Dex Media, Inc. (DXM)

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Dex Media (DXM)

Q2 2013 Earnings Call

August 07, 2013 10:00 am ET

Executives

Peter J. McDonald - Chief Executive Officer, President and Director

Samuel D. Jones - Chief Financial Officer, Executive Vice President and Treasurer

Analysts

Frederick Taylor

Colin Wilson-Murphy

Chad Quinn

Tim Daggett

Samuel Sekine

Parker Lewis

Jennifer Ganzi

Stan Manoukian - Independent Credit Research LLC

Presentation

Operator

Good morning, and welcome to Dex Media's Second Quarter 2013 Conference Call. With me today are Peter McDonald, Chief Executive Officer; and Dee Jones, Chief Financial Officer. The 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 reports filed by Dex Media and its predecessor companies with the Securities and Exchange Commission.

The company has no obligation to update any forward-looking statement. 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 19149862. The replay will be available through August 21, 2013.

In addition, a webcast will be available on Dex Media's website in the Investor Relations section at www.dexmedia.com.

At the end of the company's prepared remarks, there will be a question-and-answer session.

And now I'd like to turn the call over to Peter McDonald. Peter?

Peter J. McDonald

Thank you, Paula, and welcome, everyone, to the second quarter earnings call for Dex Media. I'll make some comments about the quarter, and then Dee will follow up with a review of the financials. We will then take your questions.

This was an eventful quarter with the completion of the merger between Dex One and SuperMedia on April 30. The combination of these companies is good for shareholders, lenders, our clients and the future of our employees. I again recognize and thank the Boards of Dex One and SuperMedia, as well as our advisors, lenders and shareholders for your support.

We are now 3 months into integration, and we have accomplished a lot. While the merger was consummated 4 months later than originally planned, all of the planning that had been done prior to the closing date is paying off, and we are seeing the benefits in best practices, strengthened management teams and synergies.

I'm very pleased with how the teams are working together, and I can say we are on track in that regard at this point. We have evaluated nearly all the jobs in the company. We have made some tough decisions and have identified and put in place our top 127 managers in just the first 2 months of integration. It is interesting and significant that our management team consists of nearly an even split of people from both predecessor companies.

I'm very pleased with the talent in the new company. It is important to get leadership team in place so that we can make the decisions necessary to drive the business forward. This has been a distracting time as people needed to get the "me questions" resolved. With nearly 5,000 people now in place in 135 locations, we are anxious to continue to make progress.

The HR and legal teams have done an outstanding job of getting this work completed. In each of the functional departments, we have quality leadership in place and are moving forward each day to improve this business. Marketing team is working on migrating the best products across the entire footprint and leveraging best practices. The bundles Dex One used will be rolled out to the former SuperMedia footprint, and the former SuperMedia digital bundles will be rolled into the former Dex One markets.

Over the second half of 2013 and into 2014, we look forward to rolling out additional products across our entire combined footprint. Getting all the systems ready to accommodate these new products is high on our list of priorities as we migrate our customer base to the digital world. As we get deeper into this combination, it is clear that a lot of quality work was done in each organization prior to the merger.

Our technology and system teams are outstanding and are well on their way to integrating multiple systems to accommodate the products and changes made in integration. Again, we're very pleased with the leadership and partnering that has taken place this quarter.

The operations teams have played a large role and -- as we continue to see bad debt decline and efficiencies improve. Everyone is participating in finding new ways to do business more effectively.

In sales, we have a very dedicated and quality team focused on our clients and their needs. We continue to build strong relationships as we retain our clients in the 80% to 85% range. The combination of channels available and managers in place, we are working on our plans to improve the top line and attract more clients.

Recurring revenue, on a dollar basis, for our clients has been in the 70% to 80% range, which indicates they are receiving value and getting results from our products and solutions. This year, we have seen stronger recurring revenue among clients who purchased bundles last year.

Our new business is in the 3% to 5% range, and we see an opportunity to improve this. In terms of the second quarter and year-to-date, sales trends are not what we would like or what we expect them to be, once we have completed the merger integration and our team's products and processes are in place. We continue to see increasing pressure on print. The combined sales trends across all products and markets over the past 2 quarters have remained consistent.

Read the rest of this transcript for free on seekingalpha.com