Thryv Holdings Inc (THRY) 2010 Q1 法說會逐字稿

Good morning and welcome to SuperMedia's first quarter 2010 earnings conference call. With me today are Scott W Klein, 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 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 800-642-1687. International callers can access the replay by calling 706-645-9291. The replay passcode is 69826861. The replay will be available through May 25, 2010. In addition, a live 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'd like to turn the call over to Scott Klein, SuperMedia's CEO. Scott?

Good morning, everyone and thank you, Julie Ann and welcome. I appreciate everyone taking time this morning to join us for an update on our first quarter as SuperMedia. I'm going to provide an overview of the plans and strategies we've implemented thus far, all of which are designed to ultimately drive revenue, reduce expenses and continue to foster a high performance culture. Dee will follow with a financial review and then we will take your questions.

With our financial restructuring more than 100 days behind us, we are encouraged by the progress we've made so far this year. While there's additional work ahead of us and plans that must be successfully executed, overall results for the first quarter were consistent with the view of the business we discussed with you earlier in the year. We've been driving to improve sales productivity and processes. Compared to a year ago our costs have decreased by 19%. Dee will provide more color around the cost details in just a few minutes. We continue to focus on programs and processes in all areas of the business to create cost efficiencies throughout this year and beyond.

Because of the nature and timing of our business cycle, it will take more time for the benefits of our continuing transformation to impact the financial results. Since it may not be obvious to everyone, I wanted to take a moment to explain the process of our sales close to revenue recognition timing for our SuperYellowPages offering. Our sales close when the advertiser signs a 12 month contract for placement in our directory. Once a book distributes, we categorize this as advertising sales. This occurs two to four months after an ad was sold. Ad sales are a leading indicator for the reported financial statement revenue. Once the advertising sales are reflected in ad sales as published they are recognized as reported revenue over the life of the book, usually 12 months. As a result of the cycle, there is a lag in what we are selling versus what we report as revenue. In other words, it takes longer for current activity to be reflected on the income statement.

Now, here is a trend of our ad sales that clearly shows the impact of the economy over the last 24 months faced by our small and medium businesses. Even today, the SMB market continues to see a slow recovery in their own sales and their access to credit. While our Q1 reported ad sales reflect activity that was primarily from the third and fourth quarters of last year, we are encouraged by the early indicators we are seeing this year.

Before Dee provides details, I'd like to talk a little bit more about how we are further proving value to consumers and local businesses and some of the ways we are driving productivity and effectiveness. Everything we are doing is focused on our top goal of improving sales and profit performance. I'm very pleased to report that throughout the first quarter, we continue to see an upward trend in the possession and usage of our top 100 directories, an overall increase in call counts for our customers in those markets and more positive feedback from clients who are seeing benefits of the SuperGuarantee program. We're driving to accelerate the momentum of this program further with our recent launch of the SuperGuarantee Mobile program on all three major platforms, iPhone, BlackBerry and Android. We expanded the program recently with the introduction of our SuperGuarantee Autos program on our new everycarlisted.com vertical site, as well as superpages.com.

Our advertisers asked to be able to wrap themselves inside the SuperGuarantee branding. In response we created a licensing program where eligible businesses can leverage our shield to show existing and potential customers that they are one of the good guys and backed by the power of the SuperGuarantee shield. All of this is being supported by a new wave of TV and radio commercials featuring our Cape Good Guys. If you haven't seen or new commercials you can see them at supermedia.com. By the way, our commercials from last year have received the highest accolades and awards, not only in our industry but within the advertising and marketing world as well. While we are certainly encouraged by these preliminary indicators as clients begin to see the impact of our marketing and consumer focused programs, the true measure of our success will be in the ability of our media consultants to improve and sustain sales performance as SuperGuarantee driven usage share of our products continues to increase. On this front we're encouraged by what we have seen so far this year.

