Yellow Pages' (YLWDF) CEO Julien Billot on Q4 2015 Results - Earnings Call Transcript

| About: Yellow Pages (YLWDF)

Yellow Pages Ltd. (OTC:YLWDF) Q4 2015 Earnings Conference Call February 11, 2016 2:00 PM ET

Executives

Julien Billot - President and CEO

Ginette Maillé - SVP and CFO

Analysts

Jamie Pancer - RBC Capital Markets

Vahan Ajamian - Beacon Securities

Bentley Cross - TD Securities

Operator

Good afternoon, ladies and gentlemen. Welcome to the Yellow Pages Full Year and Fourth Quarter 2015 Earnings Release Call.

Today’s conference call will contain forward-looking information about Yellow Pages' outlook, objective and strategy. These statements are based on assumptions and are subject to important risks and uncertainties. Yellow Pages' actual results could differ materially from expectation discussed. The details of Yellow Pages' caution regarding forward-looking information, including key assumptions and risks can be found in Yellow Pages’ Management Discussion and Analysis for the full year and fourth quarter 2015.

This call is being recorded and webcast and all of the disclosure documents are available in the company’s website or on SEDAR. I would now like to turn the meeting over to Mr. Julien Billot, President and CEO. Please go ahead, Mr. Billot.

Julien Billot

Thanks, Maria, and good afternoon, everyone. And welcome to Yellow Pages Limited’s fourth quarter 2015 conference call. Joining me today is Ginette Maillé, Chief Financial Officer of Yellow Pages.

Now two years into the execution of our Return to Growth Plan, we have attained [ph] tangible progress in our digital transformation. More than ever before our value proposition to Canadian consumers and small and medium-sized businesses is unparalleled. Few Canadian players have our market positioning. In addition few have the quality marketing and media solutions, data and staff, required to [indiscernible] the local digital market place as well as Yellow Pages Ca. And as we further execute on our Return to Growth plan we'd like to strengthen our positioning and growth into Canada's leading local digital company.

Local is at the heart of what we do at Yellow Pages. Across every Canadian province and territory we are helping small and medium-sized businesses market their service effectively. It's of no surprise but the market is becoming increasingly digital. These changes can be overwhelming for local business as the complexity of the digital market place takes time and expertise to master. For example, [indiscernible] need to have strong visibility across online and mobile web as well as over the app and website, the mobile app and highly ranked presence on search engines and key consumer properties.

In addition social media is becoming a larger social native advertising dollars among big brands and retailers. This will cause small and medium-sized businesses to up their game in this media in order to remain top of mind among consumers. We believe however that every local business can find success amidst these market dynamics. Yellow Pages simplifies digital marketing for merchants by acting as their dedicated Chief Marketing Officers.

Regardless of the size of budget Yellow Pages provides SME's with access to comprehensive digital marketing program, including solutions such as placement, conference education, search engine, website, social media and digital display advertising. Facilitated by our [ph] sales and fulfillment team Yellow Pages has grown to service over 22% of local businesses in Canada today a notable national market share. And given that a number of Canadian small and medium size businesses do not have comprehensive digital marketing programs in place there remain significant room for us to grow.

We strong believe that Yellow Pages is competitively positioned to capture this growth going forward. Few competitors offer as complete, affordable and national level solution as Yellow Pages does. And no other digital marketing solutions provider in Canada has access to proprietary local media as strong as YP's.

Our company owns and operates a suite of websites and mobile applications dedicated to helping Canadians discover, connect and transact with local merchants. Our network approxes 464 million visits annually, spanning across various such verticals, including services, dining, real estate and shopping. Supported by our rich extensive database of merchant information and unique user experiences our properties have also become one of Canada's top 15 most visited digital destinations.

Leveraging off this strength a clear strategy is now in place to help grow Yellow Pages into Canada's leading local digital company. Launched in May 2014 the Return to Growth plan sets out to accomplish this objective by enhancing our value proposition to local and national merchants as it relates to effective digital marketing, going adoption and usage of our network of digital media properties and strengthening the company's digital brand perception among Canadians.

I'm proud to say that Yellow pages has gained significant traction in the execution of its Return to Growth plan. Digital revenues exceeded $486 million in 2015 and currently represent over 62% of consolidated revenues. Customer acquisition continues to accelerate with 30,800 new customers acquired in 2015, up from 22,100 the year prior. Customer renewal rates are also being controlled at industry leading levels of 85%. And profitability and cash flows remains strong. Adjusted EBITDA in 2015 exceeded $260 million or 31% of revenues having helped us to repay over $100 million in senior debt over the course of the year. Since inception in December 2012, we have repaid close to half of the outstanding notes.

