• Digital revenues grew 8.4% year-over-year to reach $138.6 million for the three-month period ended September 30, 2016, now representing 68.9% of total revenues.
• The Company's customer acquisition initiative continued to accelerate and is on track with its 2016 target, having acquired 40,200 new customers during the twelve-month period ended September 30, 2016, as compared to 27,200 new customers acquired during the same period last year. The Company's customer count totalled 243,000 customers as at September 30, 2016, as compared to 246,000 customers as at the same time last year.
• EBITDA adjusted for restructuring and special charges ("Adjusted EBITDA") totalled $56.9 million, or 28.3% of revenues, for the three-month period ended September 30, 2016, as compared to $63.8 million, or 30.3% of revenues, for the same period last year. Free cash flow for the third quarter of 2016 totalled $58.2 million, as compared to $34.6 million during the same period last year.
• The Company anticipates making a total principal mandatory redemption payment of $61.1 million on its 9.25% Senior Secured Notes (the "Notes") on November 30, 2016. Principal mandatory redemption payments will total $97.1 million in 2016, reducing the outstanding balance of Notes to $309.7 million as at November 30, 2016

MONTREAL, Nov. 10, 2016 /CNW Telbec/ - Yellow Pages Limited (TSX: Y) (the "Company") released its operational and financial results today for the quarter ended September 30, 2016 and announced changes to its senior leadership team.

"We have made strong progress on our Return to Growth plan, with an ongoing deleveraging of our balance sheet, with 243,000 small business customers and over $550 million in annualized digital revenues," said Julien Billot, President and Chief Executive Officer of Yellow Pages. "We are now at a pivotal point in our plan where we begin looking at the requirements for the next phase of our evolution. As a result, we are making some changes to our senior leadership team to ensure our organization is best adapted to our current and future environment."

Management Changes
Key management changes include:

• Ginette Maillé, Senior Vice-President and Chief Financial Officer, will retire from Yellow Pages after 13 years with the Company, effective March 1, 2017. The Company has initiated a search process for a new CFO who can be a strategic partner to the CEO. Franco Sciannamblo, Vice-President and Corporate Controller, will work closely with Ms. Maillé during the transition period to ensure a seamless changeover.
• Doug Clarke, Senior Vice-President and Chief Operating Officer, whose core functions include leading the sales and customer excellence business units, will also be retiring on March 1, 2017.
• Dominique Vallée, who developed and oversaw the Company's very successful customer acquisition strategy as Vice-President, Sales, will succeed Mr. Clarke, taking on the newly titled role of Senior Vice-President, Sales and Customer Care.

"We thank Ginette and Doug for their contribution to the organization over the years and wish them all the best in the future," continued Mr. Billot. 

Third Quarter Results 2016
Revenues for the quarter ended September 30, 2016 decreased 4.5% year-over-year to $201.1 million, as compared to $210.6 million for the same period last year. Revenue decline for the quarter is due to lower print revenues. Included in revenues for the quarter were revenues generated by JUICE, acquired on March 17, 2016. On a pro forma basis, which adjusts revenues for the inclusion of JUICE in the third quarter of 2015, revenues decreased 7% year-over-year for the three-month period ended September 30, 2016.

Digital revenues grew 8.4% year-over-year to total $138.6 million for the quarter ended September 30, 2016, representing 68.9% of total revenues. This compares to $127.8 million, or 60.7% of revenues, during the same period last year.  On a pro forma basis, digital revenues during the third quarter of 2016 grew 3% year-over-year. Yellow Pages' local operations contributed favourably to pro forma digital revenue growth, a result of continued acceleration in customer acquisition and ongoing increases in digital spending among the Company's renewing customer base. Pro forma digital revenue growth was also favourably impacted by ComFree/DuProprio's ("CFDP") growing network of home sellers and buyers in Quebec and Ontario, as well as by revenue growth in our national advertising operations (JUICE and Mediative). However, national advertising operations have had a softer performance than anticipated.

In this context, Yellow Pages revises its 2016 revenue guidance and anticipates delivering a year-over-year  pro forma digital revenue growth for the year ending December 31, 2016 between 5% and 8% compared to the previously disclosed guidance of 9% to 11%.

Print revenues decreased 24.4% year-over-year and amounted to $62.6 million during the third quarter of 2016. Print revenue performance was adversely impacted by a decline in the number of print customers and the migration of print marketing spending to digital.

