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Executives

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

Peter McDonald - Chief Executive Officer, President and Director

Analysts

Jason Alper - BTIG, LLC

Kyle Okita

George Schultze

Jonathan Levine - Jefferies & Company, Inc.

Unknown Analyst -

Michael Kass - BlueMountain Capital

SuperMedia (SPMD) Q2 2011 Earnings Call August 2, 2011 10:00 AM ET

Operator

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 reports filed by SuperMedia 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) 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?

Peter McDonald

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 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 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, address some of the challenges facing small businesses, and outline our go-to market approaches. During the second quarter, we continued 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 from 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.

Third, mobile websites. The same comScore study showed significant growth in mobile local search use, providing an opportunity to help local business engage with potential customers via mobile websites, a solution, as mentioned earlier, we've begun offering. In January 2011, 77 million mobile subscribers accessed local content on a mobile device. That's up 34% from the previous year. Local content users accounted for 33% of mobile subscribers, with 87% owning a GPS-capable handset. Securing local content dominated usage as mobile subscribers increasingly turn to their mobile phones for information on maps, weather, traffic, retail and other local content.

And lastly, Facebook Business Pages. In December 2010, Facebook reported it was serving more than 2 billion "like buttons" every day to more than 2 million websites that have implemented it. Consumers "like" these pages to receive latest offers, exclusive content and enter sweepstakes. Much like having to deal with multiple advertising companies, the typical small business owner doesn't have time to create and manage a business page. That is why we are offering this service.

A total local media solution must be combined with great advice and quality customer service. We are training and coaching our media consultants to become trusted advisers to business owners. We are testing different go-to market approaches that provide existing and new clients with the most relevant and cost-effective mix of solutions, whether they be online, print, direct mail, social or mobile. That will help them add and retain customers with great return on investment. Our approach is to provide simple total solutions, rather than a complicated menu of products to choose from. As I've mentioned before, our sales force is going to be compensated for providing their clients with total solutions that work. When small business confidence returns, we will be positioned as a trusted adviser in attracting ready-to-buy consumers. Everyone at SuperMedia is committed to providing and delivering value to every client we see.

In conclusion, the 3 points I'd like you to take away are: First, we remain committed to strong financial discipline and cost management; second, while it is clear that small business confidence in the economy remains low, the products we are currently -- we currently offer and trialing offer value to consumers and businesses; and last, based on all the initiatives I've discussed, we are focused on improving our top line results.

Again, thanks for your time. And now to Dee.

Samuel Jones

Thank you, Peter, and good morning, everyone. First, I would like to mention that our 2011 second quarter and year-to-date reported results are provided in GAAP format and non-GAAP format. Due to the fresh start accounting in 2010, GAAP results for that period will not provide comparability with the 2011 GAAP results. As a result, I will be speaking to non-GAAP numbers. Reconciliations of the GAAP and non-GAAP results are included in the presentation appendix.

For the second quarter, revenues were $421 million, a decline of 17.8% compared to 2010. EBITDA was $152 million, compared to $165 million in 2010. Our second quarter 2011 EBITDA margins were 36.1%, compared to 32.2% for the same period in 2010. As disclosed in the second quarter of 2010, in that period, we had a favorable noncash data operating tax impact of $16 million, which reduced our expenses and contributed to the $165 million EBITDA. Year-to-date revenues were $859 million, a decline of 17.8%, compared to year-to-date 2010. EBITDA was $306 million compared to $328 million. Our EBITDA margins were 35.6% compared to 31.4%, which resulted in an improvement of 420 basis points. Again, year-to-date 2010 results were favorably impacted by the $16 million state operating tax favorability.

Looking at advertising sales for the second quarter, ad sales declined 16.7% compared to a decline of 16.4% in 2010. The ad sales were slightly impacted by the certified marketing representatives situation mentioned in our first quarter call. Without the related impact, ad sales would have been 16.3% for the second quarter. As of now, the accounts impacted by the single CMR situation have been transitioned to other CMR firms.