Ultimately supported by these milestones, we remain confident in our ability to return Yellow Pages back to revenue and adjusted EBITDA growth by 2018. Our Return to Growth is primarily design to improve Yellow Page's digital value proposition to Canadian merchants and consumers. Through our [ph] Digital Media properties and marketing solutions we aim to optimize and simplify the way businesses and consumers interact and transact in today's digital marketplace. Our offering to Canadian small and medium size business is unique. We know that there is significant room for Yellow Pages to grow within the Canadian market and a number of merchants who can benefit from our offerings, regardless of their size or budgets.

Customer acquisition is therefore a key pillar of our Return to Growth Plan and a driver of sustainable digital revenue growth. We're very happy to announce that the company acquired 30,800 new customers in 2015, in line with our previously stated guidance of 30,000 and exiting 22,100 customers acquired in 2014. A synergy concern [ph] to our sales culture has helped drive this improved performance. More than ever before our sales channels understand the importance of new customer acquisition to the long-term sustainability of our business. Our reps are actively self-prospecting and taking advantage of sales incentive programs to grow customer acquisition during all sales seasons.

In conjunction our sales channels are utilizing new technologies to improve the way they approach and convert new business leads. A new customer relationship management platform was implemented in 2015 to help our sales managers to optimize lead assignment, lead tracking and lead conversion rates across their team of reps. This platform has also helped enrich the sales dialogue we have with local businesses. Our new customer facing tools are much more visual and dynamic, allowing us to cohesively pitch the value of our digital marketing solutions to current and prospective clients. These tools go beyond expanding what we offer and sales meeting have evolved to become much more than simply a workflow of our solutions and their respective pricing. Rather our reps leverage our proprietary database of competitive market data to build value enhancing digital marketing programs. Through data intelligence, merchants are now able to understand what their competitors are doing, what their clients are looking for, which market they should target and what return investment could look like dependent on the evolution of the marketing campaigns.

Accompanying these technologies has also been the long-term new marketing solutions. Introduced in April 2015 the Presence line up of solutions serves to syndicate merchant business information on YP properties and over 40 additional partner sites. For an affordable monthly price Presence solutions allow our customers to develop an entry level digital marketing presence across the web's properties. Presence therefore continues to be a driver of customer acquisition with over 79,000 units of the solution sold to date.

Complementary to accelerated customer acquisition we continue to protect our customer renewal rates at industry leading levels. In 2015, customer renewal improved to 85% relative to 84% in 2014. This performance is an achievement for Yellow Pages, particularly as newly acquired digital customers are expected to have a higher churn profile relative to our older customers, enriching the end-to-end customer journey from sales to fulfillment to customer service and billing is as critical to Yellows Pages as customer acquisition. New processes and technologies were introduced across these teams to improve the quality of services offered to merchants. Our sales teams are smarter, our fulfillments teams were better and faster and customer claims are resolved much more quickly. Customer have also been offered new sales features within the company's business-to-business 360 business center portal providing them with added flexibility to update and track their marketing campaigns in real time.

Most importantly, our customers are giving us improved satisfaction scores when it comes to their experience with YP. These achievements alongside accelerated acquisition are clearly reflected in the performance of our customer KPIs. Our customer count has reached 245,000 as of December 31, 2015 last year relative to 256,000 customers as at December 31, 2014. Annual declines in the customer count are rapidly decelerating from 33,000 in 2015, 20,000 in 2014 and 11 net customers lost in 2015. What’s most impressive is our customer count remained relatively stable sequentially. With only 1,000 net customers lost between our customer count as at September 30, 2015 and December 31, 2015 we remain confident in our ability to return to customer count growth by 2017 at the latest.

The development of our media remains critical to our Return to Growth Plan, particularly as advertising on a digital media generates a profit return on investment for merchants and high level of profitability for the company. Total digital visits grew to 464 million for the year ended December 31, 2015, up 9% from 424 million visits in 2014. Our YP Flagship properties saw content enhancement in 2015. Not only did we add a lot more listings but a big number of business profiles are now hosting more pictures, video and user generated reviews.

