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Dex Media Announces First Quarter 2015 Earnings

By Thryv Contributor | 05.07.15
Dex Media Announces First Quarter 2015 Earnings

DALLAS–(BUSINESS WIRE)–May 7, 2015–
Dex Media, Inc. (NASDAQ: DXM), one of the largest national providers of
social, local and mobile marketing solutions through direct
relationships with local businesses, today announced financial results
for the first quarter 2015.

Key highlights for first quarter 2015:

  • On track to exceed expense reduction target for 2015, realizing
    annualized run rate savings of approximately $160M
  • Launched new service model featuring dedicated campaign management
  • Completed digital product simplification and began testing new
    solutions including DexLnk, a CRM product that helps SMBs automate
    their marketing
  • Rolled out updated print directories with bigger, more readable type
    and attractive new covers
  • Introduced first phase of improvements to IYP sites featuring improved
    user experience

“We’re working with focus across every functional department to reshape
and redefine the company,” said Joe Walsh, president and CEO. “In the
first quarter, we began introducing new products, a more focused sales
call, and a new service model that will enhance the client experience
and deliver increased value.”

First Quarter 2015 Results

$ in millions

GAAP Reporting

1Q’ 15

Operating Revenue$406
Operating Revenue Growth YoY-11.0%
Operating Income$26
Net (Loss)$(59)

Non-GAAP Reporting

1Q’ 15

Operating Revenue$406
Operating Pro Forma Revenue Growth YoY-16.5%
Adjusted EBITDA¹$143
Adjusted EBITDA margin¹35.2%

Sales Metrics

1Q’ 15

Print Ad Sales-26.0%
Digital Ad Sales-29.6%
Total-27.1%

1 Adjusted EBITDA is a non-GAAP measure that
represents earnings before interest; taxes; depreciation and
amortization; and other nonrecurring items, including
business
transformation costs and long term incentive compensation. Adjusted
EBITDA margin (non-GAAP) is calculated by dividing Adjusted EBITDA
(non-GAAP) by operating revenue.

Management believes several factors contributed to these slower ad sales
results, including delayering of sales management teams resulting in
temporary dislocation as sales managers adjusted to their new
geographies and teams. In addition, right sizing the sales force
resulted in reassignment of accounts and impacted the timing of serving
our clients. We believe the impact of these factors will lessen over
time.

Cash provided by operations for the first quarter in 2015 was $46
million less $3 million in capital expenditures which resulted in free
cash flow, a non-GAAP measure, of $43 million. The Company had a cash
balance of $171 million as of March 31, 2015.

Financial Guidance for Second Quarter 2015

Low

High

Operating Revenue$390$410
Operating Revenue Growth YoY-17.7%-13.5%
Adjusted EBITDA$140$150
Adjusted EBITDA Margin35.9%36.6%
Free Cash Flow$70$80

Earnings Call and Webcast Information

Dex Media will host an investor call at 10 a.m. EDT today. Individuals
within the United States can access today’s call by dialing
888-603-6873. International participants should dial 973-582-2706. The
pass code for the call is: 32259145. In order to ensure a prompt start
time, please dial into the call by 9:50 a.m. EST. A replay of the
teleconference will be available at 800-585-8367. International callers
can access the replay by calling 404-537-3406. The replay pass code is:
32259145. The replay will be available through May 28, 2015. In
addition, a live webcast will be available on Dex Media’s website in the
Investor Relations section at dexyp.wpengine.com.

Basis of Presentation and Non-GAAP Financial Measures

The financial information accompanying this release provides a
reconciliation of GAAP to non-GAAP and adjusted pro forma non-GAAP
results. Dex Media believes that the use of non-GAAP financial measures
provides useful information to investors to gain an overall
understanding of its current financial performance. Specifically, Dex
Media believes the non-GAAP results provide useful information to
management and investors by excluding certain nonrecurring items that
Dex Media believes are not indicative of its core operating results. In
addition, non-GAAP financial measures are used by management for
budgeting and forecasting as well as subsequently measuring Dex Media’s
performance, and Dex Media believes that non-GAAP results provide
investors with financial measures that most closely align to its
internal financial measurement processes.