Turning to our EBITDA performance. Year-to-date EBITDA margin at 35.6% has trended favorably as a result of our overall cost reductions and continued commitment to cost management. Total operating expense on a year-to-date basis, excluding depreciation and amortization, was favorable last year by $164 million, or 22.9%, reflecting savings from reductions across all operating expenses. Again, our 2010 results include a $16 million expense reduction related to favorable state operating tax claims resolutions. Selling expense reflected a reduction of 23.5%, or $70 million, primarily driven by sales efficiencies and lower related sales costs, including advertising. Cost of sales was favorable at last year by 21.2%, or $58 million. This was primarily driven by lower print and distribution volumes and efficiencies in the operations area.

Our G&A expenses are favorable relative to 2010 by 24.8%, or $36 million. This was driven by favorability related to our bad debt and continued efficiencies from our G&A functions. Year-to-date bad debt expense was 4.1% compared to our 2010 full-year provision rate of 5.2%. The result of our cost initiatives has continued to impact our headcount. On a year-to-date view, we have lowered our headcount by over 10% and both sales and support and in non-sales staff related to year end of 2010.

Year-to-date free cash flow was $42 million consisting of operating cash flow of $49 million and $7 million in capital expenditures. This included federal tax payments of $72 million relative to 2010 tax obligations paid in the first quarter and $37 million in federal tax payments for 2011 paid in the second quarter. We made a $36 million mandatory debt suite payment in the second quarter and our ending cash balance was $180 million.

With that, operator, Peter and I are now ready to address questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question is from the line of Lance Vitanza with CRT Capital.

Kyle Okita

Actually, this is Kyle Okita calling in for -- filling in for Lance. Just first, to start off a really quick question, I know, that this will eventually be in the Q, but just so I can run my numbers quickly, could you give me the cash interest payments for the quarter?

Samuel Jones

It's $56 million.

Kyle Okita

$56 million? Okay. And did I hear you correctly, that the $37 million, you made $37 million of cash tax payments this quarter, Q2, and that's for the entirety of the year, correct?

Samuel Jones

That's correct.

Kyle Okita

Okay. So we shouldn't expect material cash payments for the remainder of 2011?

Samuel Jones

No, no, no. The $37 million is the year-to-date level. It was all made in the second quarter of cash tax payments. So you've got quarterly tax payment on April 15, and we had another quarterly tax payment on June 15. So we've made 2 of our cash tax payments.

Kyle Okita

Okay. So it's 2 quarters worth?

Samuel Jones

That's correct.

Kyle Okita

Okay. And then, can you discuss any of the new -- maybe, in a little bit more detail, any of the new products and services aimed at sort of the digital world? You did mention a little bit about the Facebook management and the mobile websites, maybe going into a little bit more detail about other new products or services?

Peter McDonald

Sure, Kyle. This is Peter. We're running a number of different trials, and as matter of fact, I've been in the field in 2 different locations with the new trials. And really, the problem that small and medium-size business is really having is that they are being really inundated with multiple companies. I said 30, and it's maybe more than that coming in with different offerings. So what we're doing is effectively representing, we can go in and help them with all of these different products, whether it's reputation management, whether it's Facebook, whether it's Google. They're confused, because they just don't want to deal with all of them. So it's not like there's some magic product out there. I think the way to think about it is, that we're helping simplify their life. And one of the things that small business tells us, is they just don't have time to deal with this, nor do they really have the interest. And so I wouldn't think about it as, here's a special individual product. It's more of the total solution that we're finding is really making an impact on getting in to talk to the customer and developing that relationship, so that they can then try and market their business, because their customers are now all over the different array of products that are out there. And so I think that's the best way to look at it.

Kyle Okita

Okay. That's helpful. And then are these -- some of these new add-on -- or I should say, are these different products, are they offered solely as an add-on to a print directory sale? Or if a person comes to you and says, I need you to help me manage my Twitter and my Facebook. I'm not really interested in the print directory, but I've dealt with you guys before, so you could manage all my online and my Google searches and things like that. Would you do that as a stand-alone service?