Editorial level stuff publishable in YP to a destination aid in helping Canadian discover all that their local neighborhoods have to offer. Most importantly the relevance and quality of our digital media was well recognized. As a result of the devastating [ph] and completeness of our content Apple Maps, has recently started syndicating our business information across its Canadian mobile search engine. All together total digital visits measured visits across the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of application syndication partners.

For the fourth quarter only with all that improvement, in the first quarter ending December 31, 2015 total digital visits totaled 118 million, up from 117 million for the same period last year. We do recognize that the performance of our total digital visits was soft during the fourth quarter of 2015. This was principally impacted by a change to the layout of Google’s mobile web search, results pages which put organic result for all mobile web publishers including those on the Yellow Pages lower on the search page. Unfortunately this layout change was outside of our control.

So we will be able on the long term to maintain a leading actual ranking on Google across key such headings despite the search engine's most recent layout charges. And what remains in our control is obviously to protect and direct profit to our digital properties, principally by delivering richer content and more engaging user experience and that’s what we’re going to get focused on for 2016.

The true theme on 2015 however was verticalization. Our dining and real estate properties really took shape over the year, while empowering users by bringing them closer to the end transaction. We’re starting from a position of strength, relative to other local digital search properties, particularly given our rich content and increasingly verticalized digital network. Yet consumers today are living by the smart devices, using them as a trusted companion to gain intelligence, compare offerings, get feedback and transact directly with local merchants. Evolving our properties to address the e-Commerce business of consumers is therefore of growing importance. YP Dine was the first mobile application to address this dynamic. Launched nationally in June 2015 YP Dine simplifies the restaurant reservation process for diners.

Supported by the acquisition of Bookenda and dine.TO in late 2014, YP Dine allows users to search through an extensive data base of restaurants and filter their selections based on time of day, mood, activity and expert reviews. Bookenda in particular was a key acquisition for Yellow Pages, as it accelerated our presence in the restaurant vertical. Thanks to its flexible pricing structure Bookenda is attracting a growing base of restaurant owners from competing for point of sales offering such as open table.

In restaurants the platform has grown to service over 430,000 diners weekly. Combined with Yellow Pages' extensive database of local listings the YP Dine application now hosts a close to complete [indiscernible] of Canadian restaurants. And through Bookenda Technologies users can now use the YP Dine app to reserve a table or order food directly from their mobile phones. These unique features were recently recognized by Apple having selected YP Dine as one of the best new mobile applications for 2015.

2016 also marked YP's entrance into the digital real-estate marketplace. On July 1, 2015 Yellow Pages closed its acquisition of the ComFree/DuProprio Network growing our company into Canada's largest consumer-to-consumer real-estate marketplace. ComFree/DuProprio operates online and mobile properties that connect home buyers with home sellers without intermediation from traditional real estate brokers. ComFree/DuProprio is a leader in this space holding a 17 [ph] market share of all real estate transaction in Quebec and being a top five real estate network in the rest of Canada. By circumventing the traditional brokerage model ComFree/DuProprio offers home owners a proven option to sell their homes quickly and in a much more cost effective manner.

At a fixed monthly price, home owners are offered a complete suite of services, including high quality photos and digital and print marketing presence as well as a dedicated team of real estate professionals to guide them through the sales process. The ComFree/DuProprio value proposition is a core complement to Yellow Page's digital media strategy centered on empowering consumers when addressing a key local need. Although that not included in our total digital visits figure the ComFree/DuProprio Network attracted 16 million visits during the fourth quarter of 2015.

As evidenced by merchant adoption of our digital marketing solution and consumer adoption of our digital properties we continue to have a trusted brand nationwide. Various branding initiative will launch over the course of 2015 to further strengthen awareness of Yellow Pages Digital Media and marketing offerings among Canadians. For example, the company held a number of media campaigns in 2015 to advertise its suite of mobile applications. With a focus on the YP and YP's Shopwise mobile application these multi-media campaigns were rolled out in Vancouver, Calgary, Toronto and Montreal to showcase the application unique features when it comes to local business search and discovery.

In support of local shopping, Yellow Page also hosted its third annual shop the neighborhood event on Saturday, November 28, 2915. This event was held across 400 Canadian neighborhoods during a weekend when many Canadians shop at U.S. retailers to take advantage of Black Friday and Cyber Monday deals. With over 12,500 local Canadian merchants participating we had 6,300 exclusive deals published on the YP Shopwise mobile application on event day. For the first time in the event's history, shop the neighborhood also introduced iBeacon Technologies in various Canadian neighborhoods. Through this location based technology participating merchants were able to post deal related notifications directly to YP Shopwise users while they shopped on location. We look forward to hosting the Shop the Neighborhood campaign once again in late 2016 further reinforcing our commitment to supporting the growth of local economies across Canada.