About Dex Media

Dex Media (NASDAQ: DXM) is a full-service media company offering
integrated marketing solutions that deliver measurable results. As the
marketing department for more than 475,000 small and medium-sized
businesses across the U.S., Dex Media helps them Get Found, Get Chosen
and Get Talked About. The company’s widely used consumer services
include the DexKnows.com®
and Superpages.com®
search portals and applications as well as local print directories. For
more information, visit www.DexMedia.com.

Forward-Looking Statements

Some statements included in this release constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and the federal securities laws. Statements that
include the words “may,” “will,” “could,” “should,” “would,” “believe,”
“anticipate,” “forecast,” “estimate,” “expect,” “preliminary,” “intend,”
“plan,” “project,” “outlook” and similar statements of a future or
forward-looking nature identify forward-looking statements. You should
not place undue reliance on these statements, as they are not guarantees
of future performance. Forward-looking statements provide current
expectations with respect to our financial performance and future events
with respect to our business and industry in general. Forward-looking
statements are based on certain assumptions and include any statement
that does not directly relate to any historical or current fact.
Forward-looking statements address matters that involve risks and
uncertainties, and include, without limitation, future operating and
financial performance of the Company (including, without limitation, the
future prospects for and stability of the industry in which the Company
operates, anticipated future revenues, EBITDA margins and free cash flow
for the second quarter of 2015, the implementation of the business
transformation program and the ability of the Company to retain existing
business and to obtain and retain new business. Accordingly, there are
or will be important factors that could cause our actual results to
differ materially from those indicated in these statements. We believe
that these factors include, but are not limited to, the risks related to
the following: our ability to provide assurance for the long-term
continued viability of our business; our ability to comply with the
financial covenants and other restrictive covenants in our credit
facilities; limitations on our operating and strategic flexibility and
the ability to operate our business, finance our capital needs or expand
business strategies under the terms of our credit facilities; limited
access to capital markets and increased borrowing costs resulting from
our leveraged capital structure and debt ratings; our ability to obtain
additional financing or refinance our existing indebtedness on
satisfactory terms or at all; our ability to accurately report our
financial results due to a material weakness in our internal control
over financial reporting; possible changes in our credit rating; changes
in our operating performance; our ability to implement our business
transformation program as planned; our ability to realize the
anticipated benefits in the amounts and at the times expected from the
business transformation program; the risk that the amount of costs
associated with our business transformation program will exceed
estimates; reduced advertising spending and increased contract
cancellations by our clients, which causes reduced revenue; declining
use of print yellow page directories by consumers; our ability to
collect trade receivables from clients to whom we extend credit; credit
risk associated with our reliance on small and medium sized businesses
as clients; our ability to anticipate or respond to changes in
technology and user preferences; our ability to maintain agreements with
major Internet search and local media companies; competition from other
yellow page directory publishers and other traditional and new media
including increased competition from existing and emerging digital
technologies; changes in the availability and cost of paper and other
raw materials used to print our directories; our reliance on third-party
providers for printing, publishing and distribution services; our
ability to attract and retain qualified key personnel; our ability to
maintain good relations with our unionized employees; changes in labor,
business, political and economic conditions; changes in governmental
regulations and policies and actions of federal, state and local
municipalities impacting our businesses; the outcome of pending or
future litigation and other claims; and other events beyond our control
that may result in unexpected adverse operating results.

The foregoing factors should not be construed as exhaustive and should
be read together with the other cautionary statements included in this
and other periodic reports we file with the Securities and Exchange
Commission “SEC,” including the information in “Item 1A. Risk Factors”
in Part I of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014, which is incorporated herein by reference. If one or
more events related to these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be incorrect,
actual results may differ materially from what we anticipate. All
forward-looking statements included in this report are expressly
qualified in their entirety by the foregoing cautionary statements. You
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof or, in the case of
statements incorporated by reference, on the date of the document
incorporated by reference and, other than as required by law, we
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.

