Yellow Pages Limited. Investor Presentation June 2015 Available in English Only

Transcription

1 Yellow Pages Limited Investor Presentation June 2015 Available in English Only

2 Disclaimer This presentation contains forward-looking statements about the objectives, strategies, financial condition, results of operations and businesses of Yellow Pages Limited. These statements are considered forward-looking because they are based on current expectations about our business and the markets we operate in, and on various estimates and assumptions. Our actual results could be materially different 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, we cannot guarantee that any forward-looking statements will materialize. Forward-looking statements do not take into account the effect that transactions or non-recurring items announced or occurring after the statements are made may have on our business. We disclaim any intention or obligation to update any forward-looking statements, except as required by law, even if new information becomes available through future events or for any other reason. Risks that could cause our actual results to differ materially from our current expectations are discussed in section 6 of our May 8, 2015 Management's Discussion and Analysis. 2

3 Yellow Pages at a Glance Our Mission: To Champion Canada s Local Neighbourhood Economies 55% of revenues are sourced from the sale of digital solutions Servicing 251,000 local businesses through Canada s most comprehensive suite of digital marketing solutions One of Canada s largest sales teams, holding 1,100 Media Account Consultants One of Canada's largest databases of business information, containing over 1.8 million business listings Over 104 million visits executed on YP s digital properties every quarter The 3 rd most visited network of Canadian digital properties, reaching 40% of digital Canadians monthly 3

4 Strong Traction of Digital Revenue Growth Consolidated Digital Revenues (in C$ millions) $104.0 $108.4 Year-over-year +5% +10% $ % $ % $ % Q Q Q Q Q % Digital-Only Customers Digital Revenues as a % of Total Revenues 10% 11% 13% 15% 16% 47% 49% 52% 54% 55% Digital revenue growth is fuelled by the migration of print customers towards our digital solutions, as well as by accelerated customer acquisition 4

5 Accelerating Customer Acquisition to Grow Digital Revenues Accelerating Customer Acquisition 1 Closing the Gap in Customer Count Decline 1 (in thousands) (in thousands, unless otherwise noted) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q TTM 2014 TTM 2015 TTM Customer Count Customer Renewal Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q % 85% 85% 85% 85% 85% 85% 84% 85% Sustainability of digital revenue growth is dependant on finding new sources of digital revenues, mainly from customer acquisition 1 YP Core only, excludes the contribution of Mediative, 411 Local Search Corp. and Yellow Pages NextHome 5

6 Improving Trends in Revenue Performance Relative to 2014 $223.2 $220.6 $218.4 $215.3 $205.9 Total Revenues (in C$ millions) Q Q Q Q Q Year-over-Year Decline Rate 1-12% -9% -8% -8% -8% Supported by customer acquisition, revenue decline rates will continue to improve relative to 2014, with growth anticipated for Q year-over-year decline rate adjusted for the contribution of $4 million of non-recurring revenues in Q

7 Return to Growth Plan Positioning Yellow Pages For Future Growth Growth in the Customer Count Growth in Revenues Growth in Profitability (EBITDA)

8 Core Pillars Underlying the Return to Growth Plan ( RTG ) MEDIA Grow traffic on our network of media properties by providing Canadians with richer, more diversified content and improved verticalized search experiences. PRODUCTS Enrich, diversify and verticalize our suite of digital solutions to best address demands of SMEs. SALES Revamp acquisition engine through improved lead acquisition and management, while optimizing sales tools to improve the productivity and effectiveness of our Media Account Consultants. CUSTOMER EXPERIENCE Promote customer renewal by improving the fulfillment process of our digital solutions and optimizing customer service systems/processes. BRAND Improve the digital perception of the brand, and grow awareness of our media properties and digital solutions among Canadian shoppers and SMEs. RTG is aimed at improving Yellow Pages relationship with merchants and consumers, ultimately creating a leadership position in Canada s digital media and marketing industry 8

