Investor Presentation February 2016

Investor Presentation
February 2016
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 February 11th, 2016 Management's Discussion and
Analysis.
2
The Way Consumers and Merchants Are Interacting is Evolving
The vast majority of Canadians are connected
online (web and mobile)
More than ever before, Canadians are
researching online before making a purchase
decision…
…and turning to their smart devices to transact
directly within their neighbourhoods
1.2 million small and medium-sized businesses
call Canada home
The majority do not have a comprehensive
digital presence, let alone a website
They also continue to struggle with digital
marketing, given its complexity and personal
time constraints
3
Our Mission
We aim to champion the local digital economy by offering consumers and
merchants media and marketing solutions that help them interact and transact
4
Acting as the Chief Marketing Officer for SMEs
Owned & Operated Solutions
Paid advertising on Yellow Pages’ verticalized network of digital and print media
Services
Dining
Real
Estate
Retail
Comprehensive Digital Services
Full suite of digital solutions that attract consumers wherever they search
Website
Fulfillment
Search Engine
Optimization
Facebook Campaign
Management
Digital Display
Advertising
Search Engine
Marketing
Digital Content
Syndication
Reservation
Management Systems
5
A Verticalized Digital Experience for Consumers
Business & People Search
Retail
YP App
Discover everything the local
neighbourhood has to offer
YP Shopwise
Everyday shopping app to help Canadians save
time and money
Canada411
One of Canada’s most frequented and trusted
online and mobile destinations for personal
and local business information
RedFlagDeals
Canada’s leading provider of online and mobile
promotions, deals, coupons and shopping tools
Real Estate
Dining
ComFree/DuProprio Network
C2C marketplace offering homeowners a
professional and cost effective service to
market and sell their properties
YP Dine
Discover, search for and book local restaurants
based on time of day, mood and expert suggestions
YP NextHome
Provides Canadians with valuable real estate
information to help them make the right buying,
selling, and/or renting decision
Bookenda
Leading online transaction platform for users and
merchants to easily interact and manage bookings
dine.TO
Connecting users in the Greater Toronto Area with
an extensive database of local restaurant listings,
reviews and deals, as well as real-time online
ordering capabilities
Attracting Over 464 Million1 Visits to Our Network of Digital Properties Annually
1 Excludes the contribution of the ComFree/DuProprio Network, which attracted 16.5 million visits during the fourth quarter of 2015.
6
We Are Starting from a Position of Strength
A Rich, Diversified
Digital Media
Network
A Leader in Local
Digital Marketing
One of Canada’s Most Adopted Digital Properties for Local Discovery
Over 464 million visits executed across our network of digital properties annually
14th most-visited digital network in Canada, garnering a 41% reach among Canadians
Canada’s Most Comprehensive Provider of Digital Marketing
Solutions
Dedicated Chief Marketing Officer for 245,000 local businesses
Largest national network of sales, customer service and digital fulfillment professionals
Profitable Digital Revenue Growth, with Low Indebtedness
A Strong
Financial Profile
$486 million in annual digital revenues, currently representing 62% of total revenues
Adjusted EBITDA margins at 30%
Lean capital structure, with net debt-to-Adjusted EBITDA of 1.7x
7
Our Key Pillars of Digital Transformation
Brand
Media
Strengthen the digital relevancy and perception of our media and
marketing solutions through the deployment of national advertising
campaigns
Introduce richer content, improved functionalities and transactional
experiences to promote the adoption and usage of our verticalized
media properties
Customers
Support customer acquisition, retention and upsell by improving the
sales, fulfillment and customer service experience offered to
merchants
Operational
Efficiencies
Promote cost savings and enhanced productivity across the
organization through improved processes and technologies
8
Our Path to Growth is Clear
Debt Free
Capital
Structure
Growth in
Adjusted
EBITDA
Growth in
Revenues
Growth in
the Customer
Count
2017
2018
9
Significant Deceleration in Net Customer Count Decline
Annual Customer Acquisition1
Net Customer Count Decline1,2
(in thousands)
(in thousands, unless otherwise noted)
30.8
30
27.2
16.5
18.4
20.2
22.1
23.7
26
24.8
23
20
19
17
14
11
Q1
Q2
Q3
2014 TTM
Q4
Q1
Q2
Q3
Q4
Q1
2015 TTM
Q2
Q3
Q4
Q1
2014 TTM
Q2
Q3
Q4
2015 TTM
Customer
Count
270
265
260
256
251
248
246
245
Customer
Renewal
85%
85%
85%
84%
85%
85%
85%
85%
Renewers
Upselling
26%
26%
27%
31%
35%
40%
44%
44%
With only 1,000 net customers lost between September 30th, 2015 and December 31st, 2015, we are
close to stabilizing the customer count
1 YP Core only, excludes the contribution of Mediative, 411 Local Search Corp, Yellow Pages Homes Limited and the ComFree/DuProprio Network.
