Dex One (DEXO)
Q4 2011 Earnings Call
March 01, 2012 8:30 am ET
Tyler D. Gronbach - Senior Vice President of Communications
Alfred T. Mockett - Chief Executive Officer, President and Director
Gregory W. Freiberg - Chief Financial Officer and Executive Vice President
Donna Jaegers - D.A. Davidson & Co., Research Division
Jonathan B. Levine - Jefferies & Company, Inc., Research Division
Previous Statements by DEXO
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Good morning, and welcome to Dex One Corporation's Fourth Quarter and Year End 2011 Results Conference Call. [Operator Instructions] Please note that today's call is being recorded as well as webcast live over the company's website at www.dexone.com. I would now like to turn the call over to Mr. Tyler Gronbach. Sir, you may begin.
Tyler D. Gronbach
Good morning, everyone, and thank you for joining us today. We will begin this morning with comments from Dex One Chief Executive Officer, Alfred Mockett; and Chief Financial Officer, Greg Freiberg. Following their comments, we will then have time for some of your questions.
I would like to remind everyone, certain statements made today may be forward-looking as defined by the Private Securities Litigation Reform Act. We call your attention to our press release for the fourth quarter and fiscal year ended December 31, 2011, and the company's Form 8-K furnished to the SEC this morning. These documents discuss fourth quarter and full year 2011 results, as well as guidance for 2012. The 8-K also includes the results information package, which provides additional information pertaining to the discussion this morning.
We encourage you to review these materials and the company's other periodic filings with the SEC, which set forth important risks and other factors that could cause actual results to differ materially from those contained in or suggested by any forward-looking statements. Electronic versions of Dex One's SEC filings can be obtained by contacting us or visiting dexone.com or visiting the SEC's website at sec.gov. Copies of the news release and results information package can also be found under the Investor Relations tab at dexone.com.
Commencing on February 1, 2010, the company adopted fresh start accounting as required under GAAP, which had a significant impact on the reported results of operations in that year. These reported results were not indicative of our underlying operating or -- and financial performance and are not comparable to any prior or subsequent period presentation.
During the call today, we will refer to certain adjusted figures that are non-GAAP financial measures such as expenses, EBITDA, free cash flow and net debt. Some of these exclude items such as impairment charges, stock-based compensation and long-term incentive program expenses, fair value adjustments and the impact of fresh start accounting. Additional information about non-GAAP financial measures as well as a reconciliation between these items and the comparable GAAP measures can be found in the press release and related 8-K furnished to the SEC.
One final reminder, this call is the property of Dex One Corporation and any retransmission or broadcast without the expressed consent of the company is strictly prohibited.
I would now like to turn the call over to Alfred.
Alfred T. Mockett
Thank you, Tyler, and good morning, everyone. We are pleased to share with you our full year and fourth quarter results. Entering 2011, we identified several key areas of focus and we have made significant progress on each of them. First, as part of our effort to establish a 21st century sales force, we completed a major sales refresh by replacing approximately 40% of our sales force, with digitally savvy individuals, who can sell integrated offerings. We established the Dex One Sales Academy with a continuous learning digital curriculum, online training, podcast and other e-learning tools and recruited, trained and deployed digital-only sales teams in our major markets and in 2 pilot markets outside of our footprint.
Second, we expanded our partnership network and struck alliances with 11 leading local, social and mobile players. These agreements are helping to support our $200 million additional business with bookings growth of 30% in the fourth quarter, well ahead of the industry peer group. Third, we simplified how we bring solutions to market with the introduction of service bundles that are easy to sell and easy to buy. Customers have responded favorably to this new approach. In just 6 months, we sold 34,000 bundles. And in the fourth quarter, bundles represented 40% of total bookings. Fourth, we continue to exercise prudent financial discipline and reduce costs by more than $120 million in 2011, bringing the 3-year cumulative expense reduction to $420 million. Lastly, we strengthened capital structure by reducing net debt by $385 million. The actions we took during 2011 directly led to today's announcement that we are pursuing amendments to our credit agreements to enable the company to repurchase outstanding loans below par.
While we are pleased with our progress, we must stabilize the top line by effectively managing the decline [indiscernible] and accelerating the growth of our digital business. Ad sales in the fourth quarter were down 13% within the guidance range. Results were impacted by weaker print sales, which were down 18%, but offset by the very solid digital growth I referenced earlier. Digital services now represent 19% of total bookings. Recent industry reports indicate print advertising revenue will continue to decline at approximately 20% per year for the foreseeable future. While we expect to generate print performance a couple of points ahead of the industry in 2012, digital sales will not overcome print declines. That being said, we expect to maintain our industry-leading margins in part by driving more profitable leads from our owned and operating profits business, and leveraging Dex Net's sophisticated algorithm to cost effectively buy leads in the market. We focus on the 3 p's: people, partnership and packaging to help us capture a greater portion of the rising investment in digital local marketing. We took important steps in each of these 3 areas in 2011.