During the first quarter, we concluded an exhaustive search for our Chief Marketing Officer position. Everything Sandra Crawford Williamson has accomplished in her career has lead her here. She spent nearly six years as Chief Operating Officer and Chief Global Officer for true.com. At Zapf Creation, a German-based toy company, she guided the creation of a subsidiary for the Americas. At Universal Studios she was responsible for integrating all marketing and sales efforts to prepare for a new global product launch in the entertainment industry. She also held marketing and sales roles at Nabisco, the Coca Cola Company and Proctor and Gamble. Sandra is responsible for driving market strategy, advertising and marketing communications, customer acquisition, customer conversion and retention, customer research, analytics and databased marketing, as well as marketing operations and processes. She also will drive brand strategy and development of SuperMedia's portfolio of brands.

During the first quarter we announced the launch of a new social media offering on Twitter to drive more leads to our clients, in more than 70 cities via coupons. We also created a social platform in live beta testing right now designed to capture and dress the different stages of the consumer research and decision-making cycle with questions, answers, content, and lead generation. We call this platform Ask, Learn, Hire. You can see our first three communities at superhvac.com, supermortgages.com and superremodelers.com.

Industry analysts who allotted us for changing the game with the SuperGuarantee are once again pointing to us as innovators and leaders. In the first quarter we introduced Super Match on superpages.com where clients can reserve one of three available spots per category group in each metropolitan geographic area on a first come first serve basis. With limited inventory, Super Match is great for clients because it helps them move ahead of its competitors, grow their business and get exposure to clients each time the heading is searched. One of our media consultants said it best by saying "it's like having beachfront property with only two neighbors. "

We continue to enhance the SuperYellowPages. As I mentioned before, our SuperGuarantee has been super for our books. We're now making it easier for our consumers to use the product with general increases in listing font size up 40% in most markets. The first books with the larger front began delivering earlier this month in Maryland and will rollout throughout the year and they look great.

While we're proving our business value for both consumers and businesses there is still work to do. As always we never stop looking at ways to drive productivity and effectiveness within the Company as we connect buyers with sellers and act as the catalyst of commerce for local businesses. Our Super View CRM tool from sales force.com continues to enhance the performance of our media consultants as seen through adoption rates and number of appointments and sales completed each and every day. Super View continues to drive efficiencies and streamline sales efforts and will continue to do so. Super View is one of the enablers that allowed us to reduce the number of media consultants by 610 over the last 12 months.

In the first quarter, to compliment Super View, we introduced another sales tool that we called the platinum presentation, designed to efficiently and professionally create client presentations specific to the type of business and geographic area. These laptop presentations, which literally take less than two minutes to create, contain all of our latest product information, usage studies, collateral, commercials, success videos and recommendations on how SuperMedia can help grow a business. As new studies are published, products evolve and collateral is updated, so are these presentations in realtime. Initial response has been nothing less than outstanding. Clients are seeing how we differentiate ourselves from the competition and media consultants are able to spend less time gathering information and more time selling. This innovation and transformation is having a positive impact on what we do, but there are still opportunities to make our systems and processes more nimble.

We will continue to seek ways to improve our revenues, increase sales efficiency, reduce expenses and enhance the client experience through other innovative changes that are currently in process. We're pleased to have added Michael Nelson Dunn to our team as CIO. Last week, Michael was recognized by CIO Magazine with the Ones to Watch award for 2010. Michael is responsible for all information technology initiatives, expense efficiencies and oversight of the Company's internal technology infrastructure, including current and ongoing system conversions. In addition, he is responsible for data center operations, superpages.com IT operations and business solutions, evaluating all legacy systems in the development and implementation of SuperMedia's technology road map.

Now, Dee will walk you through the numbers. I'll then quickly outline the importance of our new super promise 365 promise and then we'll open up the call to your questions. Dee?

Thank you, Scott. Good morning everyone. I want to start off by mentioning that as on prior calls, I'll be speaking to our results on a non-GAAP basis referred to as adjusted pro forma. As a result of the Company's reorganization, we are required to adopt fresh start accounting resulting in SuperMedia becoming a new entity for financial reporting purposes and thus having implications in regard to our GAAP financials and relative comparability. We have provided a reconciliation of GAAP results to the adjusted pro forma results in the appendix of this presentation.

