Business News

Yellow Media Inc. Reports Q3 2010 Financial Results

Wednesday 03. November 2010 - Conversion to a corporation on November 1, 2010; Distributable cash per unit of $0.35, in line with last year; Record online revenues of $463 million on an annualized basis; Online revenues now represent 27% of revenues

Yellow Media Inc. (TSX:YLO) announced today its results for the third-quarter of 2010. Concurrent with this release Yellow Media Inc. begins a new era as a corporation. YPG’s timely conversion to a corporation coincides with improving economic conditions and a stream of new products and initiatives which are expected to accelerate YPG’s ongoing digital transformation.
For the third quarter ending September 30, 2010, net earnings stood at $74.7 million compared to a loss of $168.5 million (or a gain of $146.5 million before the Trader Impairment Charge) for the same period in 2009. Income from operations was $131.9 million compared to a loss of $124.1 million for the same quarter twelve months ago. Meanwhile cash flow from operating activities was $142.7 million versus $168.5 million for the same 2009 period.
Revenues grew by 5% from $408.3 million to $428.6 million, while EBITDA was $221.5 million compared to $226.2 million in 2009. EBITDA excluding non-recurring items(1) remained stable at $226.0 million compared to $226.2 million in the previous year. EBITDA on a reported basis is net of non-recurring items1 aggregating $4.4 million in the third quarter.
“Advertiser confidence is improving and we are encouraged by early signs of stabilization,” said Marc P. Tellier, President and Chief Executive Officer of Yellow Pages Group. “In today’s rapidly changing landscape of digital and social media, Canadian SMEs realize that they need a trusted ally like YPG in order to reach new customers. With our attractive products and solutions, along with our growing network of print, online and mobile properties, we are helping SMEs optimize their marketing spend and grow their business.”
Combined online revenues for Directories and Vertical Media were $115.7 million for the quarter, or $463 million on an annualized basis. This represents organic growth of 15% for the quarter and 17% for the nine-month period ended September 30, 2010.
Third-quarter distributable cash was $176.9 million or $0.35 per unit compared to $179.2 million or $0.35 per unit during the same quarter last year.
Directory Business
For the third quarter of 2010, the Directories business posted revenues of $348.9 million, in line with 2009 revenues of $346.8 million. EBITDA excluding non-recurring items1 was $202.9 million, representing a margin of 58.2%, as compared with EBITDA of $208.1 million and a 60% margin in the previous year. YPG’s control over expenditures once again generated strong EBITDA conversion, with the savings largely redeployed to new online initiatives and product launches.
Mediative: New Digital Marketing Company
Subsequent to quarter end, YPG launched Mediative, a digital advertising and marketing solutions provider for national agencies and advertisers, to strengthen its position as Canada’s leading performance media and marketing solutions company.
(1) See Non-GAAP Measures
Mediative will address national agencies and advertisers’ needs through its two divisions: YPG Ad Network and Mediative Performance.
YPG Ad Network will offer digital media advertising, capitalizing on YPG’s existing strong network of print and online properties, including the flagship destinations AutoTRADER.ca, RedFlagDeals.com and YellowPages.ca. Specifically, the YPG Ad Network will provide premium and performance display advertising and audience targeting on Canada’s leading online and mobile ad networks, as well as vertical ad products and solutions in the automotive, real estate and retail categories.
Mediative Performance will offer a wide array of services, such as Search Engine Optimization, Search Engine Marketing, social media marketing, and location-based marketing.
In order to accelerate the market position of Meditative, YPG announced a series of transactions. YPG acquired Enquiro, a leading search engine marketing company, Ad Splash Media, a national retail advertising leader, and UPTREND Media, Canada’s leading independent online advertising representation firm. These companies will be combined under Mediative, a Yellow Pages Group Company. YPG has also entered into an exclusive licensing agreement with Acquisio, enabling Mediative to provide to its customers access to Acquisio’s leading search, social and display advertising platform in Canada. YPG has held a 24% ownership interest in Acquisio Inc. since April, 2009. The aggregate purchase price consideration for these acquisitions will be for an amount of up to $60 million. An amount of $35 million was paid in cash at closing and the balance will be paid over time subject to future performance. These acquisitions are expected to generate approximately $35 million of annualized revenues.