I will now pass the call over to Ginette who will provide you with an overview of 2015 and Q4 2015 results.

Ginette Maillé

Thank you Julien. With significant traction made in the execution of our Return of Growth plan the company's financial profile has strengthened significantly. Digital revenues in 2015 grew 10% year-over-year to reach $486 million, representing 59% of total revenues. For the fourth quarter ended December 31, 2015, digital revenues grew 11% year-over-year to total $129 million, representing 62% of total revenues. Growth in digital revenues remains fueled by accelerated customer acquisitions particularly as newly acquired customers purchase digital marketing solutions.

This dynamic is made evident through our customer profile as digital only customers grew to 54,500 or 22% of the customer base as at December 31, 2015. This represents an increase when compared to 37,000 digital only customers or only 14% of the customer base at the same period last year. As newly acquired digital customers come in, at low entry level pricing ranging between $1,000 and $2,000 customer upsell also remains an important driver of digital revenue growth. An improved sales fulfillment and customer service experience in addition to a more diverse portfolio of digital marketing solution continues to support customer upsell.

Over the 12 months period ended December 31, 2015 44% of YP's renewal customer base experienced a year-over-year increase in annual spending as compared to 31% of renewing YP customers over the same period of last year.

Lastly businesses outside those of YP core, including ComFree/DuProprio, Mediative and 411 are combined, delivering a growing proportion of consolidated digital revenues. The acquisition of the ComFree/DuProprio Network on July 1, 2015 had a favorable impact on digital revenue growth in 2015 and the fourth quarter of 2015. Excluding the contribution of ComFree/DuProprio, digital revenues in 2015 and the fourth quarter of 2015 grew by approximately 6% and 4% year-over-year respectively. We anticipate seeing digital revenue growth across ComFree/DuProprio, Mediative and 411 over the course of 2016, particularly as ComFree/DuProprio expands its brand awareness in Quebec and invests to grow its presence in other regions of Canada, Mediative signs publishers with digital advertising network and enhances service levels to national brands and retailers, and 411 improves its local digital offerings to merchants and shoppers.

Alongside accelerated customer acquisition and ongoing customer upsell organic digital revenues in 2016 are expected to grow in the high single digits. Sustained by content enhancement and pricing initiative that have protected customers investment in print advertising, print revenue decline rate have stabilized. Print revenues decreased 21% year-over-year to reach $343 million in 2015. During the fourth quarter of 2015 print revenues decreased 19% year-over-year to reach $79 million.

Coupled with digital revenue growth lower print revenue declines have helped deliver significant improvement in annual consolidated revenue declines. Revenues in 2014 decreased 5% year-over-year to reach $830 million with revenues for the fourth quarter ended December 31, 2015 decreasing 3% year-over-year to reach $209 million. This performance compares to a year-over-year revenue decline of 10% seen in both 2014 and the fourth quarter of 2014. With print revenue decline rates stabilizing and organic digital revenue growth rates expected to land in the high single digits we are confident in our ability to improve revenue declines in 2016 and return Yellow Pages to revenue growth by 2018.

Adjusted EBITDA, which measures EBITDA adjusted for restructuring and special charges, totaled $261 million in 2015 as compared to $316 million in 2014. The adjusted EBITDA margin reached 31% in 2015, down from 36% the year prior. Adjusted EBITDA remained relatively stable in the fourth quarter ended December 31, 2015 at $64 million as compared to $65 million the year prior. The adjusted EBITDA margin during the fourth quarter of 2015 also remained stable at 31% as compared to 30% the year prior. Adjusted EBITDA for the full year and fourth quarter of 2015 was principally impacted by revenue pressure and the change in revenue mix toward lower margin digital solutions. This was offset by benefits realized from cost saving initiatives and lower employee related expenses.

As expected we are started to see an improvement in annual adjusted EBITDA declines with adjusted EBITDA decreasing 17% in 2015 relative to a decline of 24% the year prior. These improvements are anticipated to continue in 2016 particularly as revenue declines decelerate and the company benefits from lower investment in its digital transformation and the realization of cost savings initiatives. Lower investments in our digital transformation are best reflected via our recently implemented corporate realignment.

