SuperMedia's CEO Discusses Q2 2012 Results - Earnings Call Transcript

SuperMedia Inc. (NASDAQ:SPMD)

Q2 2012 Earnings Call

July 27, 2012 10:00 AM ET

Executives

Peter McDonald – CEO

D Jones – CFO

Analysts

Chad Quinn – Bennett Management

Colin Murphy – Valerie

Lance Vitanza – CRT Capital Group

Presentation

Operator

Good morning and welcome to SuperMedia Second Quarter 2012 Earnings Conference Call. With me today are Peter McDonald, Chief Executive Officer; and D 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 line 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 800-585-8367. International callers can access the replay by calling 404-537-3406. The replay passcode is 11277433. The replay will be available through August 10, 2012.

In addition, a webcast will be available on SuperMedia’s website in the Investor Relations section at www.supermedia.com. At the end of the company’s prepared remarks, there will be a question-and-answer session.

And now, I would like to turn the call over to Peter McDonald. Peter?

Peter McDonald

Thank you, Maria, and good morning, everyone. In the next few minutes, I will review some of the highlights for the quarter focusing on ad sales, expenses and our progress of our new sales approach.

Following my comments, D will review the financials and then we will be happy to take your questions.

As I think about this quarter, it is disappointing to see us reflecting a 19.7% decline in adjusted ad sales numbers. In that regard, I would like to remind everyone that these results reflect the value of print directories that were primarily sold in the fourth quarter of last year and the first quarter of 2012 and then published in Q2.

In addition, our digital results reflected in the calculation are on an amortized basis such that what we sell and fulfill in the current period are only partially reflected. While our reporting methodology is the same as always, the response to our new approach and trends, we are seeing the marketplace have not yet been scaled and are not yet reflected in our results.

Today it is clear that while many customers see the value of print advertising, most are also interested in marketing their business online or with social media. Let me give you an example. An existing customer may have $1,000 a month budget and decided to keep $750 in print. And take the remaining $250 and use it toward digital marketing solutions.

On a print basis, we would recognize a 25% loss from the prior year, while it will take a full 12 months for the effect of the $250 digital order to be fully reflected in ad sales. At this time, we aren’t changing our sales reporting process as it is more closely tied to the sales that will translate to revenue.

While we aren’t growing yet, we are seeing real progress with our new approach in the marketplace; that our reporting methodology doesn’t capture right away. We have trained all of our premise consultants that handle the bulk of our customers and are seeing improvements across all regions.

Our new approach is being well received by our media consultants as well as our customers. It is no longer just a project; it is taking off in all regions because it does make sense.

We are now training the new approach with telephone sales and have started our training for consultants that handle our top 5% customers. This customized team selling approach for the top 5% of our customers is key to our transformation. While training has received high grades from the top media consultants; they are now in the field calling on customers. We expect to be able to report more as we go forward.

I’ve been in the field this quarter to see first-hand on the front lines, how we deliver our approach and how it is received by our existing and new customers. Most small, medium sized businesses don’t know how to manage their business on Google, Bing or Yahoo! They have no idea of how to deal with social media or manage their message on mobile. But they do agree that their customer search for businesses in all these places and they need to be there.

Most customers are happy with us and are very open to ideas. Riding in the field with Christina in Boston, Dan in Philadelphia and Ernesto in DC, I saw talented media consultants that could deliver our approach easily and effectively. Armed with iPads and our internal app, they demonstrated that they could win customers and help grow the business. I left each of these field visits feeling good about our ability to drive business in the right direction.

I also spent time sitting with one of our top telephone media consultants, Julie in Boston; and again, was impressed with her technique over the phone. Customers want solutions and that is what we are providing. We believe we are moving in the right direction and expect to see improvements as I watched the progress in the marketplace.

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