partnerships.
As the Company transforms its business, uncertainty surrounding whether and when new product introductions will compensate for the declining trend in print revenues may cause Yellow Media's actual results to be different than expectations. As a result, the Company has withdrawn guidance for the current fiscal year. The Company has also decided to discontinue providing annual revenue, EBITDA and earnings guidance.
The Company's focus is to manage the transformation of the business for the long term. Management remains committed to high levels of disclosure and transparency to investors, and will show visibility on recent and expected trends in key operating metrics, product/revenue mix, product life cycle, EBITDA margins, capital expenditures, restructuring, special charges and other notable items impacting results of operations.
Yellow Media anticipates growing online revenues to 50% of total revenues by the end of 2014. Through successful integration and cost containment initiatives, the Company's EBITDA margins should stabilize at approximately 50% over the next three years.
Investor Conference Call
Yellow Media Inc. will hold an analyst and media call at 1:00 pm (Eastern Time) on August 4, 2011 to discuss the second quarter of 2011 results. The call may be accessed by dialing (416) 695-6616 within the Montreal area, or 1 800 355-4959 outside of Toronto. The call will be simultaneously webcast on the Company's web site at http://www.ypg.com/en/investors/financial-reports/2011/quarterly-reports/second-quarter. The conference call will be archived in the Investor Center of the site at www.ypg.com. A playback of the call can also be accessed from August 4 to August 12, 2011 by dialing (905) 694-9451 from within the Toronto area, or 1 800 408-3053 outside Toronto. The conference passcode is 2127253.
About Yellow Media Inc.
Yellow Media Inc. (TSX: YLO) is Canada's #1 Internet company through its network of companies that include Yellow Pages Group and Canpages. Yellow Media Inc. owns and operates some of Canada's leading properties and publications including Yellow Pages™ directories, YellowPages.ca™, Canada411.ca™, RedFlagDeals.com, and LesPAC.com. Its online destinations reach approximately 9.2 million unique visitors monthly and its mobile applications for finding local businesses and deals have been downloaded over 2.5 million times. Yellow Media Inc. is also a leader in national digital advertising through Mediative, a digital advertising and marketing solutions provider to national agencies and advertisers. For more information, visit www.ypg.com.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements about the objectives, strategies, financial conditions, results of operations and businesses of the Company. These statements are forward-looking as they are based on our current expectations, as at August 4, 2011, 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 6 of our August 4, 2011 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.
Financial Highlights
(in thousands of Canadian dollars - except share information)
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For the three-month For the six-month periods
periods ended June 30, ended June 30,
Yellow Media Inc. 2011 2010 2011 2010
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Revenues $342,738 $360,118 $692,110 $699,802
Income from operations $110,620 $143,798 $247,484 $314,377
Net (loss) earnings
from continuing
operations ($20,698) $52,953 $49,755 $173,340
Basic (loss) earnings
per share from
continuing operations
attributable to common
shareholders of Yellow
Media Inc. ($0.05) $0.09 $0.08 $0.32
Cash flow from
operating activities
from continuing
operations $87,923 $165,777 $199,624 $293,466
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EBITDA(1) $176,476 $203,978 $366,511 $402,550
EBITDA margin(1) 51.5% 56.6% 53.0% 57.5%
Adjusted earnings from
continuing
operations(1) $89,225 $136,259 $206,200 $273,188
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Weighted average number
of common shares
outstanding 514,623,616 503,465,369 512,525,771 504,105,534
Adjusted earnings per
common share from
continuing operations $0.17 $0.27 $0.40 $0.54
Dividends on common
shares $83,521 $100,653 $166,985 $201,686
Dividends declared per
common share $0.16 $0.20 $0.32 $0.40
Payout ratio 94% 74% 80% 74%
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Note: The financial information presented herein has been prepared on the basis of International Financial Reporting Standards (IFRS) for interim financial statements. The amounts in this table for the three and six-month periods ended June 30, 2010 have been restated to reflect our adoption of IFRS, effective from January 1, 2010. Please refer to Note 19 of the accompanying interim condensed consolidated financial statements for a summary of the differences between our consolidated financial statements previously prepared under Canadian GAAP and those under IFRS for the three and six-month periods ended June 30, 2010.
Non-IFRS Measures(1)
In order to provide a better understanding of the results, the Company uses the term EBITDA, defined as income from operations before depreciation and amortization, acquisition-related costs and restructuring and special charges. Management believes this measure is reflective of ongoing operations. The Company also uses the term Adjusted earnings from continuing operations, defined as net (loss) earnings from continuing operations available to common shareholders excluding amortization of intangible assets attributable to shareholders, non-cash financial charges, deferred income taxes and non-recurring items such as acquisition-related costs, restructuring and special charges, and impairment of investment in associate, where all adjustments except deferred income taxes are net of the income tax effect thereon calculated at the statutory income tax rate. These terms do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. Management believes EBITDA and Adjusted earnings from continuing operations to be important measures as they allow management to assess the performance of the ongoing business. The table below is a reconciliation of Adjusted earnings from continuing operations to the most comparable IFRS financial measures:
Adjusted earnings from continuing operations
(in thousands of Canadian dollars - except share information)
For the three-month For the six-month periods
periods ended June 30, ended June 30,
2011 2010 2011 2010
Net (loss) earnings
from continuing
operations ($20,698) $52,953 $49,755 $173,340
Attributable to non-
controlling interest 190 - 357 -
Dividends to preferred
shareholders (5,662) (5,779) (11,372) (11,477)
Net (loss) earnings
from continuing
operations available
to common shareholders
of Yellow Media Inc. ($26,170) $47,174 $38,740 $161,863
Amortization of
intangibles
assets(1)(4) 36,394 23,695 76,927 38,977
Acquisition-related
costs(2)(4) 4,494 13,974 5,073 16,508
Restructuring and
special charges(4) 8,571 6,293 8,571 6,293
Other(3)(4) 38,558 (709) 47,459 68
Deferred income taxes 27,378 45,832 29,430 49,479
Adjusted earnings from
continuing operations $89,225 $136,259 $206,200 $273,188
Weighted average number
of common shares
outstanding 514,623,616 503,465,369 512,525,771 504,105,534
Adjusted earnings per
common share from
continuing
operations(4) $0.17 $0.27 $0.40 $0.54
Dividends on common
shares $83,521 $100,653 $166,985 $201,686
Dividends declared per
common share $0.16 $0.20 $0.32 $0.40
Payout ratio 94% 74% 80% 74%
(1) Represents amortization of intangible assets attributable to
shareholders.
(2) Acquisition-related costs are excluded from the calculation as they do
not reflect the ongoing operations of the business.
(3) Includes amounts relating to other non-recurring items, such as
impairment of investment in associate and non-cash financial charges.
(4) Items are net of income taxes using the combined statutory provincial
and federal tax rate of 27.9% (29.9% for 2010).
Contacts:
Investor Relations
Anne-Sophie Roy
Director - Corporate Finance and Investor Relations
(514) 934-2828
anne-sophie.roy@ypg.com
Media
Annie Marsolais
Director, Corporate Communications
(514) 934-4016
annie.marsolais@ypg.com