Shift to Digital to Deliver Sustained Growth in 2011
During the quarter, YPG announced further improvements to its flagship online properties, YellowPages.ca and PagesJaunes.ca. These improvements include the launch of Yellow Pages address book which allows users to create their own preferred list of merchants.
Among new product launches is Deal of the Day from RedFlagDeals.com, an innovative way for consumers to shop for local goods and services. The concept brings group buying to consumers. RedFlagDeals.com is Canada’s number one online shopping community.
Also, YPG launched a BETA version of a public application programming interface (API). Targetting developers working on online and mobile platforms, the API enables the development of applications that stream local search content from YPG’s database. As these applications become available, millions more Canadian consumers will have access to relevant and dynamic local content. This in turn allows YPG to increase the visibility and number of business leads our advertisers receive.
During the quarter, YPG created a partnership with TELUS whereby the Yellow Pages mobile application will be preloaded on select BlackBerry smartphones, with equivalent applications to follow on other phones. Canadians have already downloaded this application more than 1.8 million times. The exclusive partnership adds significant value, as it feeds YellowPages.ca local content to millions of TELUS 411 users and builds YPG’s mobile presence.
To better inform Canadian SMEs about YPG’s growing digital clout and strong offer, a multimedia advertising campaign was launched to re-introduce YPG to businesses. Coinciding with Small Business Week on October 18, the newspaper and radio B2B campaign focuses on raising awareness about the fact that Yellow Pages is digital. The goal is to invite businesses to learn more about YPG’s new digital solutions.
Vertical Media Business
Revenues for the quarter grew by 29% to $79.6 million largely on the strength of Dealer.com. Meanwhile Trader’s performance continued to improve, with gains in the commercial vehicle segment. As these revenue trends suggest, cyclical pressures appear to be abating. However, while results in the automotive category improved, the real estate and generalist categories remained sluggish. Third-quarter EBITDA was $23 million, a 27% gain over the same quarter in 2009.
During the quarter, Trader expanded Dealer Smart Solutions to the non-passenger vehicles (NPV) segment. This product expansion leverages all the successful components of Dealer Smart Solutions but also customizes the offering to the NPV market’s specific needs. The focus will be on targeting existing Trader customers, up-selling them from current print media offerings to the integrated solutions. New customer acquisition is expected to deliver additional lift.
As at September 30, 2010, 3,300 unique advertisers had subscribed to our Dealer Smart Solutions out of a total of 7,700 commercial vehicle advertisers.
Conversion to Corporate Structure
As previously announced, on November 1, 2010, Yellow Pages Income Fund’s (YPIF) proposed Plan of Arrangement became effective resulting in the conversion of YPIF’s income trust structure into a dividend paying publicly-traded corporation named Yellow Media Inc.
Unitholders of YPIF received, for each unit of YPIF held, one common share of Yellow Media Inc. On that same date, the units of the Fund were delisted from the Toronto Stock Exchange. Trading of the common shares of Yellow Media Inc. on the Toronto Stock Exchange commenced on November 1, 2010, under the symbol “YLO”.
Concurrent with the conversion, the Company announced the implementation of a Dividend Reinvestment Plan (“the Plan”), which enables holders of common shares who are resident in Canada to automatically have their cash dividends reinvested in additional common shares of Yellow Media Inc. At this time, under the Plan, the Company intends to have the common shares issued from treasury at a 5% discount from the average market price (as defined under the Plan) of the common shares on the applicable dividend payment date. Eligible holders of common shares who wish to participate in the Plan should contact the financial institution, broker or other intermediary through which their common shares are held to provide appropriate enrolment instructions and to ensure that any deadlines or other requirements that such financial institution, broker or intermediary may impose or be subject to are met.