9 Key Achievements in RTG s First Year of Implementation Growing Traffic on our Digital Properties Total digital visits reached 104 million in Q1 2015, up 10.5% year-over-year. Ongoing verticalization of the Company s media properties, with YP Dine and a redesigned YP Shopwise launched for the restaurant/dining and shopping sectors, respectively. Closing the Gap on Customer Count Decline 23,700 new customers acquired in Q TTM, comparing favourably to the acquisition of 16,500 customers the year prior. Customer renewal rate remained stable and at industry-leading levels, landing at 85% for the twelve-month period ended March 31, Delivering Sustainable Digital Revenue Growth Digital revenues continued to grow in the high single-digits, up 8.6% year-over-year to reach $113 million in Q Yellow Pages is now a digital company, with digital revenues representing over 55% of total revenues. Delivering Profitability in-line with Forecasted Levels EBITDA margins being maintained between 30% and 35% over the life of the Return to Growth Plan, with margins reaching 34.4% for the three-month period ended March 31, Ongoing Strengthening of the Balance Sheet $140 million of the 9.25% Senior Secured Notes were repaid in 2014, exceeding the minimum aggregate mandatory redemption requirement of $125 million for 2014 and 2015 combined. An additional $100 million redemption on the Senior Secured Notes is anticipated in On track with the successful execution of the Return to Growth Plan

10 Growing Adoption of YP s Digital Media Properties Total Digital Visits in Continued Growth (in millions, unless otherwise noted) 94.1 Flat year-over-year % % % % Q Q Q Q Q Strong Reach Among Digital Canadians Rich Content & Experiences Driving Recognition Bell Amazon CBC YP Trip Advisor Yelp Expedia YP added as content provider to Apple Maps Ranking (Overall) YP and YP Shopwise selected as one of the first Canadian apps available on Apple Watch Reach 58% 54% 45% 40% 26% 18% 17% YP, YP Shopwise, YP Dine and Canada411 all received titles of Best New App in 2014/2015 MEDIA 10

11 Verticalizing the User Experience to Reach New Audiences and Merchants Business & People Search YP App Discover everything the neighbourhood has to offer Canada411 The person finder, Canada-wide Retail YP Shopwise Your everyday shopping app to help you save time and money RedFlagDeals Hunt for the best deals across the web and share them with your fellow Canadian deal hunters Dining YP Dine Discover where to eat based on your mood, time of day/week and expertly curated recommendations Coming in Real Estate MEDIA ComFree/DuProprio Network Offering a proven, professional and cost effective service to reach buyers and sell your property YP NextHome Gain access to listings, personalized tips and neighbourhood information to find your next rental and dream home Your one-stop resource for home improvements and repairs Get the best recommendations on what to do this weekend 11

12 Tuck-In M&A to Accelerate Verticalization Strategy Restaurants M&A activity started in December 2014 with two acquisitions geared at accelerating Yellow Pages presence, growth and monetization within the restaurant vertical Provider of digital reservation management systems Owner and operator of digital restaurant guides within the Greater Toronto Area Strong presence in the restaurant industry within the Greater Montreal Area Leading online transaction platform to easily interact and manage bookings Extensive database of local restaurant listings, reviews, deals, playlists and events Real-time online ordering capabilities MEDIA 12

13 Tuck-In M&A to Accelerate Verticalization Strategy Real Estate Leading Real Estate s Digital Disruption Founded in 1997 Offers for-sale-by-owner operations in Quebec and Saskatchewan, and flat-fee brokerage operations in Ontario, Alberta and Manitoba Addresses a growing demand for comprehensive, cost effective real estate services in Canada Proven Business Model Serviced 170,000 Canadians to date, with an average satisfaction rate of 99% in Quebec Leader in Quebec - holds a 17% share of the listings market and is the #1 real estate site in the province Consolidated revenues exceeded $40 million in 2014, having grown organically and profitably at a 3-year CAGR of 20% Valuable Synergies Complements Yellow Pages mission of championing neighbourhood economies Provides Yellow Pages with a leading presence in the real estate vertical, access to exclusive listings, and platforms to transact with Canadians Delivers attractive growth opportunities - Yellow Pages will leverage its national reach to enrich ComFree/DuProprio s value proposition, extend it Canada-wide and improve lead monetization MEDIA 13