Revenues were down 20.9% compared to first quarter 2009. Our first quarter amortized revenues are still impacted by the economic cycle of the last 18 to 24 months, faced by small and medium size businesses. As Scott mentioned earlier, where we ended the first quarter with respect to ad sales was consistent with the second half of 2009. Total ad sales were down 20.6% in the first quarter compared to down 20.9% in the fourth quarter of last year.

We reported adjusted pro forma EBITDA at $163 million compared to $216 million in first quarter 2009, a decline of 24.5%. EBITDA margin was 30.6% compared to 32% in the first quarter of 2009. Our ability to mitigate the EBITDA decline relative to revenue performance was primarily driven by our cost initiatives, improved bad debt and some expense timing relative to last year.

Selling expenses were down 23% from prior year primarily due to reduced headcount, lower related sales cost and timing of certain advertising expenses. Our operating expenses were down from prior year by 8.6%, driven by cost initiatives and lower paper and distribution costs, as well as benefits of reduced traffic costs relative to revenue.

Free cash flow was $81 million in the quarter. We prepaid debt principal of $55 million in early April, which represents the required sweep for the first quarter. With that said, I'd like to turn it back to Scott.

Thanks, Dee. We spent some time talking about what we have been doing. Before we take your questions I want to take a moment to talk about how we're doing it. Simply put, it is our super promise 365. It's our committment to providing clients with white glove treatment each and every day. Faster and 100% accurate product fulfillment, more frequent and effective communication with clients without short cuts that don't work or easy and effective ways of doing things. We're not only focused on getting the job done right, we're going to get the job done the right way.

Let me be clear. This is not some sort of marketing speak. It's actually very simple. Do the right thing, the right way, the first time. This is all about reengineering processes that have been given -- begun even before our client or potential client is contacted about advertising with us. The fact is there are hard costs incurred when a mistake is made, more costs incurred when correcting the mistake and even more costs when finally getting it done right, holding ourselves to higher levels of accountability will eliminate unnecessary costs. This falls right in line with the super pledge that every member of our team has taken. It means recommitting to always being accountable, being progressive, thinking holistically, showing a sense of community and always working for the client and we're now ready to take your questions. Julie Ann can you please read the Q&A instructions?

Thank you. (Operator Instructions) Your first question is from the line of Ian Zaffino with Oppenheimer & Company.

Hi. This is Brian sitting in for Ian. Good morning.

Good morning.

You've talked about how you're encouraged by the early indicators of your business and I was just wondering if you could go a little bit further into it. How were ad sales bookings in the first quarter compared to the fourth and how are they now compared to the first quarter?

Well, Brian, as you know, we don't give any kind of guidance on a forward-looking basis, but as I said in my prepared comments, we're encouraged by what we're seeing.

Okay so things are getting better I guess you could say?

Well, you could look at it the way you would like. We don't give guidance but I'm definitely encouraged by what we see.

Okay, well that's good. What was bad debt expense in the quarter?

Bad debt was 7.9% (Inaudible) against a revenue base, but 7.9%.

So that appears to be proving is it trending better as we go along?

Yes, last year in total we booked about a 9% bad debt. The fourth quarter was better than that overall and then we've seen another improvement as we look into the first quarter.

Great, great and then the last question would be as far as your SuperGuarantee, is that helping you gain share yet? Is there any way -- and if it is, is there any way you could quantify it? If not, is there any anecdotal evidence that you've seen?

Yes, Brian, we measure possession in usage in key markets across the country and we are seeing double digit increases in possession and usage. We're seeing nice increase in call counts to our clients. We're seeing significant registrations on the part of the consumers with the SuperGuarantee, both as a result of what's going on with the SuperYellowPages, superpages.com, everycarlisted.com, as well as our direct mail program, SuperPages Direct.

Great. Great. Well thank you.

Thank you.

Thank you.