Peter McDonald

Yes, Kyle. I think, what we're doing is, we're right now in the middle of, as I said, trialing all of the different approaches out there to try and determine the best approaches, and what makes sense for the small, medium-size businesses and what makes sense for us. And really, that's where we are at this point.

Operator

Your next question is from the line of Jonathan Levine with Jefferies.

Jonathan Levine - Jefferies & Company, Inc.

I was wondering if you could give a little more color in terms of the closing of the call center, what the cost related to that? And what is the cost, I guess, annualized savings?

Samuel Jones

There was several hundred folks that were in that call-center. The cost of that will provide savings and has contributed to the selling expense favorability that were reflected in the quarter. I'm not going to call out the specifics relative to an individual initiative. But suffice it to say, that it was a meaningful contribution to the savings that was reflected. We shifted those accounts into the field. We're looking for additional efficiencies with respect to our field sales force, such that they can take that with existing capacity. So I said very little other than a minimal number of locations, do we have to actually add heads to help mitigate the impact of those additional accounts. But there was several hundred folks that we eliminated in the process relative to the TCC. I know the accounts have been shifted, and we expect that it will continue to contribute to favorability in our selling expense line.

Jonathan Levine - Jefferies & Company, Inc.

Did you get a full quarter benefit from the closure of the call center? Or are we going to get that quarter in the third quarter?

Samuel Jones

Well, there'll be a slightly additional amount of savings in the fourth quarter resulting from that specific initiative. But you've got to be careful. We're always looking at initiatives around the sales force and the sales expense and all the other functions in the business. So isolating on 1 individual initiative is probably, not exactly what you want to do.

Jonathan Levine - Jefferies & Company, Inc.

No, I realize -- the reason I'm asking is because obviously, pretty much over the last 5 quarters you've been able to hold it right around $150 million. So I'm just trying to better understand kind of with a little bit more detail in terms of kind of where these costs are really coming out of, and how much more kind of cost efficiencies you can really drive.

Samuel Jones

No, I understand the question. I understand the driver for it. We've talked before about the fact that we're after cost in all functions. We'll continue to do so. We're going to continue to look for additional efficiencies across it as we move forward.

Jonathan Levine - Jefferies & Company, Inc.

Okay. And I believe you mentioned this and I just missed it, what was the bad debt expense rate again?

Samuel Jones

Our bad debt was 4.1% on a year-to-date basis.

Jonathan Levine - Jefferies & Company, Inc.

Year-to-date. Do you have it for the quarter?

Samuel Jones

Yes, it was in that range, within, I think, it was 3.9% in the first quarter. And so it's about 4.2% or so in the second quarter.

Operator

Your next question is from the line of Jason Alper with BTIG.

Jason Alper - BTIG, LLC

I'm just curious as you look forward, clearly, you have to have some plan for the continued decline of top line revenues. How do you envision your ability to continue to keep up cost cuts with the top line? Obviously, it sounds like you took a huge step with regards to the closure of the central call-center. Are there other opportunities like that as you move forward? How should we think about margins as the business continues to evolve?

Samuel Jones

On a total basis, we ended up in the 35.5% range for the -- on the year-to-date basis, 36% just on the quarter. As we move forward and look forward, we don't provide guidance around specific elements, but suffice it to say, we do believe we've got opportunities for additional efficiencies, and essentially, all the areas of the business, and we'll continue to get at those. You have to be methodical in that approach, so as to not exacerbate or create additional issues with your top line and continue to cover the marketplace. But we're certainly focused on cost discipline, given what we are looking at with respect to the top line results. If you look at us relative to our peers, we do still continue to have a gap in some of the efficiencies, and we've got to get more efficient across those functions. But we also, at the same time, have to focus on changing the trend lines in the top line in order to drive this business on long-term basis. But we still think there's opportunity in the various expense items to be more efficient.