14 Richer Content to Attract and Retain Audiences Merchant Profiles Quick Access to Relevant Content Rich Multimedia Greater Number of Ratings & Reviews Key Partnerships with Other Digital Players 14 MEDIA

15 Richer Content to Attract and Retain Audiences Editorials Local Stories SmartTips Playlists Discover the merchants in and around your neighbourhood Discover tips and tricks to best meet your everyday shopping needs Discover what s top and trending in your neighbourhood Over 8,000 pieces of editorial content now published on our network of digital properties MEDIA 15

16 Investment in Digital Media will Protect Long-Term Profitability Relative Size of Gross Margins of our Digital Solutions High Margin Print Online & Mobile Priority Placement Mid- Margin Websites SEO Low Margin SEM Leverage insourced traffic to deliver high-margin performance-based solutions Placement solutions represent ~2/3 rds of digital revenues and hold the highest profitability among our digital product suite MEDIA 16

17 Strongly Positioned to Succeed in the Canadian Marketing Landscape * Size of bubble denotes approximate advertising revenue in Canada Breadth of Product Offerings Search Engine People Local Digital Marketing Boutiques Self-Serve Website Platforms Local Newspapers Self-Serve Service Level Full Serve Yellow Pages is best positioned to provide a competitive, complete and full-serve marketing solution to local SMEs PRODUCTS 17

18 Evolving Our Portfolio to Better Address SME Needs at All Price Points Free $10-50 $ $ $ $1000+ Presence Line-Up (Content Syndication) Website Fulfillment Social Media Campaigns Build Your Digital Presence SEO Solutions Digital Banner Ads Digital Placement on YP s Network of Properties Drive Your Digital Performance SEM Solutions Power Your Digital Transactions Transactional functionalities to be rolled-out to enhance the monetization of our digital media properties PRODUCTS 18

19 Introducing the Presence Line-Up Launched on April 20 th, the Presence line-up provides YP with rich, relevant and up-to-date merchant content, while allowing merchants to optimize their visibility across the digital marketplace PRODUCTS 19

20 Various Initiatives To Deliver Ramp-Up in Customer Acquisition New Product Offerings + Tools/Functionalities on the 360 o Business Center + Branding Campaigns + Improved Self-Prospecting Growth in Lead Sources Enhanced Lead Management and Conversion New Customer Relationship Management Platform to Optimize Lead Assignment & Conversion Improved Dashboard Selling Tools Growth of Acquisition Sales Force Roll-out of Sales Incentive Programs Target of 30,000 new customers in 2015 SALES & CUSTOMER EXPERIENCE 20

21 And Enhance All Aspects of the Customer Experience Fulfillment Automation Improve quality and timely delivery of products by creating efficiencies along the fulfillment chain Customer Service Optimize the routing and resolution of customer inquiries by enhancing customer service systems and processes Business Center Build direct relationships with customers and prospects, while improving the overall customer experience, by launching self-serve capabilities Fulfillment handled by a single point of contact, improving consistency and reducing cancellations Proactive touchpoints for all customers, creating upsell/retention opportunities Quicker turnaround for customer inquiries & issues, including higher first call resolution Single customer profile, resulting in more knowledgeable servicing touchpoints Self-serve capabilities available on the 360 O Business Center Protecting renewal rate in light of the evolving needs of our digital customers SALES & CUSTOMER EXPERIENCE 21

