Investor Presentation - Q1 2016 Available in English Only - Yellow Pages

 
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
Investor Presentation
        Q1 2016
  Available in English Only
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
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 10th, 2016 Management's
  Discussion and Analysis.

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Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
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
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
Our Mission

 We aim to champion the digital economy by offering consumers and merchants
      media and marketing solutions that help them interact and transact
                                                                              4
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
Acting as the Chief Marketing Officer for SMEs

                             Owned & Operated Solutions
                             Paid advertising on Yellow Pages’ verticalized network of digital and print media

                             Comprehensive Digital Services
                             Full suite of digital solutions that attract consumers wherever they search

                                                                                                                 5
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
Uniquely Positioned to Capture Further Growth in the
Canadian Digital Marketing Landscape

                    * Size of bubble denotes approximate
                    advertising revenue in Canada

                                                                                                         Serving over 20% of
                                                                                                         the Canadian SME
                                                                                                         market

                                                                       Search Engine People
                                                                                              Local Digital
Product Offerings

                                                                                               Marketing
                                                                                               Boutiques
   Breadth of

                     Self-Serve
                      Website                                     Local
                     Platforms                                  Newspapers

                                            Self-Serve                                          Full Serve
                                                           Service Level

                                                                                                                               6
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
Acting as a Leading Digital Advertising Agency for National Brands

         Creating one of Canada’s leading digital advertising agencies, leveraging
      proprietary programmatic technologies and an extensive publisher network to
                      connect Canadians with the brands they love

Network of Brand Relationships                  Extensive Publisher Network

                                                    Publisher Network Attracting Over 15B
  National Revenues in Excess of $60M in 2015
                                                            Impressions Annually

                                                                                            7
Investor Presentation - Q1 2016 Available in English Only - Yellow Pages
A Verticalized Digital Experience for Consumers

  Business & People Search                                                                                        Retail

                      YP App                                                                                                          YP Shopwise
                      Discover everything the local                                                                                   Everyday shopping app to help Canadians save time
                      neighbourhood has to offer                                                                                      and money

                      Canada411 & 411.ca
                                                                                                                                      RedFlagDeals
                      Network of Canada’s most frequented and
                                                                                                                                      Canada’s leading provider of online and mobile
                      trusted online and mobile destinations for
                                                                                                                                      promotions, deals, coupons and shopping tools
                      personal and local business information

  Real Estate                                                                                                     Dining

                      ComFree/DuProprio Network                                                                                       YP Dine
                      C2C marketplace offering homeowners a                                                                           Discover, search for and book local restaurants
                      professional and cost effective service to                                                                      based on time of day, mood and expert suggestions
                      market and sell their properties

                      YP NextHome                                                                                                     Bookenda
                      Provides Canadians with valuable real estate                                                                    Leading online transaction platform for users and
                      information to help them make the right                                                                         merchants to easily interact and manage bookings
                      buying, selling, and/or renting decision
                                                                                                                                      dine.TO
                                                                                                                                      Connecting users in the Greater Toronto Area with
                                                                                                                                      an extensive database of restaurant listings, as well
                                                                                                                                      as real-time online ordering capabilities

                        Attracting Over 458 Million1 Visits to Our Network of Digital Properties Annually

1 Excludes the contribution of the ComFree/DuProprio Network, which attracted 25.2 million visits during the first quarter of 2016.                                                           8
Uniquely Positioned to Capture Audience Growth in Key Verticals

                                                                        Further Differentiating Our Properties Via
Key Search Verticals Remain                        Underpenetrated1     Rich Content and Transactional Experiences

                                              Total Unique
                                                                Reach
                                              Visitors (in M)
                                                                                                    Proven C2C
                                                                                                    Marketplace
1.          Google                                29 M          96%

3.          Facebook                              24 M          79%

5.          eBay                                  19 M          63%

7.                                                18 M          60%

19.         Yellow Pages                          11 M          37%

24.         Trip Advisor                          10 M          32%

52.         Yelp                                   6M           19%
                                                                              Integrated
65.         Expedia                                5M           17%         Booking Engine

1 As per comScore Media Metrix, March 2016.                                                                          9
We Are Starting from a Position of Strength

                         Canada’s Most Comprehensive Provider of Digital Marketing Solutions
      A Leader in        Dedicated Chief Marketing Officer for 244,000 local businesses
   Digital Marketing     Largest national network of sales, customer service and digital fulfillment professionals
                         A leading digital advertising agency for national brands

                         One of Canada’s Most Adopted Digital Properties for Local Discovery
   A Rich, Diversified
                         Over 458 million visits executed across our network of digital properties annually
     Digital Media
        Network          Over one third of online Canadians consult our verticalized network of digital media
                         properties to interact and transact with merchants in and around their neigbourhoods

                         Profitable Digital Revenue Growth, with Low Indebtedness
        A Strong         $526 million in annualized digital revenues, currently representing 65% of total revenues
    Financial Profile    Highly profitable digital operations
                         Lean capital structure, with net debt-to-latest twelve-month Adjusted EBITDA of 1.8x

                                                                                                                     10
Our Path to Growth is Clear

                                                    Debt Free
                                                     Capital
                                                    Structure
                                 Growth in
                                 Adjusted
                                  EBITDA

                     Growth in
                     Revenues

        Growth in
      the Customer
          Count

          2017                               2018

                                                                11
Significant Deceleration in Net Customer Count Decline

Annual Customer Acquisition1                                                                               Net Customer Count Decline1,2
(in thousands)                                                                                             (in thousands, unless otherwise noted)