Dex Media, Inc.Schedule A
Consolidated Statements of Comprehensive (Loss)
Reported (GAAP)
(dollars in millions, except per share amounts)
Three Mos. EndedThree Mos. Ended
Unaudited3/31/153/31/14% Change
Operating Revenue$406$456(11.0)
Operating Expenses
Selling96115(16.5)
Cost of service (exclusive of depreciation and amortization)141150(6.0)
General and administrative372360.9
Depreciation and amortization106161(34.2)
Total Operating Expenses380449(15.4)
Operating Income267NM
Interest expense, net8590(5.6)
(Loss) Before Provision (Benefit) for Income Taxes(59)(83)(28.9)
Provision (benefit) for income taxes(1)(100.0)
Net (Loss)$(59)$(82)(28.0)
Other Comprehensive (Loss)
Adjustments for pension and other post-employment benefits, net of
taxes
3250.0
Comprehensive (Loss)$(56)$(80)(30.0)
Basic and Diluted (Loss) per Common Share$(3.39)$(4.74)(28.5)
Basic and diluted weighted-average common shares outstanding17.417.3
Dex Media, Inc.Schedule B
Reconciliation of Non-GAAP Measures
(dollars in millions)
Unaudited

Three Mos. Ended

3/31/15

Three Mos. Ended

3/31/14

Net (Loss) – GAAP$(59)$(82)
Add/(subtract) non-operating items:
Provision (benefit) for income taxes(1)
Interest expense, net8590
Operating Income – GAAP267
Depreciation and amortization106161
EBITDA (non-GAAP) (1)132168
Adjustments and pro forma items:
Adjustments for SuperMedia acquisition accounting (3)21

Merger integration costs (4)

18
Business transformation costs (5)9
Long term incentive compensation (6)23
Employee benefit plan amendments (7)(13)
Adjusted EBITDA (non-GAAP) and Adjusted Pro Forma EBITDA
(non-GAAP)
(2)
$143$197
Operating Revenue – GAAP$406$456
SuperMedia revenue excluded from GAAP revenue (8)30
Operating Revenue – GAAP and Pro Forma Operating Revenue
(non-GAAP)
$406$486
Operating income margin (9)6.4%1.5%
Impact of depreciation and amortization26.1%35.3%
EBITDA margin (non-GAAP) (10)32.5%36.8%
Impact of adjustments and pro forma Items2.7%3.7%
Adjusted EBITDA (non-GAAP) and Adjusted Pro Forma EBITDA margin
(non-GAAP)
(11)
35.2%40.5%
Three Months Ended June 30, 2015 GuidanceLowHigh
Operating Income – GAAP2131
Add backs:
Depreciation and amortization103103
Non-GAAP adjustments1616
Adjusted EBITDA (non-GAAP) (2)$140$150
Note: Please see accompanying reconciliation end notes.
Dex Media, Inc.Schedule C
Consolidated Balance Sheets
Reported (GAAP)

(dollars in millions)

UnauditedMarch 31, 2015December 31, 2014
Assets
Current assets
Cash and cash equivalents$171$171
Accounts receivable, net of allowances of $29 and $30142151
Deferred directory costs150161
Prepaid expenses and other1214
Total current assets475497
Fixed assets and capitalized software, net5464
Goodwill315315
Intangible assets, net701794
Pension assets4945
Other non-current assets67
Total Assets$1,600$1,722
Liabilities and Shareholders’ (Deficit)
Current liabilities
Current maturities of long-term debt$132$124
Accounts payable and accrued liabilities132167
Accrued interest1120
Deferred revenue8593
Total current liabilities360404
Long-term debt2,2502,272
Employee benefit obligations125127
Deferred tax liabilities2930
Unrecognized tax benefits1111
Other liabilities2
Stockholders’ (deficit):

Common stock, par value $.001 per share, authorized – 300,000,000
shares: issued and outstanding – 17,623,266 at March 31, 2015 and
17,608,580 at December 31, 2014

Additional paid-in capital1,5551,554
Retained (deficit)(2,650)(2,591)
Accumulated other comprehensive (loss)(82)(85)
Total shareholders’ (deficit)(1,177)(1,122)
Total Liabilities and Shareholders’ (Deficit)$1,600$1,722
Dex Media, Inc.Schedule D
Consolidated Statements of Cash Flows
Reported (GAAP) and Non-GAAP Financial Reconciliation – Free Cash
Flow

(dollars in millions)