Your next question is from the line of Aaron Weitman with Appaloosa.

Hi. Could you talk about are you seeing a natural stabilization in orders that we might see in a quarter or two?

In regard to -- I think what you're referring to with respect to that is in retention and client counts and that sort of stuff. We are still seeing some slight deterioration in the number of clients. Retention is not back to where we would like it to be, but we are seeing improvement in that level of retention, but it will still take time for the small and medium businesses to continue to come out of the economic cycle that they're in and we're hopeful that we'll benefit from that as we move forward.

Are you seeing price increases ?

Pricing varies all over the country. In markets where we're driving more oddballs as a result of possession and usage of the product. Certainly there's some firming of prices, but there are other markets in the country today, Florida being a good example, where the economy is certainly not allowing us to take any pricing increases of significance.

Could you talk about, do you have a lot of opportunity to still cut costs and how much is left to I guess realize cost cuts quantitatively?

Well, again, we don't provide detailed guidance, but as I said in my comments, we've made great progress on the cost front and as we look forward to the balance of the year and beyond as I said, we see additional opportunities to become more efficient.

Okay, should we assume then that I guess the prior bankruptcy estimates don't still hold?

Was there something specific that you had in mind?

Just the current previous 2010 EBITDA you had?

Yes, again, we have decided not to provide guidance, but we're very much encouraged by the results that we see.

Okay, and a last couple here. Is there still a lot of bankruptcy costs to be paid out of the current cash number and is depreciation and amortization abnormally high this quarter?

The depreciation and amortization is somewhat a result of the fresh start accounting aspects of things and things that we capitalize on to the balance sheet and are now amortizing. So relative to prior year as an activity depreciation and amortization is being impacted by that.

With respect to the cost being paid out, there's still some measure of cost, but the majority of those have been paid out as we move through the first quarter, but there will be some residual settlements and claims from say for example, some of the state tax claims are still unresolved as yet. So there may be an element of costs that are put out as we move through the remainder of the year, but a good chunk of the costs we had set aside for in the Chapter 11 were paid in that first quarter.

Should we assume I guess on a going forward basis then for D&A that it should be closer to $100 million or closer to $200 million?

Yes, the first quarter is more indicative of what your normal quarterly level of D&A is going to be going forward because of the fresh start accounting implications. So there will be a period of a couple years where that stays at those levels until some of those assets that we've put on the balance sheet as a result of fresh start have depreciated out.

Okay, thank you.

Thanks, Aaron.

Your next question is from the line of Nilesh Desai with the Carlyle Group.

Hi. Thanks for taking my question. I've just got a quick one on the SuperGuarantee. Can you tell me what sort of trend you're seeing in terms of actually paying out on claims on that? Is that a material number at the moment?

We don't disclose any of the details about the SuperGuarantee program. It's built in as part of our marketing budget and we're more than adequately covered.

Okay, thank you very much.

Okay, thanks.

(Operator Instructions) Your next question is from the line of Jonathan Levine with Jefferies.

Yes, I was wondering if you could just comment, there had been an article in the New York Times that Verizon had requested permission so they don't have to print the directories anymore. Can you comment on that, please? Thanks.

Sure, well as you know, we are the official publisher of the Verizon Yellow Pages and the Verizon White Pages. Both the residential White Pages and the business White Pages, and while the usage of the Yellow Pages remains quite high and while the usage of the business White Pages remains quite high, usage of the residential White Pages is actually quite low. As a matter of fact based on the studies that we have, only about one in nine households actually use the residential White Pages. So with our partner Verizon, we have applied to the Public Utilities Commission in the State of New York for permission to stop doing a blanket distribution of the residential White Pages and making it available only to those households that want it.

This is a trend that's begun in the industry. AT&T has been successful in getting this kind of permission and a handful of states including New York. So this will result in us sticking to our dedication to not distribute products or make or sell products that folks don't want and only give them ones that they actually do want, and that's something that we feel very important about. So at the end of the day, assuming we get permission, we will create and opt in option for residences to tell us they want and would like to have the White Pages and in that case we will distribute it to them.