                                                                                    34.6                         26
                                                                         30.8                                               23
                                                             27.2                                                                       20
                                                  24.8                                                                                             19
                                      23.7                                                                                                                    17
                           22.1
               20.2
   18.4                                                                                                                                                             14
                                                                                                                                                                          11

                                                                                                                                                                                 7

    Q2          Q3         Q4          Q1          Q2         Q3          Q4          Q1                        Q2          Q3         Q4          Q1         Q2    Q3    Q4    Q1
           2014 TTM                                 2015 TTM                        2016                               2014 TTM                               2015 TTM          2016
                                                                                    TTM                                                                                         TTM
                                                                                               Customer
                                                                                                  Count
                                                                                                                265         260        256         251        248   246   245   244

                                                                                               Customer
                                                                                                Renewal
                                                                                                                85%        85%         84%         85%        85%   85%   85%   84%

                                                                                               Renewers
                                                                                               Upselling
                                                                                                                26%        27%         31%         35%        40%   44%   44%   42%

                With only 1,000 net customers lost between December 31st, 2015 and March 31st, 2016
                                    we are close to stabilizing the customer count

1 YP Core only, excludes the contribution of Mediative, JUICE Mobile, 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.                                                                                                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                                                                                                       YoY Change
    (22%)                 (21%)              (21%)               (19%)              (23%)                            +9%                    +7%               +12%                +11%              +17%1
                                                                                                                                                                                   129                132
                                                                                                                                                               128
         93
                            88                                                                                                              116
                                               83                                                                        113
                                                                   79
                                                                                      72

     Q1 2015            Q2 2015            Q3 2015            Q4 2015             Q1 2016                            Q1 2015             Q2 2015            Q3 2015            Q4 2015             Q1 2016

    Stabilization in print revenue decline rates supported by                                                      Long-term, sustainable digital revenue growth driven by
     content enhancement and pricing initiatives that have                                                       accelerated customer acquisition, increased digital spending
   encouraged renewal of print advertising spending among                                                        among renewing customers, and revenue growth across new
                             customers                                                                                         verticals and national channels

1 On a pro forma basis, digital revenues for the three-month period ended March 31, 2016 grew 8% year-over-year. Pro forma digital revenue growth adjusts digital revenues for the full inclusion of the
ComFree/DuProprio Network and JUICE Mobile during the three-month period ended March 31, 2015, as well as for the full inclusion of JUICE during the first quarter of 2016.                                  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
                                                                                                               YoY Change
   (8%)                 (7%)               (4%)                (3%)              (1%)1
                                                                                                                  (25%)                (24%)              (15%)                (1%)                 (13%)

                                            211                209
     206                205                                                       204
                                                                                                                      71

                                                                                                                                                            64                 64
                                                                                                                                         62                                                          62

                                                                                                                 Adjusted
                                                                                                                 EBITDA
  % Digital                                                                                                       Margin
    55%                 57%                 61%                62%                65%                              34%                  30%                30%                 31%                  30%

  Q1 2015            Q2 2015            Q3 2015             Q4 2015            Q1 2016                            Q1 2015            Q2 2015            Q3 2015            Q4 2015             Q1 2016

1 On a pro forma basis, consolidated revenues for the three-month period ended March 31, 2016 declined 5% year-over-year. Pro forma consolidated revenue performance adjusts consolidated
revenues for the full inclusion of the ComFree/DuProprio Network and JUICE Mobile during the three-month period ended March 31, 2015, as well as for the full inclusion of JUICE during the first
quarter of 2016.                                                                                                                                                                                            14
Maintaining Strong Profitability During Our Digital Transformation
                                  Relative Size of Gross Margins of our Local Digital Solutions

                                                                                 Print                                                           Cost structure is
 High                                                                                                                                           principally variable,
                                                                                                                                                 with profitability
Margin                                                                                                                                              tracked on a
                                                Online & Mobile Priority Placement                                                              book-by-book basis

                                            Websites
                                                                                                     Over 90% of traffic on Yellow Pages’
                                                                                                     digital properties is direct or organic
 Mid-
Margin
                       Search Engine Optimization

                            Presence Pro/Extended

 Low                Search Engine                                       Leveraging YP traffic to deliver high-margin
Margin                Marketing                                            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, JUICE Mobile, 411 Local Search Corp., Yellow Pages Homes Limited and the ComFree/DuProprio Network.                           15
Delivering Strong Free Cash Flow to Reduce Outstanding Debt

        (in millions, unless otherwise noted)                                 March 31, 2016                               Dec. 31, 2015             Dec. 31, 2012

        Senior Secured Notes1                                                            407                                        407                  800

        Exchangeable Debentures2                                                          91                                         90                   87

        Obligations Under Finance Leases                                                   1                                           1                  2

        Total Debt                                                                       498                                        498                  888

        Cash and Cash Equivalents                                                         35                                          67                 107

        Total Net Debt                                                                   463                                         431                 782

        Total Equity                                                                     748                                        760                  286

        Net Debt / Adjusted EBITDA                                                       1.8x                                        1.7x                1.4x

        LTM Free Cash Flow                                                                86                                         122                 198

    ~$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 Pro Forma Digital Revenue Growth Between 9% and 11%

                                      Improvements to Revenue and Adjusted EBITDA Declines

                                            $100 Million in Principal Debt Repayment

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