Dex One Management Discusses Q2 2012 Results - Earnings Call Transcript

Dex One (DEXO)

Q2 2012 Earnings Call

July 25, 2012 8:30 am ET

Executives

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

Analysts

Lance W. Vitanza - CRT Capital Group LLC, Research Division

David Roeske

Colin Wilson Murphy

Christopher Mathewson - Ares Management LLC

Presentation

Operator

Good morning and welcome to Dex One Corporation's Second Quarter 2012 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. And sir, you may begin.

Tyler D. Gronbach

Thank you, Karen. 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 quarter ended June 30, 2012, and the company's Form 8-K furnished to the SEC this morning. These documents discuss second quarter 2012 results, as well as full year financial guidance and ad sales guidance for the third quarter. The 8-K includes the results package, which provides additional information pertaining to our 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, 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.

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 discount and gain on debt repurchases. 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.

The transformation of Dex One is well underway and generating solid results. Despite a lingering economic malaise and challenging conditions for the print publishing industry, we continued to make progress. Most notably, we delivered a 53% increase in digital bookings compared to the second quarter last year. Bundle accounts for more than 50% of all bookings in the first half of 2012. In the quarter, they represented 58% of total bookings. EBITDA was $141 million for the quarter. For the first half of the year, we have posted EBITDA of $291 million.

We successfully retired $470 million of debt in the first half of the year and we expect to retire an additional $50 million by year end. We remain on track to achieve our guidance.

The cultural shift we have driven within our most critical asset, our sales force, clearly has traction. The investments we've made in digital, in training, tools, technology, products and services are producing the results we all anticipated.

During the quarter, we completed the roll out of our Bundle Builder iPad app to all sales professionals across the company. We deployed iPads to our sales force almost 2 years ago and people asked, "Why?" The answer is compelling on 2 fronts: Firstly, it makes Dex One products and services easier to buy and easier to sell, improving the adoption rate for Bundles by utilizing our value presentation and iPad app. Secondly and importantly, selling Bundles on the iPad has lifted the productivity of our sales force across the board, veterans and new hires alike.

Our Digital portfolio is opening up new groups of target customers. This is important because it takes us beyond our traditional customer base, opening new markets and segments, bringing in new customers. For example, last month, we gained a new client in the business sector we would have never encountered in the past, DNA testing. This customer purchased an array of digital services including SEM and digital display ads to better promote their business.

Our sales forces is our most important asset, and with their successful transformation to a digitally savvy team, we are building on this asset. This transformation is critical as print ad sales continue to decline as we managed the secular shift from print to digital. The effectiveness of Bundles cannot be overestimated. I said a number of times, Bundles make it easier for us to sell and easier for the customer to buy. In addition with Bundles, we see the rate of decline in print moderating within the Bundle from customer who spend more.

Turning to sales performance. Overall bookings declined 13% for the quarter, but as I noted, bookings for digital increased 53%. Ad sales for the quarter were 1 point better than expected of minus 12% compared to the previously provided guidance. The company's revenue decline slowed to 11% for Q2.

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