2 Represents the year-over-year change in customer count experienced during the period.
10
Uniquely Positioned to Capture Further Growth in the
Canadian Digital Marketing Landscape
* Size of bubble denotes approximate
advertising revenue in Canada
Market share of over
20% of the Canadian
SME market
Breadth of
Product Offerings
Search Engine People
Self-Serve
Website
Platforms
Local Digital
Marketing
Boutiques
Local
Newspapers
Self-Serve
Service Level
Full Serve
11
Promoting Usage of Our Digital Media Properties
Differentiating Our Properties Via
Rich Content and Transactional Experiences
Total Digital Visits1 Remain Strong
(in millions, unless otherwise noted)
YoY Change
+14%
+12%
117.4
+14%
+13%
124.1
+1%
Proven C2C
Marketplace
118.2
116.4
105.3
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Integrated
Booking Engine
1 Number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of
Yellow Pages Limited's application syndication partners
12
Delivering Sustainable Print and Digital Revenue Performance…
Print Revenue Performance
Digital Revenue Performance
(in millions, unless otherwise noted)
(in millions, unless otherwise noted)
YoY Change
(22%)1
98
(22%)
(21%)
(21%)
(19%)
YoY Change
+9%
+9%
+7%
93
88
117
83
Q4 2014
Q1 2015
Q2 2015
Q3 2015
113
+12%
128
+11%
129
Q3 2015
Q4 2015
116
79
Q4 2015
Stabilization in print revenue decline rates supported by
content enhancement and pricing initiatives that have
encouraged renewal of print advertising spending among
customers
1 Q4 2014 year-over-year decline rate adjusted for the contribution of $4 million of non-recurring revenues in Q4 2013
Q4 2014
Q1 2015
Q2 2015
Long-term, sustainable digital revenue growth driven by
accelerated customer acquisition, increased digital
spending among renewing customers, and growth across
new verticals and national channels
13
…and Reducing Revenue and Adjusted EBITDA Declines
Consolidated Revenue Performance
Adjusted EBITDA Performance
(in millions, unless otherwise noted)
(in millions, unless otherwise noted)
YoY Change
(8%)1
(8%)
(7%)
206
205
215
(4%)
(3%)
211
209
YoY Change
(29%)
(25%)
(24%)
(15%)
(1%)
64
64
71
65
62
% Digital
54%
55%
57%
61%
62%
Adjusted
EBITDA
Margin
30%
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q4 2014
1 Q4 2014 year-over-year decline rate adjusted for the contribution of $4 million of non-recurring revenues in Q4 2013
34%
30%
30%
31%
Q1 2015
Q2 2015
Q3 2015
Q4 2015
14
Profitability Supported by the Strength of Our Media Network
Relative Size of Gross Margins of our Digital Solutions
Print
High
Margin
Online & Mobile Priority Placement
Websites
MidMargin
Search Engine Optimization
Over 90% of traffic on
Yellow Pages’ digital properties is
direct or organic
Presence Pro/Extended
Low
Margin
Search Engine
Marketing
Leveraging YP traffic to deliver high-margin
performance-based leads solutions
Placement solutions, which hold the highest profitability among our digital product suite,
represent ~2/3rds of YP Core’s1 digital revenues
1 Exclude the contribution of Mediative, 411 Local Search Corp., Yellow Pages Homes Limited and the ComFree/DuProprio Network.
15
Delivering Strong Free Cash Flow to Reduce Outstanding Debt
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Senior Secured Notes1
407
507
647
800
Exchangeable Debentures2
90
89
88
87
Obligations Under Finance Leases
1
1
1
2
Total Debt
498
597
735
888
Cash and Cash Equivalents
67
103
202
107
Total Net Debt
431
494
533
782
Total Equity
760
684
544
286
Net Debt / Adjusted EBITDA
1.7x
1.6x
1.3x
1.4x
LTM Free Cash Flow
122
73
275
198
(in millions, unless otherwise noted)
~$393 million in debt repaid since the issuance of the Senior Secured Notes on December 20, 2012
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.
1 9.25% Senior Secured Notes due November 30, 2018.
2 8% (or 12% Paid in Kind) Subordinated Unsecured Exchangeable Debentures due November 30, 2022.
16
Strengthening Our Financial Profile in 2016
Stabilization of the Customer Count
YoY Organic Digital Revenue Growth in the High Single Digits
Adjusted EBITDA Margins of 30%
Improvements to Revenue and Adjusted EBITDA Declines
$100 Million in Principal Debt Repayment
17