Finalized in Q4, 2015 the corporate realignment is a result of the progress Yellow Pages has made in the execution of its plan, specifically from inter-dependencies built between our information technology strategy and marketing functions and the decommissioning of legacy systems platforms and processes. The corporate realignment eliminated approximately 300 positions during the third and fourth quarters of 2015, affecting those that have been integrated with other functions or that are no longer aligned with Yellow Pages digital reality. On an annualized basis the corporate realignment is expected to generate $30 million in operational cost savings.

In addition, further cost savings in 2016 will be generated from the ongoing optimization of print operations as well as the insourcing and automation of various digital fulfillment functions. These dynamics remain offset by a change in revenue mix towards lower margin digital solution. The growing contribution of lower margin digital businesses such as ComFree/DuProprio, Mediative and 411 will also have a diluted effect to consolidated adjusted EBITDA margin, effects which when combined are anticipated to deliver adjusted EBITDA margins at 30% for the year ended December 31, 2016.

Free cash flow for the year ended December 31, 2015 totaled $122 million, up from $73 million in 2014. The increase in free cash flow was mainly attributable to a favorable change in cash income taxes of $98 million following a tax settlement partly offset by lower adjusted EBITDA. For the fourth quarter ended December 31, 2015 free cash flow reached $25 million, up from $4 million of utilized free cash flow during the same period last year. In addition to a favorable change in cash income taxes, the increase was also attributed to lower capital expenditures.

With the foundational elements required to deliver an improved user and customer experience now in place, Yellow Pages is gradually reducing its annual investment in capital expenditures. For the year ended December 31, 2015 capital expenditures totaled $75 million, down from $84 million in 2014. During the fourth quarter of 2015 capital expenditures totaled $17 million down from $34 million in 2014. This trend will continue in 2016 where capital expenditures are anticipated to total $60 million.

Supported by strong free cash flow generation the company made $100 million in principal mandatory redemption payments on its senior notes over the course of 2015. This reduces the balance of notes outstanding to $407 million as at December 31, 2015 representing a $393 million reduction since inception on December 28, 2012. Net debt as at December 31, 2015 reached $431 million, down from $494 million the year prior. With deleveraging in mind the company anticipates repaying an additional $100 million on its senior notes in 2016 and supported by strong free cash flow generation we expect to fully deleverage the balance sheet by 2018.

I will now allow Julien to provide his concluding remarks.

Julien Billot

Thank you, Ginette. So we have delivered [indiscernible] on plan to 2015 expectations. With notable progress already demonstrated in the execution of our Return to Growth Plan, we are now starting 2016 with a clear plan in place. Our focus will remain centered around our core pillars of transformation, including our brand, customer and user value proposition. On the branding front, we'll continue hosting multimedia campaigns Canada wide. These will target a wider range of Yellow Pages solutions vertical media properties and serve to strengthen our relevancy and digital perception for more merchants and consumers. Accelerating customer acquisition protecting our industry leading renewal rate will also remain a focus. Combined with an improved sales culture, new sales technology as well as delivery of an improved customer journey, we anticipate to stabilize the customer count in 2016, ultimately to return to growth in the number of customers by 2017.

And lastly in order to further differentiate ourselves from other local such properties and grow direct profit to our media, a deeper focus will be placed on integrating transactional functionalities across all mobile applications. These enhancements will impact Yellow Pages existing verticals, growing the company's digital media network into a trusted destination for Canadians to discover, interact and transact within the neighborhoods.

To summarize our [indiscernible] value points. The execution of our Return to Growth Plan has and will continue to strengthen our financial profile. Our 2016 outlook is targeting material improvements in annual revenue and adjusted EBITDA declines. Anticipated for the year ended December 31, 2016 is year-over-year organic digital revenue growth in the high single digits. Adjusted EBITDA at 30%, capital expenditures net of related lease incentives at $60 million and mandatory redemption payments of approximately $100 million on now senior secured notes. We look forward to sharing the progress made on our transformation as it unfolds in 2016, progress which will ultimately bring us closer to return to revenue and adjusted EBITDA growth by 2018.

We thank you again for taking the time to join us this afternoon. I would like now to pass the call over to Marie to collate your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We have a question from Jamie Pancer from RBC Capital Markets. Please go ahead.

Jamie Pancer

Hi and good afternoon. Just a few questions from me here. Firstly now that you guys have met your target for 30,000 new customer acquisitions in 2015, I was just wondering whether you had a specific target in mind for 2016.