Adjusted EBITDA totalled $56.9 million for the three-month period ended September 30, 2016, as compared to $63.8 million during the same period last year. The Adjusted EBITDA margin for the third quarter of 2016 was 28.3%, as compared to 30.3% for the third quarter of 2015. The decrease in Adjusted EBITDA and Adjusted EBITDA margin was principally due to lower print revenues, changes in product mix, partly offset by the ongoing realization of cost saving initiatives. The Adjusted EBITDA margin was also impacted by the acquisition of JUICE, which operates at a lower Adjusted EBITDA margin relative to Yellow Pages' prior to the acquisition. Given that revenues from JUICE are expected to be lower than initially expected, Yellow Pages anticipates delivering an Adjusted EBITDA margin of approximately 29% for the year ending December 31, 2016, compared to the previously disclosed guidance of 28%.

Net earnings for the three-month period ended September 30, 2016 amounted to $3.8 million, as compared to net earnings of $13.2 million the year prior. Net earnings were principally impacted by lower Adjusted EBITDA and higher depreciation and amortization, mainly resulting from a higher level of capital expenditures in the context of the Company's digital transformation as well as the amortization of intangible assets related to the acquisition of JUICE. For the quarter ended September 30, 2016, the Company recorded basic earnings per share of $0.14, as compared to basic earnings per share of $0.49 the year prior.

Free cash flow for the three-month period ended September 30, 2016 increased to $58.2 million, as compared to $34.6 million during the same period last year. The increase in free cash flow was mainly due to higher cash flows from operating activities, resulting from the settlement of sales tax assessments, as well as lower capital expenditures.

Net debt totalled $390.7 million as at September 30, 2016, as compared to $430.6 million the year prior. The Company anticipates making a payment of $61.1 million on November 30, 2016, bringing the total principal mandatory redemption payments in 2016 to $97.1 million.

Operational Update
"Our digital business continues to grow as we show strong digital customer acquisition. We remain focused on cost control, cash generation and investing in digital growth opportunities," said Mr. Billot.

Enhancing Customer Value Proposition

• The Company's customer count was 243,000 customers as at September 30, 2016, as compared to 246,000 customers as at September 30, 2015. This represents a net customer count decline of 3,000 year-over-year, a significant improvement when compared to 14,000 net customers lost during the same period last year; 
• Yellow Pages continues to accelerate customer acquisition, with 40,200 new customers acquired during the twelve-month period ended September 30, 2016, as compared to 27,200 new customers acquired during the same period last year. Various initiatives are being deployed to promote lead generation and conversion within the Company's sales force. These include targeted lead-generation advertising campaigns, new sales tools, as well as new product offerings specifically tailored to respond to the needs profile of the small and medium-sized business advertiser.
• The customer renewal rate was of 83% for the twelve-month period ended September 30, 2016, as compared to a renewal rate of 85% during the same period last year. The customer renewal rate remains adversely impacted by accelerated levels of customer acquisition. Generally, new customers churn at higher rates than older customer cohorts. In an effort to protect customer renewal rates, Yellow Pages has deployed specialized onboarding teams as well as retention teams.

Strengthening its Media Assets

• Total digital visits (TDV) totalled 109.4 million for the quarter ended September 30, 2016, as compared to 124.1 million during the same period last year. Total digital visits measures the number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, C411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of the Company's application syndication partners. TDV performance improved slightly during the third quarter of 2016 as compared to the second quarter of 2016, yet remained adversely impacted by ongoing changes that started in late 2015 to the layout of Google's mobile web search results pages, which pushed organic results for all mobile web publishers lower on Google's search pages. Yellow Pages' leading ranking among Google's organic listings on mobile web, however, remained relatively unchanged despite this layout change, a reflection of the strong relevancy and quality of the Company's data.
• Data-driven improvement and adjustment of user functionalities and experience remains a key focus for Yellow Pages in its platforms. Ongoing improvements to the search results page ("SERP") of YP.ca as well as new layouts to the merchant pages took place with the objective of driving more clicks to advertisers. Partnerships continue to provide added-value for users, such as that with Apple Maps, by creating more engaged audiences, growing direct traffic, and delivering deeper ROI for merchants advertising on Yellow Pages' digital media.

