Yellow Pages Limited

Thank you very much. Good morning, everyone and welcome to our fourth quarter analyst call.

We really appreciate your interest. As usual, today, I am joined by Franco Sciannamblo, our Chief Financial Officer; and by Sherilyn King, our Senior Vice President of Sales, Marketing and Customer Service.

I will begin with some overview comments and Franco will provide a little more detail on that and then we’ll be happy to answer any questions you might have. We’re quite pleased with our results reported for the fourth quarter, particularly for the fourth consecutive quarter.

This quarter, we report a favorable, what we call bending of the revenue curve this quarter, as our rate of change in revenue is better than the change reported for the previous quarter. This is really key.

We also report continued good progress on metrics that underlie that revenue generation, including the size of our sales force increasing as well as the deceleration of the customer count decline rate fueled by an increase in new customer acquisitions, which were 6% higher than the same quarter last year and 28% higher for the year overall. We continue to believe that these fundamentals bode quite well for our medium and long-term future.

We also today for this quarter report solid quarterly earnings. Our adjusted EBITDA for the quarter and for the full year was 16.0% and 23.7% of revenue, respectively, even with our continued significant investments in revenue initiatives, including the steady, continued expansion of our sales force.

In addition, I want to point out that the 23% increase in the market price of our shares during the fourth quarter resulted in a non-cash charge to our reported earnings due to the way that we account for stock-based compensation, which did put some additional pressure on adjusted EBITDA. This and some other one-time factors accounted for several percentage points of one-time lower EBITDA.

We have a very healthy cash balance. Our steady cash generation, which continues, has grown our cash on hand to approximately $49 million and that’s as of the end of January – the end of January.

Also during the fourth quarter, we realized a very important milestone, as we completed our voluntary payments into our pension plan under our deficit reduction plan. It was consistent with that deficit reduction plan that we announced in May of 2021 so almost 4 years ago.

We made a final $1.5 million worth of voluntary incremental payments in the fourth quarter of 2024 and for the full year 2024 $6 million of those voluntary payments toward the defined benefit pension plans wind up deficit. And those marked the last voluntary payments intended under that deficit reduction plan.

As a result of the deficit reduction plan and the advancement of the voluntary incremental cash contributions to the pension plan pursuant to the plans of arrangement in 2022 and in 2023, the wind up ratio of our defined benefit pension plan reached over 95% in the quarter. As a result, our Board has approved a plan to de-risk the pension plan and protect those realized investment gains and the wind-up ratio.

And this is so important for our retirees, for other members of the defined benefit pension plan and for the company, frankly, as the company now does not have any further voluntary payments to make under that deficit reduction plan. Finally, our Board has declared a dividend of $0.25 per common share to be paid on March 17, 2025 to shareholders of record as of February 26, 2025.

So we feel we have had a very good continued progress, has capped another good year of progress, and we continue to be optimistic about our future as we make step by step by step progress. Thank you very much.

And I’d like to pass the microphone over to Franco Sciannamblo, our Chief Financial Officer, to provide you some additional details.

Good morning, everybody and thanks, David. So let me take you through our financial results for the fourth quarter ended December 31, 2024.

Starting with revenues, our revenues decreased by $4.5 million, or 8.1% year-over-year and amounted to $51.4 million for the fourth quarter, an improvement from the decrease of 9.4% reported just last quarter. The year-over-year 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 service products, thereby creating pressure on our gross profit margins.

For digital revenues, they decreased 7.2% year-over-year and amounted to $42 million for the 3-month period ended December 31, 2024, an improvement from the decrease of 8.7% reported last quarter. The year-over-year decline was mainly attributable to a decrease in digital customer count and to a lesser extent, the decrease in average spend per customer.

On print revenues, they decreased 11.5% year-over-year and amounted to $9.4 million for the 3-month period ended December 31, 2024, an improvement from the decrease of 12.4% reported last quarter. The decline in revenue was mainly attributable to the decrease in the number of print customers, while the spend per customer has improved year-over-year driven by price increases.

