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Yellow Media

Yellow Media

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Published by Steve Ladurantaye

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Published by: Steve Ladurantaye on May 08, 2012
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05/08/2012

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Yellow Media Inc. Reports First-Quarter 2012 Financial Results
Yellow Media focused on execution of its 360° Solution strategy with digitalrevenues now representing 30% of total revenues
Company recognizes non-cash impairment charge of $2.9 billion
Company reports net earnings before the impairment charge of $58 million
Company to adjourn Annual Meeting due to a lack of quorum
Montréal (Québec), May 7, 2012
— Yellow Media Inc. (TSX: YLO) released its financialresults today for the first quarter ended March 31, 2012. The Company is focused onand continues to make progress towards its transformation to a digital media andmarketing solutions company.For the quarter ending March 31, 2012, the Company recorded a net loss of$2.9 billion as a result of a goodwill impairment charge net of taxes of $2.9 billion. Netearnings before this impairment charge were $57.5 million compared to net earningsfrom continuing operations of $70.5 million in 2011 due to lower revenues and increasedincome taxes.The impairment charge is a non-cash item and does not affect the Company’soperations, its liquidity, its cash flow from operating activities, its bank credit agreementor its note indentures.During the quarter, we noted changes in our revenue trends affecting our long-termprojections and indicating that the Company’s assets may be impaired. These includedlower revenue performance compared to what had been expected in the review of ouroperating plans performed during the third quarter of 2011. The development of a newbusiness plan taking into account these revised trends in the context of the review of ourcapital structure, and a recent third party transaction within our industry caused theCompany to perform an impairment test which resulted in the recognition of a goodwillimpairment charge net of taxes of $2.9 billion in the three-month period ended March 31,2012.Net earnings per share before the goodwill impairment charge (net of taxes) for the firstquarter ending March 31, 2012 were $0.10 compared to net earnings per share fromcontinuing operations of $0.13 in 2011. Adjusted earnings per common share for thequarter were $0.13 versus $0.26 of adjusted earnings per common share fromcontinuing operations for the same period last year primarily due to lower revenues andincreased cash taxes.Revenues for the first quarter ended March 31, 2012 were $289.1 million compared to$349.4 million for the first quarter in 2011. The 17.3% decrease is due principally tolower print revenues, the discontinuation of some books published at Canpages, thedivestiture of LesPAC on November 14, 2011 and lower revenues associated with theCompany’s U.S. operations. Online revenues were $85.9 million compared to $83.2million last year, representing growth of 3.2%. On an organic basis, excluding the impactof the changes to the Canpages business and the LesPAC divestiture, online revenuesgrew 7.8% during the quarter compared to the first quarter of 2011.
 
 
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Income from operations before the impairment charge for the quarter was $115.9 millioncompared to $136.9 million for the same quarter in 2011. EBITDA for the quarterdeclined from $190.0 million to $146.0 million. The EBITDA margin in the quarter was50.5% compared to 54.4% last year. The decrease is mainly attributable to print revenuepressure and investments in support of the Company’s transformation.“Our industry continues to evolve as it adapts to a new digital reality. Although the needsof advertisers have not changed, they are seeking support navigating through thiscomplex market.” said Marc P. Tellier, President and Chief Executive Officer of YellowPages Group. “Through our 360° Solution and dedicated sales force, we offer acompelling value proposition to help Canadian businesses succeed in today’s digitalworld.”
Continued Progress on Yellow Pages’ Digital Strategy
Launched in 2011, Yellow Pages 360° Solution marked a key milestone in theCompany’s digital transformation. Its value proposition resides in how customers canaccess expert support and unprecedented visibility through online, mobile and printmedia platforms, and access services such as managed website services, customizedsearch engine marketing and search engine optimization, and Yellow Pages Analytics™,all offered through a single point of contact.Through its 360
o
Solution YPG is demystifying digital advertising for Canadian SMEs,helping them make the necessary shift to digital. Yellow Pages 360° Solution bringsrelevancy to Yellow Media’s product and service portfolio moving forward, generatinggrowth potential for the Company.As of March 31, 2012, the advertiser penetration of YPG’s 360º Solution (defined asadvertisers who subscribe to three product categories or more) was 7.9% compared to1.9% as at March 31, 2011. In addition, the Company has also sold approximately13,000 websites for SMEs, making it one of the leading website providers in Canada.In 2012, Yellow Media will expand its product and service offering to meet the needs oflarger advertisers through a High Priority Accounts Program. This program is aimed atmitigating revenue risk and optimizing revenue growth of larger advertisers through adifferentiated servicing model. A comprehensive advertiser profiling methodology is nowin place to guide the evaluation of account needs and opportunities through the review ofYellow Pages Analytics
TM
results, website audits and competitive rankings, searchengine marketing estimates, and social media and search engine reviews.On April 27, 2012, Yellow Pages received two Gold Excellence Awards for its innovativemobile local search placement product and its MarketProfiler™ online evaluation toolfrom the Local Search Association. Launched in July 2011, the local search placementproduct is YPG’s first foray into mobile advertising. This product puts local smallbusinesses at the top of the list in mobile searches for their products or services. Sixmonths after its launch, more than 13,000 Canadian SMEs have invested in mobileplacement.
 
 
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Enhancing the User Experience
In an effort to increase traffic across its network of properties and provide additionalvalue to Canadian advertisers, Yellow Media continues to invest in the online and mobileuser experience and engagement.YPG’s network of sites currently reaches approximately 8 million unique visitors,representing approximately 33% of Canada’s online population. During the first quarterof 2012, we improved the search engine optimization of YellowPages.ca to ensureincreased indexation on search engines.Yellow Media’s business transformation also revolves around the continuedimprovement of its mobile applications which have been downloaded more than 4 milliontimes.During the first quarter of 2012, Yellow Pages Group launched a redesignedYellowAPI.com website for the company’s public application programming interface.Through this initiative the Company’s main objective is to generate more business leadsfor its advertisers.Since its initial launch in late 2010, YellowAPI.com has gained industry recognition andhas enrolled over 1,700 software developers. These developers have created numerousdigital applications using YPG’s database of 1.5 million business listings, currently thelargest in Canada. The expanding list of applications currently leveraging YellowAPI.comlistings range from leading consumer brands such as Yahoo! Mobile Canada toinnovative creations by local start-ups, such as Reservely, an app that makes onlinereservations to any restaurant in Canada.
Mediative
Through Mediative, Yellow Media is a leader in national digital advertising. Mediative isone of Canada’s largest integrated advertising and digital marketing companies, holdingextensive experience in developing innovative and unique marketing solutions fornational companies.In 2011, Mediative was chosen as the top Enterprise SEO Services as well as IntegratedSearch Company. With over 12 lifestyle and behaviour based vertical networks reachingapproximately 15 million unique visitors per month, Mediative matches advertisers withthe websites of premium online brands. During the first quarter of 2012, Mediativewelcomed three new publishers, making it the leading online media sales partner fornational advertisers in the Health and Food sector.
Capital Structure
As at March 31, 2012, the Company had approximately $1.5 billion of net debt, or$2.1 billion including preferred shares, Series 1 and 2, and convertible debt instruments.The net debt to Latest Twelve Month EBITDA ratio as of March 31, 2012 was2.7 times as compared to 2.5 times as of December 31, 2011. On April 2, 2012 thecompany made its second quarterly mandatory repayment of $25 million on its non-revolving credit facility.As of May 7, 2012 $155 million was outstanding on the non-revolving tranche of thecredit facility and $239 million drawn on the revolving facility. The Company hasapproximately $292 million of cash as at May 7, 2012.

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