Yellow Pages (TSX:Y) Q2 2025 Earnings Call

0:01 All participants, please stand by. Your conference is now ready to begin. Good morning, ladies and gentlemen, and welcome to Yellow Pages' second quarter 2025 earnings release call. Today's conference call contains forward-looking information about Yellow Pages' outlook, objectives, and strategy. These statements are based on 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 second quarter of 2025.

0:48 This call is being recorded in webcast, and all of the disclosure documents are available on the company's website and on CDAR. I would now like to turn the meeting over to Mrs. Sherilyn King, President and Chief Executive Officer. Please go ahead, Madam.

1:10 Thank you, Paul. Good morning, everyone. Welcome to our second quarter 2025 analyst call. We really appreciate your interest today. Today I'm joined by Asunta Tortoise, our Chief Financial Officer. I will begin with some overview comments. and then Asunta will provide more details on our financials. We will both be available to answer any questions you have at the end of the call. We are quite pleased with our results reported today for our second quarter in 2025. Particularly for the sixth consecutive quarter, we report favorable progress in revenue stability. as our rate of change in revenue was better than the rate of change reported for the previous quarter, and this is key to our success.

2:03 We are encouraged by the continued momentum in our core metrics driving our revenue performance. These metrics include continued deceleration of our customer count decline rate, supported by new customer acquisition, stable renewal rates, and strong average spend per customer. We believe these fundamentals position us well for continued success in the medium and long term. We also report solid earnings. Our adjusted EBITDA for the quarter was 20.1% of revenue, even with our continued investments in our revenue initiative. We have a cash balance of approximately $49 million at the end of July.

2:52 As previously announced on May 21st in 2025, we completed the purchase of a group annuity contract for $210 million from BMO Life Insurance Life Assurance Company. This transaction aligns with the plan to de-risk our defined benefit pension plan as we annuitize approximately 50% of the pension liability. The company intends to voluntarily contribute an additional $4 million to the defined pension plan by the end of June 2026. Yesterday, the Board approved $2 million of this announced voluntary cash contribution to be completed by the end of 2025.

3:40 Also, our board has declared a dividend of 25 cents per common share to be paid on September 15, 2025, to shareholders of record on August 25, 2025. Those are my comments for today, and I will pass it along to Asunta to provide some additional details on our numbers.

4:02 Thanks, SK. Good morning, everyone. Let me take you through our financial results for the second quarter ended June 30, 2025. Our total revenues decreased by $4.2 million or 7.4% year-over-year and amounted to $51.7 million for the second quarter, an improvement from the decrease of 7.6% reported 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 services products, thereby creating pressure on our gross profit margins. Digital revenues decreased 6.4% year over year and amounted to $41 million for the three-month period ended June 30, 2025, an improvement from the decrease of 6.8% reported last quarter.

4:54 The year-over-year decline was mainly attributable to a decrease in digital customer count, partially offset by an increase in average spend per customer. Print revenues decreased 11.2% year over year, and amounted to 10.7 million for the three month period ended June 30. The decline in print revenue was mainly attributable to the decrease in the number of print customers, while the spend per customer has improved year over year, year over year driven by price increase. The decline rate of revenues improved during the quarter ended June 30 2025. Compared to the same period last year, the improvements were mainly due to the deceleration of the customer count decline rate, fueled by an increase in the new customer acquisitions, while renewal rates remained relatively stable, and an increase in average spend per customer due in part to price increases.

5:49 Adjusted EBITDA for the second quarter was impacted by pressures from lower revenue, change in product mix, continued investments in our sales force capacity, and the impact of the company's share price on cash settled stock-based compensation expense, partially offset by price increases, the efficiencies from optimization in cost of sales, and reduction in the operating costs, including reduction in our workforce and associated employee expenses. As a result, adjusted EBITDA decreased year-over-year by $4.1 million, or 27.7% to $10.7 million for the quarter. Adjusted EBITDA margin decreased to 20.7% compared to 26.5% for the same period last year. The re-evaluation of cash settled stock-based compensation liabilities resulted in a charge of $0.6 million for the three-month period ended June 30, 2025, compared to a recovery of $1.2 million for the same period last year. Revenue pressures and continued investments in our Salesforce capacity, partially offset by continued optimizations, will continue to cause pressure on margins in upcoming quarters.

7:00 Adjusted EBITDA less CapEx for the second quarter decreased by 3.7 million year-over-year to 10.4 million, mainly due to the decrease in adjusted EBITDA, partially offset by the decrease in CapEx spend year-over-year. As SK mentioned, on May 21, 2025, the company announced the purchase of the group annuity contracts of $209.9 million from BMO Life Assurance Company. The defined benefit pension plan obligations for the group that are settled via the annuity purchase are $205.9 million on an accounting basis. As a result, a non-cash settlement loss of $4 million was recognized during the second quarter of 2025. As also announced, the company intends to voluntarily contribute an additional $4 million to the remaining defined benefits pension plan by the end of June 2026, subject to board approval. On August 5th, 2025, our board approved that $2 million of the announced voluntary cash card distributions be completed by the end of 2025. Net income for the quarter decreased to $1.5 million, compared to $7.6 million for the same period last year, Due to lower adjusted EBITDA, the settlement loss on the annuity purchase and the increase in restructuring and other charges partially offset by the decrease in depreciation and amortization and income tax.

8:26 As at June 30th, 2025, our total workforce decreased to 566 employees compared to 603 at the same date last year, a decrease of 6.1%. As Sherilyn mentioned, our cash on hand at July 1st at the end of July stood at approximately $49 million. The board has also declared a cash dividend of $0.25 per common share, payable on September 15th to shareholders of record as at August 25, 2025. This concludes our formal remarks. Thank you for taking the time to join us this morning. We will now take your questions. Thank you. Paul? We will now take questions from the telephone line.

9:12 If you have a question, please press star 1 on the device's keypad. You may cancel your question at any time by pressing star 2. So please press star 1 at this time if you have a question. There will be a brief pause while the participants register. We thank you for your patience. Once again, please press star 1 on the device's keypad if you have a question. There are no questions being registered on the telephone lines.

10:06 I will turn the meeting back over to Mrs. King.

10:12 Thank you, Paul. And I'd just like to thank everyone for your interest in joining our call today. and we look forward to speaking with you again in November. Thanks, everyone, and have a great day. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.