Julien Billot

Okay, so basically for 2016 obviously we want to do better. We are on the continuous improvement. So we target a figure between 35,000 and 40,000, so with a significant growth comparing to 2015.

Jamie Pancer

That's great. Thank you for that. Secondly in your outlook, I see that the updated margin expectation is 30% in 2016. Previously you had mentioned that margins would be at the low end of your 30% to 35% target. I was wondering whether you could provide some color as to what's behind that and whether do you believe there is potential for expansion towards 35% in the future or whether 30% will be the base line?

Ginette Maillé

Yes, actually following some of the acquisitions that we've made and this is what we've tried to refer to, when we look at 411.ca or ComFree/DuProprio the EBITDA margin relatively speaking are lower than what we have experienced and still experiencing in our core business. So given that these enterprises will contribute more and more relative to total revenues we believe that 30% margin is a better reflection for 2016 and going forward.

Jamie Pancer

Okay. That's great color there. Thank you very much. Last one for me. I was just wondering if you would be able to expand a little bit more on the impact of Google changing the layout of its mobile web search results page and how that might affect total digital visits and revenue going forward.

Julien Billot

Okay. So you know Google is very fair in competition. So what they did is basically they just changed the layout to put their product first and have SU [ph]. So a third party going to the second page of mobile. So obviously that had an immediate effect on our traffic and we had nothing to do on it. So it's not about our own internal capability, meaning what's ranking first in SU, it's just that SU is now in second page and no more in first page. So we'll let the competition authority to look at that if they want. But the outcome for us is we experienced a decrease in the mobile traffic coming from Google in the second half of 2015, and obviously that will have an impact for all the first half of 2016.

So that's why we anticipate a traffic stabilization in 2016 comparing to 2015. The reason is on one side we have very good news on different fronts. The upper [ph] deal is providing a lot of good tracking for advertisers, our other direct properties are doing well but on the other side we have to suffer from that changing Google presentation. That change occurred 6, August, 2015 so obviously will have an impact for the totality of 2016 where we only had an impact for four months in 2015. So that’s why today our target is stable traffic in 2015 and in 2016.

Jamie Pancer

That’s great. I’ll pass the line thank you very much.

Operator

Thank you. The next question is from Aravinda Galappatthige from GE [ph]. Please go ahead.

Unidentified Analyst

Thanks for taking my questions. Just a follow-up on that last question with respect to the Google format change, Julien are you able to give us a rough idea as to how much of your mobile hits or your mobile visits come from Google searches?

Julien Billot

Well, we don’t completely disclose that. What we say, of course we have a big part of our mobile traffic coming from Google. Of course the other part is coming from our direct properties. We never said that we’ll lose all our traffic obviously on mobile. What we said is that had an impact and so definitely we were actually trending quite higher numbers in Q1, Q2, Q3 and you could see in our figures compared to 2014, to show that our traffic in Q4 2015 was at the same level than Q4, 2014 and that’s much really the impact we had from the Google and that’s why say this impact should continue all over 2016.

Unidentified Analyst

Okay. I'm just wondering if that could potentially cause a bit of a sort of a reshaping of the ROIs, that you’re able to provide to customers versus sort of the self-serve products that Google has. I mean at this stage is there any concern around sort of maybe a bit of a share shift there?

Julien Billot

Well, of course we have a bit less traffic arriving on our owned and operated media and also our mobile product, in some cases have little less profit coming. On the other side we are also selling a lot of SEM, so search engine marketing which is also at Google. So all together I would say the impact on our revenues is actually stable.

I would say it’s more long term concern meaning that Google is not totally a reliable partner. You need to face it. So that’s why so for 2016, one of our major priorities is to continue growing what we did in 2015, our direct properties and going also to more verticalized experience where it’s much less easy from Google to compete with us, typically when you talk about dining, booking and dining, when you talk about shop wise fliers, we have much more room to grow up that one. And that’s why we are more and more verticalized and focused on generating direct traffic on mobile.

Unidentified Analyst

Okay, great and just moving to some of the non-core, on-line assets that you have, as far to the extent that you can, just talk to the growth that you’re seeing with ComFree and Mediative. I know Mediative in the second half of last year saw a little bit of pressure because of some changes in that - in the accounts and the timing of the incoming, some of the incoming accounts. Just want to get a sense of how - what kind of growth we’re seeing from both the properties and in particular for ComFree I was just wondering are you still seeing double-digit top line growth there.