Jason Alper - BTIG, LLC

Yes. I probably have a couple questions on the top line. Just to further ask about the margins, you mentioned the gap between you and competitors. I believe your predecessor might have discussed that in terms of your markets, providing additional sources of cost, that perhaps your competitors didn't have to incur. Is that still the belief at SuperMedia? Or do you think, eventually, you could get to parity with some of your competitors?

Samuel Jones

Again, I'm not going to speak to parity or speak to their cost structure. I mean, there are unique aspects to the business and the markets that we operate in and some of those do contribute to the differentials in margins. But there's also efficiency opportunities that we believe exist in our cost structure as we move forward, and we're going to work to get at those. Where that lands and where that ends up with the end result margin, I can't speak to that. There's a lot of variables in that regard as we look out, and again, we don't provide guidance in that respect. But just suffice it to say that we continue to look for efficiencies in all elements of the cost structure.

Jason Alper - BTIG, LLC

Okay. And then with regards to the top line, it sounds like you're in the process of test marketing some new products. Is there a framework in which you have a timeframe for rollout of new products that you anticipate might have some material effect on helping abate some of this decline that you continue to experience?

Peter McDonald

Jason, we are in the trialing phase right now. And our sales and marketing teams are very engaged. And we're testing things, so it's hard to say exactly, the impact of this, and what it will be. Clearly, I would say, that as I said in my remarks, the 2 things that are very -- we're very focused, one is on cost management, which is obvious. And that's, I don't want to say it's easier, but it is easier, and I think, in many ways, in the business. But driving the top line is #1 high priority on our list, because we understand the value that creates to this business. And so every single day, that's -- we wake up, that's the key thing that we need to focus on to drive and we're very aware of that. Hard to tell you a timeline and be accurate.

Jason Alper - BTIG, LLC

Okay. And I was also hoping if you could shed some light, I know, Dex One recently announced a relationship with Google. There was some excitement around that. Is that something that you're currently pursuing or a part of? I was wondering if you could comment on that.

Peter McDonald

Well, we've had a relationship with Google for some time, as I believe, Dex has as well. So I think that all of the publishers are having very similar relationships with Google.

Jason Alper - BTIG, LLC

All right. So your thought on that would be that you currently have a relationship, meaning you resell Google AdWords. Is that…

Peter McDonald

Exactly. Right.

Operator

Your next question is from the line of Chad Quinn [ph] with Bennett Management.

Unknown Analyst -

I was wondering if you could comment on any plans for additional buybacks of your bank debt? We had the one amendment and tender; I was wondering if there were any plans for any additional buybacks at this point in time?

Samuel Jones

I mean, we're always looking for opportunities to efficiently work on our capital structure and the position that we're in. Can't comment as to specific plans around that aspect. But it's certainly, I think, we were successful with the buyback that we made at the end of last year. So certainly look at that opportunity as we have the chance to. But I can't really comment, specifically, on specific plans.

Unknown Analyst -

Okay. And your products for social media, can you just maybe walk me through how you're compensated for that? Is that -- and what exactly that is? Are you creating pages that are posted on a Facebook, and is it a contractual agreement between you and the client? Or can you comment on what's going on there?

Peter McDonald

Really, Chad, again, we're in the trial stages. And so we've -- we're responding and you're trying to listen to your customers in business, and our customers are confused with all of this. And they really don't have the aptitude for it. So it's really, think about it as services, as we create, again, as I -- just think about this as a total solution. If you picture the landscaper out there, and they're doing their job to try and get involved with all of the different social media, whether it's Google AdWords or Facebook or Twitter or whatever, they're confused. So we're trying to walk in, and we are finding the doors are opening when we come in with a total solution. And so I wouldn't think about pricing for any individual product. It's more of here's what the total solution is, and here's what we think we can provide to help you grow your business and attract more customers.

Unknown Analyst -

Okay. But are you paid directly from the client? I'm just wondering how you're compensated for working with social media.

Peter McDonald

Right. We're providing products and services to the clients, and we will get paid by the clients.