22 Providing More Power to the Merchant via the YP 360 Business Center Sign-in to Manage Your Profile, Consult YP Analytics & Buy Solutions Online Claim Your Listing for Free Discover Our Solutions Chat with an Advertising Expert SALES & CUSTOMER EXPERIENCE 22

23 Simplified Architecture to Enhance Recognition of the YP Brand New Holding Name Leveraging the Power of the YP Brand Across Our Media Properties BRAND 23

24 Local Market Attacks to Promote Usage of the YP App BRAND 24

25 Promoting the Growth of Local Economies November 28 th, 2014 Held across five Canadian cities in over 200 neighbourhoods during one of the busiest shopping weekends of the year Participation from over 8,000 local businesses, having uploaded 6,000 deals exclusive to YP s properties on event day Participation from 750,000 Canadians, spending $89 million at local retailers on event day BRAND 25

26 Financial Review (Figures in millions of C$, unless otherwise noted) Revenue Performance Consolidated Print Digital YoY Decline Rate 1 : Q Q Q Q Q % -9% -8% -8% -8% YoY Decline Rate 1 : Q Q Q Q Q % -22% -23% -22% -22% YoY Growth Rate: Q Q Q Q Q % +10% +12% +9% +9% Profitability and Cash Flows EBITDA Operating Cash Flow Free Cash Flow EBITDA Margin: Q Q Q Q Q % 37% 34% 30% 34% Q Q Q Q Q Q Q Q Q Q Sufficient cash flow generation to invest in our digital transformation and strengthen the capital structure 1 Q year-over-year decline rate adjusted for the contribution of $4 million of non-recurring revenues in Q FINANCIAL OVERVIEW 26

27 Investing in Operational Efficiencies to Promote Cost Savings Expected Annualized Cost Savings of $20 to $25 million by 2016 Targeted Print Directory Distribution Insourcing Print Distribution New Print Publishing Platform Upgrading IT Datacenters Operational Excellence Eliminating distribution of print books in select Canadian markets to better align directory delivery with usage and demand An initiative to bring in specific portions of the print distribution process to support improved cost flexibility Decommissioning and replacement of YP s network of legacy publishing systems Consolidating various legacy datacentres to reduce costs and increase agility of corporate systems Implementing process improvements to deliver cost savings across the sales, customer service and digital fulfillment functions Completed Completed Ongoing Ongoing Ongoing FINANCIAL OVERVIEW 27

28 Transferring Additional Value to Shareholders via Debt Reduction (in millions of C$) March 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Senior Secured Notes 1 $507 $507 $647 $800 Exchangeable Debentures 2 $89 $89 $88 $87 Obligations Under Finance Leases $1 $1 $1 $2 Total Gross Debt $597 $597 $735 $888 Cash $142 $103 $202 $107 Total Net Debt $455 $494 $533 $782 Total Equity $705 $684 $544 $286 Key Ratios Net Debt to EBITDA 1.6x 1.6x 1.3x 1.4x Average Interest Rate on Debt at Period End 9.0% 9.0% 9.1% 9.1% An additional $100 million of debt repayment anticipated in 2015 Note: The Company currently has in place a $50 million Asset-Based Loan expiring in August 2018, which may be used for general corporate purposes % Senior Secured Notes due November 30, % (or 12% Paid in Kind) Subordinated Unsecured Exchangeable Debentures due November 30,

29 Financial Outlook Digital revenue growth anticipated to be maintained in the high single digits for 2015 and thereafter EBITDA to remain under pressure relative to 2014, as additional investments are made to accelerate the Company s digital transformation. EBITDA margins to be maintained between 30% and 35% for 2015 and thereafter. Capital expenditures projected to reach between $70 and $75 million in Thereafter, as a percentage of total revenues, capital expenditures will gradually decline to stabilize at approximately 5% by Targeting revenue and EBITDA growth in Company anticipates to be debt free by year-end When excluding the impact of the acquisition of ComFree/DuProprio until Q FINANCIAL OVERVIEW 29