Earnings call transcript: Yellow Pages sees revenue decline in Q4 2024

Yellow (OTC:YELLQ) Pages, with a market capitalization of $107.83 million, reported its fourth-quarter earnings for 2024, revealing a notable decrease in revenues and adjusted EBITDA. Despite these challenges, the company maintained a positive net income. The earnings call highlighted ongoing efforts in customer acquisition and cost optimization, although revenue pressures remain a concern for future quarters. According to InvestingPro analysis, the company maintains a GREAT financial health score of 3.12 out of 5, suggesting strong fundamental stability despite current headwinds.

Key Takeaways

• Fourth-quarter revenue decreased by 8.1% year-over-year.
• Full-year revenue fell by 10.3%.
• Adjusted EBITDA for Q4 dropped by 49.3%.
• Net income for the quarter was $2.7 million, down from $12.2 million the previous year.
• The company saw a 6% increase in new customer acquisitions in Q4.

Company Performance

Yellow Pages experienced a challenging fourth quarter in 2024, with significant declines in both quarterly and annual revenues. The company’s Q4 revenue was $51.4 million, marking an 8.1% decrease from the same period last year. For the full year, revenues totaled $214.8 million, a 10.3% drop compared to 2023. Trading at a P/E ratio of 4.67 and an EV/EBITDA of 3.0, the stock appears attractively valued relative to industry peers. Despite these declines, the company reported a net income of $2.7 million for the quarter, although this was significantly lower than the $12.2 million reported in Q4 2023.

Financial Highlights

• Revenue: $51.4 million in Q4 2024, an 8.1% decrease year-over-year
• Full-year revenue: $214.8 million, down 10.3% from 2023
• Q4 Adjusted EBITDA: $8.2 million, a 49.3% decrease
• Full-year net income: $25 million

Outlook & Guidance

Looking ahead, Yellow Pages remains optimistic about its future, despite anticipated margin pressures. The company expects continued challenges due to revenue pressures and investments in expanding its telesales force. The company maintains an attractive dividend yield of 8.93% and a strong free cash flow yield of 24%, supporting its shareholder returns. The board has approved a plan to de-risk the pension plan, and a dividend of $0.25 per share was declared. InvestingPro analysis indicates the stock is currently undervalued based on its Fair Value model, with additional insights available in the comprehensive Pro Research Report.

Executive Commentary

CEO David Eckert expressed satisfaction with the Q4 results, stating, "We’re quite pleased with our results reported for the fourth quarter." He also emphasized the company’s long-term potential, saying, "We continue to believe that these fundamentals bode quite well for our medium and long-term future." CFO Franco Chenamblo acknowledged the ongoing challenges, noting, "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."

Risks and Challenges

• Continued decline in digital and print product revenues could impact future growth.
• Margin pressures from ongoing investments in telesales capacity may affect profitability.
• Economic conditions and market competition pose potential risks to achieving revenue targets.
• Workforce reductions could impact operational efficiency.
• The company’s ability to maintain customer acquisition momentum is crucial for future performance.

Full transcript - Alleghany Corp (NYSE:Y) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen. Welcome to Yellow Pages Fourth Quarter twenty twenty four Earnings Release Call. Today’s conference call contains forward looking information about Yellow Pages’ outlook, objectives and strategy. These statements are based assumptions and are subject to important risks and uncertainties. Yellow Pages’ actual results could differ materially from expectations discussed.

The details of Yellow Pages caution regarding forward looking information, including key assumptions and risks can be found in Yellow Pages management discussion and analysis for the fourth quarter of twenty twenty four. This call is being recorded and webcast, and all of the disclosure documents are available on the company 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, President and Chief Executive Officer, Yellow Pages: Thank you very much. Good morning everyone and welcome to our fourth quarter analyst call. We really appreciate your interest. As usual, today I’m joined by Frank, our Chief Financial Officer and by Cherilyn 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 was 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 a solid quarterly earnings. Our adjusted EBITDA for the quarter and for the full year was 1623.7% 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 $49,000,000 and that’s as of the 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 twenty twenty one. So almost four years ago, we made a final $1,500,000 worth of voluntary incremental payments in the fourth quarter of twenty twenty four. And for the full year 2024, dollars ’6 million of those voluntary payments toward the defined benefit pension plans wind up deficit.

And those mark 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 03/17/2025 to shareholders of record as of 02/26/2025.

So we feel we’ve 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 Chenamblo, our Chief Financial Officer to provide you some additional details.

Franco Chenamblo, Chief Financial Officer, Yellow Pages: Good morning, everybody, and thanks, David. So let me take you through our financial results for the fourth quarter ended 12/31/2024, starting with revenues. Our revenues decreased by $4,500,000 or 8.1% year over year and amounted to $51,400,000 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 $42,000,000 for the three month period ended 12/31/2024, 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 $9,400,000 for the three month period ended 12/31/2024, 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 12/31/2024 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 full year 2024, the revenues totaled $214,800,000 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, 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 $8,000,000 or 49.3% to $8,200,000 for the fourth quarter.

Adjusted EBITDA margin decreased to 16% compared to 29.1% for the same period last year. The reevaluation of cash settled stock based compensation liabilities resulted in the charge of $1,500,000 for the three month period ended 12/31/2024, compared to a recovery of $1,600,000 for the same period last year. This was driven by the 23% increase in YP share price during the fourth quarter of twenty twenty four 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 $50,800,000 or 23.7% of revenues.

For adjusted EBITDA less CapEx, the fourth quarter decreased by $7,500,000 year over year to $7,800,000 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 $48,400,000 or 22.5% of revenues. For net income, we continue to be positive. It did decrease to $2,700,000 for the fourth quarter of twenty twenty four compared to $12,200,000 for the same period last year due to lower adjusted EBITDA and higher tax expense for the three month period ended 12/31/2024. For the full year 2024, net income totaled $25,000,000 On our workforce, it decreased to five sixty five employees compared to six twenty seven at the same date last year, a decrease of 10% despite our increases in telosales force capacity.

Pension contributions, as David mentioned already, we consistent with our deficit reduction plan that we announced in May 2021, the company made the last $1,500,000 involuntary incremental cash contributions during the fourth quarter of twenty twenty four and $6,000,000 for the full year are 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 derisk the pension plan and protect the realized investment gains and the wind up ratio. One one one one Sorry about that.

I think we’re having some technical difficulties here with the snowstorm that we’re experiencing in Montreal. But I think I hear 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 over to Maud for questions. So the Board has declared a cash dividend of $0.25 per common share payable on 03/17/2025, to show the record as at 02/26/2025.

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 Maude. And hopefully we stay connected.

Conference Operator: Thank you. We will now take questions from the telephone you. We have no questions registered at this time. I would now like to turn the meeting back over to Mr. Eckert.

David Eckert, President and Chief Executive Officer, Yellow Pages: 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 ninety 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.

Conference 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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