Samuel Jones

Right. There's a monthly fee for the package of services that we provide that's inclusive of the relationship management product, and the fan-page creation and keeping up with the updates and working through those on a monthly basis. And it's a subscriber-based product set that we offer to the advertiser.

Unknown Analyst -

Any color that you can provide on the Digital revenues as a percentage of total revenues, or trends in pricing for digital as opposed to publishing?

Samuel Jones

We don't break out the specific pieces of that. As Peter mentioned, we offer local advertising solutions in totality. That's one of the reasons we changed our policy with respect to specific product breakouts. As far as pricing is concerned, we're always looking on pricing, plus or minus with respect to that. That includes the digital piece of the business, as well as the print piece of the business, and matching up pricing with the marketplace, and the value proposition that we bring to the street. As we work through these trials, we're certainly testing various price points relative to the bundles that we're offering and the value that we're bring into the advertisers, and that will continue. Average value per order has remained pretty stable over the course of the year, and that tends to how we look at pricing in totality of our average value per order, and the total solution that we're providing. And that's been relatively stable over the last several quarters.

Unknown Analyst -

And one last thing, you may have mentioned this, but what was the key driver to the G&A reduction?

Samuel Jones

Bad debt was the biggest piece. The bad debt rate, I mentioned, was at 4.1. And then in addition to that, we had headcount efficiencies in the various functions that was offset by the $16 million favorability that we had in 2Q of 2010. That hit the G&A line in the operating -- state operating tax favorability that occurred. So we had bad debt favorability, headcount and functional favorability, offset by the noncash event in 2010.

Operator

Your next question is from the line of Michael Kass with BlueMountain Capital.

Michael Kass - BlueMountain Capital

I was wondering in terms of the digital revenue opportunity, I was wondering if you could provide a little bit more color regarding your relationship with Google vis-à-vis, Dex One's. I'm just want some -- I'm looking for some sort of clarity regarding whether or not there's actually a tangible difference in the form of the relationship or the way in which you're compensated, et cetera.

Samuel Jones

Yes, with respect to the Google relationship that Dex announced, I think, there were several analysts put out reports relative to that relationship. And I think those were reasonably accurate in assessing the relationship they have forward. We're always looking to enhance and improved Google relationship, and it will continue to evolve. I'm sure it will continue to evolve for Dex, as we move forward. We felt good about our relationship with Google in the past. We feel good about it now. We continue to work with them, but it's not a static thing. We'll continue to evolve that relationship vis-à-vis, maybe what Dex did, maybe something different. But we'll continue to evolve and strive to improve that relationship on a continuous basis with Google. They're an important player in this space. I think all the publishers recognize that, and we're all trying to manage the best relationship that we can. We, as a company and an enterprise, feel really good about where we sit with Google and the relationship we have with them.

Michael Kass - BlueMountain Capital

Okay. And then just more broadly, as you guys look and trial different digital and social media products and services, could you give us some indication, I know you don't want to talk about specific numbers or breakdowns. But how do you know whether or not they're -- it's working relative to status quo? Obviously, top line and the aggregate continues to decline. You said average value per order was about stable. But what key performance indicators internally will you be looking at to know whether or not what you're doing is working or not working?

Peter McDonald

Michael, the -- good question. And as we kind of evolve, we're transforming this business from a yellow page business to a local advertising business, and then kind of a local marketing company for these small businesses. One of the things and from being in the field with customers in the last couple of weeks, we see the receptivity, and we're actually tracking, so how many calls are we making? How many end up with appointments? How many of these appointments are then being translated into some sort of a sale? And so we continue to track this against -- in the different approaches we're taking out there. And those are the kind of metrics that we look at. And we're trying with different people within the company, whether they're brand-new sales trainees, or they're people that are here 25 or 35 years. And to see how they can establish the relationship with the customers. So once we meter or track all of the different activities in the field, those are the types of things that we look at in trying to evaluate the approaches that we're taking in the field. Does that help?

Michael Kass - BlueMountain Capital

It does a little bit. Do you have any sense of share of wallet from your customers? I mean, any way of tracking that, in terms of spend, what share of that spend, some on your customers?