Ginette Maillé

Well Aravinda, so if we take, I would take 411, Mediative and ComFree/DuProprio together when we look at the growth of those three assets, talking about low double-digit it’s probably the right number. This is visitors [indiscernible]

Unidentified Analyst

Okay, that’s great. That’s fantastic color.

Julien Billot

And if we can go and give you color from that is we are quite happy the way Mediative behaved just at the end of the year and how ComFree/DuProprio is doing.

Unidentified Analyst

Okay excellent, and then just a couple of sort of questions around your disclosure on taxes. It looks like you need to provide 2017 cash tax, like an assessment of the cash taxes for ‘17. So it looks like you’re still having some benefits from tax assessment, spilling over into '17 as well because we’re just looking at about $5 million in outflows. In that are you able to kind of expand how you are - I mean I know that we’ve been seeing that for a while but I was surprised to see that spill over into ‘17 as well. I was wondering if you can kind of update on the situation there.

Ginette Maillé

Yes, absolutely. Actually it’s so we continuously try to optimize on the tax side but in add to this we’ve delivered more platforms or earlier than anticipated. So this has accelerated the tax benefit that we're getting, the tax deduction related to the capital investments. And this is why it's been extended to 2017.

Unidentified Analyst

Okay.

Ginette Maillé

So these are additional tax benefits related to increased level of capital expenditures in the last couple of the years.

Unidentified Analyst

Okay. Great. And just the last question from me with respect to the pension, can you just remind us where things stands with the pension. I know that there was a reassessment about six months ago or maybe a little bit before that. I was wondering if you guys can remind us what the deficit there was.

Ginette Maillé

Yes, actually last actuarial evaluation was performed in May of 2015, and the deficit was at $100 million. If we were to perform a new actuarial evaluation I think that the deficit would be very similar today because we go through a smoothing exercise with the pension fund. So I think the $100 million that was evaluated in May remains at that level at this point in time.

Unidentified Analyst

Great, thank you. I'll pass the line.

Operator

Thank you. We have a question from Vahan Ajamian from Beacon Securities. Please go ahead.

Vahan Ajamian

Hi, just a couple of quick questions. First off I see on the net change in customer count was down only a 1,000 customers this quarter. Yet you are still talking about aiming to grow it on a net basis in 2017. Is there a not good chance that it can grow at some point through 2016?

Julien Billot

Well, you know we always have a chance. What we said, I repeat what I said very precisely, is we anticipate to stabilize customer count in 2016, to return to growth in 2017. The gap between stabilization is growth is now big as one customer. So meaning if we do very well you never know.

Vahan Ajamian

Okay. And regarding ComFree, to what extend is there seasonality in this business on the revenues that it generates?

Ginette Maillé

So this is a real estate business. So when you look at Q1, Q2 these are the high seasons. Q3 is going down and the lowest quarter of the year is Q4 for the real estate industry.

Vahan Ajamian

Okay. And were there any one-time items that helped EBITDA this quarter.

Ginette Maillé

Well when we look at Q4 obviously as you know we've been through a corporate realignment so clearly the variable compensation associated to employees that had exited were no longer payable. So I would say that that was one of the item, that would probably be non-recurring in following quarters.

Vahan Ajamian

Got it, and finally regarding your EBITDA margin outlook for 2016. Obviously it says 30% for the year. I know the last couple of years Q1 has had stronger EBITDA margins than the rest of the year. Is that the trend we should expect going forward and for 2016.

Ginette Maillé

No, actually what I would say it really depends on when we are investing in branding. So depending on the timing of the campaign, this can really switch from one quarter to the next. So I wouldn't really count on any seasonality when I look at the quarters over the year.

Julien Billot

And also think to the fact that over the years our business was declining, so obviously Q1 was stronger in revenues than Q4, almost on a fixed cost base. So this is less and less the case, so that's why this seasonality is no more relevant.

Vahan Ajamian

Okay, so it will be more of a - all the quarters should look fairly similar than other than the timing of when investments are made.

Julien Billot

Yeah, exactly.

Ginette Maillé

That's right. The branding could make a difference.

Julien Billot

Yeah, that's exactly that.

Vahan Ajamian

Got you. Okay, thank you very much.

Operator

Thank you. We have a question from Bentley Cross from TD Securities. Please go ahead.