So this won't impact the Yellow Page distribution?

Absolutely not. As a matter of fact it accomplishes a number of things. It calls for us not delivering a product to people that don't want it. It will allow us to help the environment by not producing something that people don't want, and lastly it's just a smart thing for us to do, because as you can imagine, there is no revenue associated with the consumer White Pages. It's a pure cost for us, so this would be an improvement to our bottom line. And by the way just to be clear, this is Verizon is applying for this as our partner in this endeavor.

And then can you give us a little sense of what the potential cost savings would be if you no longer distributed the White Pages?

Well it really varies obviously it would be on a state by state basis, the potential cost savings varies widely and we don't anticipate getting permission from all states that we publish books in, over 30 states at one-time. So the cost savings realization will be realized over time and again recognize that we amortize everything over the life of a directory. So it will take some time for any of this to work its way through our income statement. Dee, do you want to add something?

Yes, I'm simply going to add when you look at these sort of initiatives that we're putting in place, they are intended from an overall perspective to help us find opportunities to invest, capture savings to the bottom line and that sort of thing. Scott mentioned the font size increase and change with respect to that, and this is one of the types of costs and initiatives that we put in place to find the opportunity to pay for things we were investing on the consumer front.

Okay, thank you very much.

Your next question is from the line of Jake Newman with CreditSights.

Hi. Could we get maybe a client count at the end of the quarter, please?

We disclose clients on an annual basis. As I mentioned earlier, we did continue to see a slight decline in client counts as we move through the quarter from the mid 550 or so that we reported at year-end, we've seen a slight decrease relative to that. But we don't disclose the explicit number, except on an annual basis, because really client count in this industry because of the publication cycle and working through the full year, it's not as meaningful in the interim periods.

Okay, maybe on the ad sales decline of 20.6%, can you say anything about what contribution came from involuntary cancellations from voluntary cancellations, shrinkage by existing customers of existing programs, and maybe the offset to that, new customers or expansion?

Yes, with respect to the overall 20.6% on ad sales in the quarter, we did see continued impact of what we call or refer to as credit cancel, the disproportionate results in the quarter are in the second half of last year and as we move through 2008 and 2009. A lot of that was influenced by credit cancels. We've seen slight improvement in that regard with respect to the credit cancels as you can see from the slight improvement we've seen in bad debt as we move through the fourth quarter and into the first quarter. But we continue to experience a disproportionate amount of credit cancel based on the sales cycle that influenced that 20.6% as we were still in the back half of 2009 relative to that.

We continue to be able to sell new and non-clients and the increased programs for those clients that are staying in the book and experiencing the effects and the benefits of the uses in possession change, but we still are seeing more decrease and more cancel than what you would like to see in this business than we anticipate moving forward the need to improve on those retention results. So there's a mix effect, as Scott mentioned, because of the sales cycle, we are still feeling the effects of that economic downturn. That does influence all of the elements of your revenue base, but credit cancel continues to be a good chunk of the influence on the disproportionate results we're seeing.

And if I could one more -- on websites for what I'll call just the internet part of the business, you're not separating that, but can you talk about the trends in terms of queries year-over-year or revenue per query year-over-year?

We don't necessarily measure it in that fashion. What we have seen, we continue to feel good about the traffic that we're driving with respect to the total network. We're still in the top 50 websites as far as total network traffic from a unique visitor perspective. We still provide excellent conversion rates to our advertisers for the consumers that come to those sites and that we're able to get their ads in front of the revenue side of the house and the revenue aspect of that, just as the print is influenced and impacted by the economic cycle that we've been dealing with.

We continue to feel that on the internet front as well as a lot of players in the internet space continue to feel the effects of that, but as far as unique visitors, the quality of results that we're providing to the advertisers in that regard feel good about where we're at and feel good about where we're going with the new initiatives that Scott mentioned earlier. So we're in the top 50 at this point and we are looking to improve in that position as we look at the various initiatives we're putting in place in that regard.