Three Mos. EndedThree Mos. Ended
Unaudited3/31/153/31/14

$ Change

Cash Flows from Operating Activities
Net (loss)$(59)$(82)$23
Reconciliation of net (loss) to net cash provided by operating
activities:
Depreciation and amortization106161(55)
Provision for deferred income taxes(3)(3)
Provision for bad debts56(1)
Non-cash interest expense25223
Stock-based compensation expense11
Employee retiree benefits1(15)16
Changes in assets and liabilities:
Accounts receivable437(33)
Deferred directory costs1156
Other current assets25(3)
Accounts payable and accrued liabilities(47)(40)(7)
Other items, net3(3)
Net cash provided by operating activities46100(54)
Cash Flows from Investing Activities
Additions to fixed assets and capitalized software(3)(3)
Net cash (used in) investing activities(3)(3)
Cash Flows from Financing Activities
Debt repayments(38)(74)36
Debt issuance costs and other financing items, net(5)(5)
Net cash (used in) financing activities(43)(74)31
Increase in cash and cash equivalents23(23)
Cash and cash equivalents, beginning of year17115615
Cash and cash equivalents, end of period$171$179$(8)
Three Mos. EndedThree Mos. Ended
Non-GAAP Financial Reconciliation – Free Cash Flow3/31/153/31/14

$ Change

Unaudited
Net cash provided by operating activities – GAAP$46$100$(54)
Less: Additions to fixed assets and capitalized software(3)(3)
Free Cash Flow (non-GAAP)$43$97$(54)
Dex Media, Inc.Schedule E
Metrics
Advertising SalesThree Mos. EndedThree Mos. Ended
Unaudited3/31/153/31/14
Print Products Sales
% Change year-over-year(26.0%)(19.6%)
Digital Sales
% Change year-over-year(29.6%)9.6%

Total Advertising Sales(1)

% Change year-over-year(27.1%)(12.7%)
Notes:

(1) Advertising sales is an operating measure which
represents the annual contract value of print directories
published and digital contracts sold. It is important to
distinguish advertising sales from revenue, which under GAAP are
recognized under the deferral and amortization method. Advertising
sales are a leading indicator of revenue recognition.

Other MetricsThree Mos. EndedThree Mos. Ended
Unaudited3/31/153/31/14
% of Revenue Sourced from Digital Solutions33%27%
As ofAs of
Unaudited3/31/153/31/14
% Clients with a Digital Relationship39%36%
Dex Media, Inc.Schedule F
Reconciliation of Non-GAAP Measures End Notes
(1)EBITDA is a non-GAAP measure that represents earnings before
interest, taxes, depreciation and amortization.
(2)Adjusted EBITDA is a non-GAAP measure that adjusts EBITDA for
certain unique costs. Adjusted Pro Forma EBITDA is a non-GAAP
measure that adjusts EBITDA for certain unique costs and pro forma
items.
Adjusted Pro Forma results for 2014 reflect the combination of Dex
One and SuperMedia as if the transaction had been consummated prior
to January 1, 2012 and reflect certain other adjustments, including
adjustments to exclude the effects of purchase accounting, merger
integration costs, business transformation costs, long term
incentive compensation and employee benefit plan amendments. Pro
forma adjusted results do not necessarily reflect what the
underlying operational or financial performance of Dex Media would
have been had the Dex One / SuperMedia merger transaction been
consummated prior to January 1, 2012.
(3)This pro forma adjustment represents the EBITDA results of
SuperMedia that as a result of acquisition accounting, were not
included in the GAAP results of Dex Media.
(4)Merger integration costs represent costs incurred to achieve
synergies related to the merger of Dex One and SuperMedia.
(5)Business transformation costs represent organizational restructuring
costs incurred to transform the Company by launching virtual sales
offices, enabling the Company to eliminate field sales offices, the
automation of the sales process, integration of systems to eliminate
duplicative systems and workforce reductions.
(6)Long term incentives include stock based compensation, other long
term incentive compensation and the value creation programs.
(7)These adjustments for 2014 include credits to expense related to
pretax gains associated with employee benefit plan amendments.
(8)This pro forma adjustment represents the revenue results of
SuperMedia that as a result of acquisition accounting, were not
included in the GAAP results of Dex Media.
(9)Operating income margin is calculated by dividing operating income
by operating revenue.
(10)EBITDA margin (non-GAAP) is calculated by dividing EBITDA (non-GAAP)
by GAAP operating revenue.
(11)Adjusted EBITDA margin (non-GAAP) is calculated by dividing Adjusted
EBITDA (non-GAAP) by operating revenue. Adjusted Pro Forma EBITDA
margin is calculated by dividing Adjusted Pro Forma EBITDA
(non-GAAP) by Pro Forma operating revenue (non-GAAP).