Bentley Cross

Good afternoon. Great quarter guys.

Ginette Maillé

Hi.

Julien Billot

Hello, hi.

Bentley Cross

I just wanted to ask on the ARPU [ph] dynamics. What you guys are expecting for this year. Obviously new customers are coming in much lower. You guys are able to upsell existing customers but at the same time some of the Diamond accounts, I'm sure coming and less Diamondish [ph]. So as the year progresses what sort of cadence can you - we expect ARPU to do. And where do you think things will stabilize if at all.

Julien Billot

Well, I think this ARPU decrease is something that' embedded in Return to Growth Plan because we knew that we were of course very strongly [indiscernible] higher ARPU customers. But we knew that the limited number of high ARPU customer’s that's exactly the same thing as limited customers when they are willing to buy business class seats in a plane. So we wanted to change the game and changing the game means volume. So we know that the more we are expanding our business the more we have customer acquisition. Basically the lower ARPU will be not because we are lowering our price, it's just because we are entering into new verticals where people are less able to pay for advertising that the historical vertical we were in. So you can expect ARPU dynamic to still go down.

Obviously and that's mainly a mixed effect meaning that because we are entering new verticals, new customers that have a different behavior, different return on investment expectation and lower budget to invest globally in advertising. Obviously at the same time we have also a complete upsell program that we ramped up in 2015 and we are continuing to ramp up this program in 2016-2017 and the Google fraction [ph] on that is the proportional, our customer's renewals which have actually increased their spending. You would notice that in this quarter we have 44% of our renewals who increased their spending with us. And that's really an effect of our strategy.

So lower ARPU for customers coming in mainly because it's new segments, come with a total upsell strategy to upsell them gradually. But altogether that's not sufficient to compensate the fact that we have less and less customer in proportion in our high end segments and we have more and more customers in proportion in our lower end segments. So you can anticipate ARPU to go down obviously over the time in the coming years. ARPU decline will ultimately stabilized. But we will see decrease in ARPU for the coming years.

Bentley Cross

And just a follow on with that, the diamond customer base, can you give me a rough idea what percentage of revenues they make up now versus last year or sometime in the recent past?

Julien Billot

Well, we are not really communicating on that. We don't see a big decrease over the percentage of diamond because basically diamond are more heavily print customers than the average base. So we're able to transform a big part of this print revenues into digital, that's the transition we have now. So we don't see a dramatic decrease over the diamond proportion in our customer base. There's something I want to be very clear about, that's not because we have a lot of acquisition, that our customer base is just made of small customers. That's not all the case. Of course we have acquisition, of course most of the acquisition are smaller customers, not because they are smaller by themselves, but because they are from different segments. But we still have a very strong member of high spenders and these high spenders actually have a much better churn than the new customers.

So we still have a fair proportion of high spenders and we still have a strong customer base in the diamond or what we call the premium customers which have the highest ARPU by far.

Bentley Cross

Okay. That's helpful. And switching gears to Mediative, can you give us any sort of indication coming into Q1 if those sales contracts you guys were hoping for have been closed, and we expect....

Julien Billot

Actually we would have loved - that's very close. But we - that's not signed yet. So we could have good news in the coming days or weeks.

Bentley Cross

So maybe in Q1 we should expect organic growth to return.

Julien Billot

Well these things, yeah normally [ph], definitely.

Bentley Cross

And then last one for me just on the restructuring outlook, obviously it's been elevated with the corporate realignment. Can we expect the restructuring charges to tail off or how should we, what is the ball park should we think of restructuring this year?

Ginette Maillé

Yeah, it's actually when you look at the end of 2015 there was an initiative that was undertaken, that was significant. So we don't foresee any other significant initiatives like the ones that we experienced in the last six months of last year. Obviously given that we are transforming progressively, that we are automating the legacy platforms, we should continue to see some of it, but never at the level that we've experienced in 2015.

Bentley Cross

And just to put some numbers around it, is not significant does that mean $10 million or $20 million?

Ginette Maillé

No, $10 million would be significant to me. So it would be lower than $10 million.

Bentley Cross

Great. That's very helpful. Thank you.

Operator

Thank you. There are no further questions registered at this time. I would like to turn back the meeting over to Mr. Billot.

Julien Billot

Thanks for everybody for your attendance and obviously we look forward to speaking again in May as we host our general assembly of shareholders here in Montreal and report on Q1, 2016 results. Have a great evening.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.

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