Your next question is from the line of Todd Morgan with Oppenheimer & Company.

Thank you, good morning. Selling expense in particular showed some pretty good improvement this quarter, way down versus last year and -- but actually up sequentially even though the revenues this quarter were down sequentially. I don't know if you can provide any kind of further color or granularity on some of the trends within that. For example, are the advertising expense growth that may be pushing that number up and anything else you could add. Thanks.

Yes, on a sequential quarter basis with respect to selling expense there was a slight increase as a result of advertising expense as you might imagine with the fourth quarter. We pull back on our program a little bit in the fourth quarter because of the holiday season and the elements around that that make it more difficult to get oddballs from an advertising program. So fourth quarter was slightly down with respect to advertising and then we stepped the program back up a little bit in first quarter.

On a year-over-year basis, we did see good improvement in the productivities and in the selling expense line relative to revenue and relative to the expense of last year, mainly because of headcount reductions that Scott referred to and the related selling costs around that. There was a slight timing element also influencing the sequential -- excuse me the year-over-year quarterly comparison and selling expense because in the first quarter of 2009, we ramped up very significantly the advertising program in the quarter of 2010 was a more normal level for a quarterly basis. You'll see that timing of the advertising program probably wash out as we move through the year. We're looking at our advertising program cost being consistent in total for the year with what we experienced in 2009, but the biggest change in the selling expense year-over-year was because of the efficiency Scott mentioned in the sales expense itself.

Okay, and then just briefly on G&A as well, pretty good improvement in the bad debt expense category it looks like. Would it be safe to think of that category as probably likely to trend lower? It would seem to me that given the economic turmoil last year, most of the advertisers that might not be in a position to pay their bills would probably wash through. I don't know if you have any sense of that or not.

Well we are looking to find additional improvement in bad debt. We've seen a couple of quarters here where we've shown improvement, certainly not as quickly as we would like and not to the degree that we would like, but as the economy improves and the small and medium business environment improves we would hope to see additional improvement in the bad debt expense line as we move through the year.

Great. Thank you. That's helpful.

Thanks, Todd.

Your next question is from the line of Warren Pustam from EverKey Global Partners.

Yes, hi, good morning gentlemen. I just had a quick question on your long term debt. Is there any plans to lower the interest or refinance the debt in the next few quarters?

We continually evaluate the credit environment and the credit market relative to what our position is. We're sitting at a, from our perspective, an 11% rated debt. So finding opportunities and evaluating the marketplace for those opportunities is an ongoing effort for us. Based on where the debt is trading and the yield it's trading against in the marketplace, I wouldn't say that those are real near term opportunities, but to the degree they present themselves for refinancing opportunities, we're certainly looking for opportunity to capture that.

I can't tell you that I've got something in the immediate or right now on the horizon. The marketplace still needs to settle to some extent. We've still got to drive improved performance in our results in order to create an environment where we'll have opportunity to refinance at better rates.

Okay, great, and can I just get the headcount numbers at the end of the quarter?

We reported good reductions in headcount as we move through 2009 and that's another statistic that we report on an annual basis, but we are continuing to take efficiencies in the business and drive headcount down as we move through this quarter, as we did throughout last year. I'm not going to report explicit numbers on a quarterly basis in that regard.

And just one more question. In terms of the direct mail, I know you don't break it out, but could you just give any indication if it's exceeding, meeting or below your targets?

Yes, we -- again you're right. We don't break it out. This is a relatively new business for us and we're making good progress.

Okay, thank you.

Your next question is from the line of [Zachary Glasser] with DK Partners.

It's actually Scott Vogel. Can you just explain to us how you're accounting for the SuperGuarantee?

Well in regard to the cost side of the SuperGuarantee is essentially the cost of the program, the administration of the program, the cost of claims that come through are recognized as we incur those costs.

Okay, but are you reserving for -- besides from the cost of administering it are you reserving for potential payments?