The decline rate of revenues improved overall during the quarter ended December 31, 2024 compared to the same period last year. The improvements were partly due to the deceleration of the customer count decline rate fueled by an increase in new customer acquisitions, partially offset by an increase in churn.

In addition, 2023 decline rates were negatively impacted by customer claim rates remaining stable in 2023, while 2022 benefited from a substantial improvement in customer claims. For the total year – for the full year 2024, the revenues totaled $214.8 million, a decrease of 10.3% year-over-year.

I move over to adjusted EBITDA. For the fourth quarter, it was impacted from pressures from our lower revenue, change in product mix, continued investments in our telesales force capacity, an increase in bad debt expense and the impact of the share price on cash settled stock-based compensation expense as well as the nature of IT spend, whereby more of the expense was classified as operating rather than capital partially offset by price increases, the efficiencies from optimization and cost of sales and reductions in other operating costs, including reductions in our workforce and associated employee expenses, which include also variable comp.

As a result, adjusted EBITDA decreased year-over-year by $8 million or 49.3% to $8.2 million for the fourth quarter. Adjusted EBITDA margin decreased to 16% compared to 29.1% for the same period last year.

The revaluation of cash settled stock-based compensation liabilities resulted in the charge of $1.5 million for the 3-month period ended December 31, 2024 compared to our recovery of $1.6 million for the same period last year. This was driven by the 23% increase in YP’s share price during the fourth quarter of 2024 compared to a decline of 8% during the same quarter in 2023.

Revenue pressures and continued investments in our telesales force capacity partially offset by continued optimizations will continue to cause some pressure on margins in upcoming quarters. Adjusted EBITDA for the full year 2024 was $50.8 million, or 23.7% of revenues.

For adjusted EBITDA less CapEx for the fourth quarter decreased by $7.5 million year-over-year to $7.8 million mainly due to the decrease in adjusted EBITDA partially offset by the decrease in CapEx spend year-over-year due in part to the nature of the IT spend, as I mentioned before, whereby more of the expense was classified as operating rather than capital. And for the full year adjusted EBITDA less CapEx was $48.4 million or 22.5% of revenues.

For net income, we continue to be positive. It did decrease to $2.7 million for the fourth quarter of 2024 compared to $12.2 million for the same period last year due to lower adjusted EBITDA and higher tax expense for the 3-month period ended December 31, 2024.

For the full year 2024, net income totaled $25 million. On our workforce, it decreased to 565 employees compared to 627 at the same date last year, a decrease of 10% despite our increases in telesales force capacity.

Pension contributions, as David mentioned already, consistent with our deficit reduction plan that we announced in May 2021, the company made the last $1.5 million in voluntary incremental cash contributions during the fourth quarter of 2024 and $6 million for the full year, our defined benefit plans wind up deficit, these marking the last voluntary payments intended under the deficit reduction plan. As a result of the deficit reduction plan and the advancement of the voluntary incremental cash contributions to the DB plan and pursuant to the plans of arrangement in 2022 and 2023, as David mentioned also, the wind-up ratio reached over 95% and as a result, our Board approved the plan to de-risk the pension plan and protect realized investment gains and the wind-up ratio [Technical Difficulty]

Hi, sorry about that. I think we are having some technical difficulties here with the snowstorm that we are experiencing in Montreal.

But I think here it was just a minute ago, and so it was probably during my comment on the dividends. So I’ll just repeat that comment and then pass it over to Mode for questions.

So, the Board has declared a cash dividend of $0.25 per common share payable on March 17, 2025 to show the record as at February 26, 2025. This concludes our formal remarks.

Thank you for taking time to join us this morning. We will now take your questions and I’ll pass it back over to Mode.

Hopefully, we stay connected.

Yes, thank you and thank you all very much for joining us this morning. We appreciate your interest and support and we look forward to getting back together with you approximately 90 days from now.

Have a good time and those of you who are also in Montreal good luck with the snowstorm. Take care.

Bye now.