Extending its Brand Promise

• In an effort to raise awareness of Yellow Pages' digital marketing programs and the effect they have on the growth of local businesses, the Company opened its own small business, The Lemonade Stand, in the Beaches neighbourhood of Toronto, Ontario. Operating as a pop-up store selling lemonade and lemon-based treats, the Company grew The Lemonade Stand from a nonexistent enterprise using nothing but Yellow Pages' digital marketing solutions. The success of The Lemonade Stand was communicated via a national multimedia campaign. The campaign, which began at the end of May 2016, produced a material uplift in Yellow Pages' perception as a credible supplier of digital advertising and marketing solutions. It also increased the likelihood of advertisers to consider Yellow Pages as a supplier for their marketing needs. The campaign can be viewed at the Company's 360^o Business Centre: https://businesscentre.yp.ca/the-lemonade-stand .

As the Company continues to execute on its Return to Growth Plan, the organization is undertaking a process to determine how to best pursue the continued evolution of the business and the accompanying strategy. We have initiated a review of our business strategy and a review of our management outlook with the purpose of supporting the continued long-term success of our digital-first business. The areas we will continue to focus on include the portfolio of products, the go-to market strategy, the strength of our brands, our operational platforms, long-term revenue and Adjusted EBITDA growth, and our capital allocation policy. The Company anticipates completing this exercise in early 2017.  

Conference Call
Yellow Pages Limited will hold an analyst call at 8:30 a.m. (Eastern Time) on November 10, 2016 to discuss third quarter 2016 results. The call may be accessed by dialing (416) 340-2218 within the Toronto area, or 1 866 225-0198 outside of Toronto.

The call will be simultaneously webcast on the Company's website at
https://corporate.yp.ca/en/yellow-pages-news/events/release-q3-2016-financial-and-operational-results/

The conference call will be archived in the Investors section of the site at https://corporate.yp.ca/en/investors/financial-events-presentations/

A playback of the call can also be accessed from November 10 to December 11, 2016 by dialing (905) 694-9451 within the Toronto area, or 1 800 408-3053 outside of Toronto.

The conference passcode is 4654766.

About Yellow Pages Limited
Yellow Pages Limited (TSX: Y) is a Canadian digital media and marketing solutions company that supports local economies by helping neighbourhood businesses reach new customers and foster stronger relationships with existing clients through its various media and products. Yellow Pages holds some of Canada's leading local online search properties including YP.ca™, the ComFree/DuProprio network, RedFlagDeals.com™, Canada411.ca, 411.ca, Bookenda.com, dine.TO and YP NextHome. The Company also holds the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, 411, Bookenda and YP NextHome mobile applications and Yellow Pages™ print directories. Through Mediative, Yellow Pages is a leader in national advertising through its various channels and services devoted to North American businesses. The Company also owns JUICE Mobile, a mobile advertising technology company whose proprietary programmatic platforms facilitate the automatic buying and selling of mobile advertising between brands and publishers. 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, results of operations and businesses of the Company. These statements are forward-looking as they are based on our current expectations, as at November 10, 2016, 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 November 10, 2016 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.

Non-IFRS Measures¹
In order to provide a better understanding of the results, the Company uses the term Adjusted EBITDA, defined as income from operations before depreciation and amortization, and restructuring and special charges. Adjusted EBITDA is not a performance measure defined under IFRS and is not considered an alternative to income from operations or net earnings in the context of measuring Yellow Pages' performance. Adjusted EBITDA does not have a standardized meaning and is therefore not likely to be comparable to similar measures used by other publicly traded companies. Management uses Adjusted EBITDA to evaluate the performance of its business as it reflects its ongoing profitability. Management believes that certain investors and analysts use Adjusted EBITDA to measure a company's ability to service debt and to meet other payment obligations or to value companies in the media and marketing solutions industry as well as to evaluate the performance of a business.

As well, free cash flow is a non-IFRS measure generally used as an indicator of financial performance. It should not be seen as a substitute for cash flow from operating activities. Free cash flow is defined as cash flow from operating activities, as reported in accordance with IFRS, less an adjustment for capital expenditures. Free cash flow is not a standardized measure and is not comparable with that of other public companies. Management considers free cash flow to be an important indicator of the performance of its business as it shows how much cash is available to repay debt and to make sound investment decisions. Management believes that certain investors and analysts use free cash flow to value a business and its underlying assets as well as to evaluate a company's performance.

Net debt is a non-IFRS measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to comparable to similar measures presented by other publicly traded companies. Net debt is defined as current portion of long-term debt plus long-term debt and exchangeable debentures, less cash. Management considers net debt to be an important indicator of its financial leverage as it represents the amount of debt that is not covered by available cash. Management believes that certain investors and analysts use net debt to determine a company's financial leverage.

SOURCE Yellow Pages Limited