Well to the degree that there's sufficient -- that we develop sufficient history around the SuperGuarantee program to drive that sort of accounting, we would account for it in that fashion. At this point with the relative history that we have here, it is more on an as incurred basis with respect to the SuperGuarantee program. As we move forward we'll continue to evaluate the significance and the degree of the claims side and the cost side of the program and make appropriate adjustments as necessary but at present, it's on an as incurred basis as we incur those expenses.

Okay, thank you.

Your next question is from the line of Shachar Minkove with JPMorgan.

Hi, actually two questions. One is on the general and admin line, obviously the bad debt expense helped. Looks like it was down about $30 million sequentially from fourth quarter to the first quarter. At least a part of that was bad debt, but can you talk about some of the other things that went into that? And the second thing is you have a pretty big chunk of cash on the books right now. Got any thoughts on what you want to do with that?

With respect to the G&A expense, you're right. The biggest component as far as changes is concerned there is the bad debt expense. On a year-over-year basis we did see about a $20 million improvement in absolute bad debt cost. The remainder of that was headcount related and costs associated with just basic finding efficiencies in the G&A categories. On a sequential quarter basis there was some pluses and minuses within that category. Bad debt was the driver of the sequential quarter change. I think it was about $7 million sequential quarter in G&A on a pro forma adjusted basis.

The remainder of that we had some headcount efficiencies and reductions there, but we had some offset against that for timing issues relative to the fourth quarter, but also the cost of stepping out of a Chapter 11 environment into a more normal public company environment as we moved into the first quarter. For example, things like your quote activity and your case activity. So your legal expenses are going to step back up relative to being in the Chapter 11 environment where everything has been stayed. Your shareholder services costs and those sorts of things also come back into a more normal public environment in the first quarter.

So there's some pluses and minuses on a sequential basis in the G&A line but net-net, we saw efficiencies in headcount and those types of costs offset for the most part by the process of moving back into a more fully public company and then bad debt created the favorability on a sequential basis. Year-over-year it was more both.

So I guess ex the bad debt, this is kind of a run rate level?

Yes, the sequential quarters would have been pretty consistent, right.

Okay, and then in terms of the cash?

With respect to opportunities for the cash, we're still fairly early out of the Chapter 11, only 100 days removed from that process and we have built some measure of cash. We'll continue to look for opportunities to put that to work in the most efficient and effective fashion. I would say at present, we're being fairly conservative with the cash we're building and we've also got a fairly sizeable hurdle rate there in the debt level at 11% as far as investment opportunities. So as we look at investment opportunities, you've got that hurdle rate because you've always got the comparison against the debt that you can take out of the business. So for the immediate, you can see us probably be fairly conservative with respect to the cash and then move from there as we get to move towards the end of the year.

Let's take one last question.

Your final question is from the line of Philip Grose with Castle Hill.

Hi, thanks. Could you give us any kind of quantum on how much money you received for publishing the White Pages? Does Verizon pay you a lump sum every year and do other operators pay you to publish the White Pages?

No, the relationship with Verizon in regard to the publication of the White Pages is that's in exchange -- we publish the White Pages in exchange for having the capacity to be the official publisher in their markets, utilize the brand of Verizon on the books in that sort of activity. So there's not an economic exchange between us and Verizon for that relationship. We don't pay them for the production -- for the utilization of the brand or the utilization as the official publisher in their markets. They do not pay us for the production of the White Pages.

So Verizon and other incumbents wouldn't have any kind of significant revenue -- be a significant revenue generator for the business for the White Pages?

No. There's not revenue to either us or the partner of any significance out of the White Pages portion of the residential White Pages portion of the business.

Is Verizon your largest client in terms of by revenues?

No.

Okay, thank you.

All right, thanks, Philip. Well, once again, thank you all for being with us. Our pledge to you remains to drive revenue, performance and cost efficiencies and to foster a high performance culture here at SuperMedia, all for the purpose of ultimately driving the value of our Company. As members of the SuperMedia team, we know we can count on each other. Every member of this team wants all of you to know that you can count on us too. Have a great day.

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 and have a great day.