Peter McDonald

We have data on that, where we understand. But it's for a general small business thing. And we're also doing a fair amount of research in this area right now to better target market, our efforts with the small business community. But it's a lot of right now, tracking how many calls we're making? How many calls are turning into appointments? How many appointments are turning into sales? And then, a lot of it is, what is the sales force, or the media consultants actually telling us out there. And it's a dramatic difference going into a customer carrying a yellow page book, which is what was the past, versus going in there and being able to discuss and help the small business with all of the different media that's out there today. And I think that that's where we see is a spot that looks very attractive to us at this point.

Operator

Your next question is from the line of George Schultze with Schultze Asset Management.

George Schultze

Just wanted to ask a little bit about potential consolidation in the industry. It seems like your main strategic goals are very similar to those of Dex One. And you both seem to be very focused on reducing costs, while at the same time, managing the downturn in your top line, with the goal of maximizing cash flow. Can you comment a little bit more in potential consolidation in the industry particularly with respect to Dex One?

Samuel Jones

I mean, with respect to Dex One and other industry players, we've always said in the past that we view this as a synergistic business. And we consider to look at any opportunities for -- to get at those types of benefits. The various footprints and relative footprints of the enterprises across the industry, for the most part, are complementary as opposed to conflicting. And so for those reasons, we've always said that, it's not new news. And we've said that consolidation in the industry is something that we would certainly consider to the degree that it's beneficial for our investors. We haven't changed that perspective of late by any means.

George Schultze

Okay. And can you give some guidance for EBITDA for this year and next?

Samuel Jones

No. Our policy has been and we don't provide guidance. We're not looking to change that policy at present.

George Schultze

Why is that?

Samuel Jones

Again, that's our policy, and it's been our policy since first part of 2010. And at this point, we don't provide guidance.

Operator

[Operator Instructions]

Operator

You next question is from the line of Colin Murphy [ph] with Longacre.

Unknown Analyst -

It looks like you have roughly 1,100 total books that you published. How many of those books are comping positive quarter-over-quarter?

Samuel Jones

The vast majority of our directories and specific to auto are profitable. That's vast majority of them. Peter made mention of the fact that we've looked at individual products and eliminated some unprofitable products. That includes some of your sideline books, like some of the companion directories, Hispanic books, certain individual markets on the print side. Also with respect to direct mail, we're always evaluating our card packs and the individual elements that we put out in individual markets to make sure that all product sets that we offer are going to contribute to the profitability in the enterprise. We'll continue to evaluate individual directories or individual titles for profitability purposes to ensure that we're maximizing the profitability with those products. We'll continue to evaluate titles and individual headings with respect to how they cope with the marketplace and the value proposition they provide to our advertiser. But with respect to the 1,100 on an individual basis, vast, vast majority of those titles contributed in a positive fashion, and we'll continue to assess those as we move forward.

Unknown Analyst -

Okay. And what was the retention rate of your large local customer segment this quarter?

Samuel Jones

We don't provide individual retention rates. But the larger customers, as we said in the past, do provide -- do have a higher retention rate than the smaller newer customers, as you would expect. New customers churn more than the longer-term larger customers, and that's continued to be the case.

Unknown Analyst -

But you can't provide a retention rate?

Samuel Jones

No, I don't -- we don't provide individual retention rates with respect to clients.

Operator

Your final question is from the line of Jason Alper with BTIG.

Jason Alper - BTIG, LLC

I just had 1 quick follow-up question, with regards to your strategy to become a local media adviser, how long has this new strategy been implemented within the company?

Peter McDonald

I think, Jason, with the addition of new sales and marketing leadership in the last couple of quarters here, really that's been the driver, I think of moving towards this direction, in -- and I'll say, more robust way. So I think it's about 1 quarter or 2 old maybe.

Operator

Thank you. This concludes today's teleconference. As a reminder, an archived version of this call will be available on the website at supermedia.com under the Investor Relations section. You may disconnect your lines at this time. Have a great day.

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