Q2 2011 Earnings Call
August 02, 2011 10:00 am ET
Samuel Jones - Chief Financial Officer, Executive Vice President and Treasurer
Peter McDonald - Chief Executive Officer, President and Director
Jason Alper - BTIG, LLC
Jonathan Levine - Jefferies & Company, Inc.
Unknown Analyst -
Michael Kass - BlueMountain Capital
Previous Statements by SPMD
» SuperMedia's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» SuperMedia's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» SuperMedia Management Discusses Q3 2010 Results - Earnings Call Transcript
Good morning, and welcome to SuperMedia's Second Quarter 2011 Earnings Conference Call. With me today are Peter McDonald, Chief Executive Officer; and Dee Jones, Chief Financial Officer.
Some statements made by the company today during this call are forward-looking statements. These statements include the company's beliefs and expectations as to future events and trends affecting the company's business, and are subject to risks and uncertainties. The company advises you not to place undue reliance on these forward-looking statements and to consider them in light of the risk factors set forth in the reports filed by SuperMedia with the Securities and Exchange Commission. The company has no obligation to update any forward-looking statements.
A replay of the teleconference will be available at (800) 642-1687. International callers can access the replay by calling (706) 645-9291. The replay passcode is 81655459. The replay will be available through August 16, 2011.
In addition, a live webcast will be available on SuperMedia's website in the Investor Relations section at www.supermedia.com. [Operator Instructions] And now I'd like to turn the call over to Peter McDonald. Peter?
Thank you, Julianne, and good morning, everyone. Once again, I thank you for your time and your interest in our company. This morning, I will provide you with an overview of our second quarter results and an update on our business. Dee will follow with our financial detail, and we will then open the line up for questions and answers.
Second quarter 2011 advertising sales declined 16.7%, compared to a second quarter of 2010 decline of 16.4%. Adjusted earnings before interest, taxes, depreciation and amortization were $152 million for the second quarter of 2011, a 7.9% decline compared to second quarter of 2010 adjusted pro forma EBITDA of $165 million.
Cost management and expense reductions partially mitigated revenue declines, resulting in an improved adjusted EBITDA margin of 36.1% compared to an adjusted pro forma EBITDA margin of 32.2% in the second quarter of 2010. As I have mentioned on prior calls, we have been applying strong financial discipline in our cost structure. During the second quarter, we continued addressing costs, efficiencies and processes, reflected in our ability to maintain the margin improvement we saw in the first quarter.
Before Dee speaks about our financials, let me briefly provide an update on our Q2 activities, just some of the challenges facing small businesses, and outline our go-to market approaches. During the second quarter, we continue improvements to become local media advisers for small businesses, and we did this in a number of ways. First, based on the results of face-to-face research with local businesses across the country, we simplified our existing product offerings and pricing. We also introduced solutions providing mobile websites, and management of Facebook business pages and other social media. Second, to strengthen the trusted relationships with clients, we restructured our sales channels, closing our centralized national telephone call center and moving these customers to the existing media consultants in our local offices. Third, we continue to evaluate, and eliminate products and markets that fell short of our criteria for substantial profitability. While these decisions were difficult, they were necessary to focus on profitability. Fourth, we implemented, streamlined and simplified operational processes to improve service quality, reduce administration, and allow our sales force to spend more time with customers.
On note, perhaps, in part, because of sales management, compensation and other process improvements, we saw a significant reduction in year-over-year sales turnover. And last, we launched new local TV, radio, online and print advertising, highlighting the value of SuperMedia provides to small businesses across print, online, direct mail and mobile media. All that said, throughout the second quarter, small and medium-sized business confidence remained low, and they lacked the confidence to invest.
Along with the slow-growing economy, the landscape for advertising choices is becoming more fragmented and dynamic. A small-business owner -- small business owners are suffering from advertising offer overload. The average small business is contacted by over 30 people a month, offering an array of individual advertising products. More often than not, owners are left confused and frustrated, not having the time, the money or the inclination to sort through proposals and claims, much less buy, and manage a wide variety of advertising products. The good news is latest research indicates the solutions we are currently offering and those that we are trying are a value to consumers and businesses.
First, the Yellow Pages. New corroborating data collected by CRM Associates for multiple publishers shows call tracking studies capture only slightly more than 1/2 of the response to an ad. Between in-person visits and visits to websites with subsequent calls to the numbers listed in the website rather than the ad, the number of leads delivered by Yellow Pages ads can be significantly higher than indicated just by call-tracking studies.
Second, Internet Yellow Pages. Online activity continues to grow in usage and intensity. New data from comScore shows local searches now account for 13% of core activity. Internet Yellow Pages in local search sites also exhibited strong growth with 5.6 billion local searches in 2010, a 15% increase over 2009.