Thryv Holdings Inc (THRY) 2013 Q4 法說會逐字稿

Good morning, and welcome to Dex Media's fourth-quarter and full-year 2013 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 Dex Media and its predecessor companies with the Securities and Exchange Commission. The Company has no obligation to update any forward-looking statements.

A replay of the teleconference will be available at 800-585-8367. International callers can access the replay by calling or 404-537-3406. The replay passcode is 6349673.

The replay will be available through March 27, 2014. In addition, a webcast will be available on Dex Media's website in the Investor Relations section at www.dexmedia.com. At the end of the Company's prepared remarks, there will be a question and answer session.

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

Thank you, Lori. Good morning, and welcome to our fourth-quarter and 2013 full-year earnings call.

It was a productive quarter and year. While we accomplished a lot, we still have more to do, and we are excited about 2014.

In 2013, the big highlight was the merger on April 30 of Dex One and SuperMedia to form Dex Media. This combination allowed us to create a new Company that is more powerful in terms of scale and more effective, as a result of the best practices from both legacy companies.

As a quick review, we have a presence in 43 states: a sales force of about 2,000 professionals who are 100% digitally trained and Google AdWords certified; more than 580,000 clients across the US. About 34% of our clients buy our digital solutions; and we retain about 80% of our clients from year-to-year. We generated over $2.1 billion in revenue. We retired more than $500 million in debt last year, while carefully managing expenses. That diligence enabled us to achieve 39.7% margins and generate adjusted pro forma free cash flow of $421 million.

As you know, we are on a mission to be the trusted local marketing partner for small businesses. They need us and our services. By consolidating a variety of advertising approaches in one place and producing solid, trackable results, we are a one-stop shop for local businesses. We offer a complete array of advertising solutions local businesses are looking for, from search optimization, to text, mobile, social, video, loyalty, and reputation management, to traditional media.

We have created and continue to test various bundles of products to further simplify the process and create more value for our clients. We are passionate about helping local businesses navigate the complex world of digital marketing, and we are continuing evolving to offer solutions that deliver results.

With our patented technologies and comprehensive partner network, we believe we can deliver leads more cheaply than a local business could achieve on its own. This gives us a real competitive advantage.

In the fourth quarter, we saw digital ad sales growth of 5.1%. Digital results accounted for approximately 24% of our revenues in 2013, with an average value order in the range of $2,500 to $2,600. As I mentioned previously, about 34% of our clients purchase digital solutions from us.

We are proud of the progress over the last quarter. We believe we can do even better. We did a lot of testing in the last quarter to gauge our clients' impressions of various bundles and different offerings. We found approaches that worked well and places where we could improve.

Going forward, we will continuously review and adjust our bundled solutions based on feedback from our markets and capitalize on those that perform well. Given our results during the trials, we look forward to rolling the most successful solutions out across the entire footprint over the next few months.

Let me give you an example. We launched the Start Smart bundle late last year, which is a very simple product that combines a number of solutions to help local businesses establish a presence on the Internet at a low, entry-level price. By bundling solutions such as listing claiming, website, social media, reputation management, and call tracking into one value-priced product, we created strong momentum with this product. The feedback from clients and from our sales teams has been positive, which tells us that we're in the right channels and training, we can achieve strong results.

We also saw that when we combine our legacy print products with digital solutions, we improve overall results for our clients. Having their business information in a number of places means they have wider presence in all the places consumers are searching. And as a result, local businesses receive more leads.

In the fourth quarter, we also saw slightly better print trends. Multi-product bundles create real value for our clients and help us deliver on our mission to help local businesses grow.

In one example, our consultant was able to help a local body shop enhance their marketing program by talking to them about the Start Smart bundle. The combination of print and digital was appealing to the client, as well as the affordable price.

We helped the client create a consistent visible presence online and in print so they appear in all the places their customers are looking for them. To date, the client has received more than 90 calls, a great beginning for a new business just starting out.

On the integration front, I'm pleased to report that we are on track or ahead in most of the areas of the business. Our leadership teams across sales and marketing, operations, technology, finance, HR, and legal demonstrated outstanding initiative and flexibility while reducing expenses and continuing to execute on all fronts. Systems consolidation always takes the longest, but our progress is on track as we focus hard on simplifying our processes and optimizing the business.

To win in any business, it is important to have a quality leadership team. And we definitely do. In 2014, we are very focused on our growing digital business, creating the right digital solutions to attract new clients and retain existing ones profitably.

We will continue managing our expenses, and we will continue to deploy cash in order to pay down our debt. Lastly, we will be proactive in pursuing strategic partnerships that position us well in the marketplace and will enable us to improve our business and the marketing solutions we offer.

We are pleased with the progress that we made in 2013, and we're excited about the opportunities ahead for a number of reasons. First, we have a high-quality team in place that's dedicated to making this business a success. Next, we know we can create solutions and bundles that will attract and retain clients.

Third, we have the right presence and scale in major markets across 43 states. Fourth, we offer marketing solutions and technology that is unique to driving results profitably. And last, we know local businesses need us, so, we have a real opportunity to make this business a success.

Thank you. And now, let me turn it over to Dee.

Thank you, Peter. And good morning, everyone.

Before we get into the financial results, I want to make mention of a couple of accounting adjustments in the period. The fourth-quarter GAAP presentation reflects a non-cash impairment charge of $458 million, associated with the write down of goodwill of $74 million, and $384 million of intangible assets. This charge had no impact on the Company's cash flow or compliance with debt covenants and was associated with our normal course review of intangibles.

In addition, in the fourth quarter of 2013, we corrected an error that was immaterial to all affected prior periods associated with the timing of revenue recognition for a former Dex One service offering called Dex Guaranteed Actions, or DGA. The Company recognized revenues for DGA as the guaranteed actions or leads were delivered. But would continue to provide service over the entire contract period, even if the guaranteed actions have been delivered before the end of the contract term.

The Company now believes that DGA revenue should be recognized on a straight-line basis over the service period, similar to the way revenue from the majority of our other products are amortized over a 12 month period. The prior periods affected were from January 1, 2012, through September 30, 2013.

The error only impacted the timing of revenue recognition by an immaterial amount. It had absolutely no impact on cash flows or advertising sales.

The financial information included in today's earnings release and in our 2013 annual report on Form 10-K have been corrected for all periods presented. Our Form 10-K will include disclosure that describes the error and its impact on each of the affected prior periods.

In closing my preliminary comments, I would remind you that some of the results I will be speaking to this morning are non-GAAP numbers. We have provided a reconciliation of GAAP to non-GAAP results in the appendix of the presentation.

Now, turning to fourth-quarter and full-year 2013 financial results, total multi-platform ad sales for the fourth quarter declined 14% as compared to the same period last year. Print declined 19.1%, and digital grew 5.1%. For full-year 2013, multi-platform ad sales declined 15.4%. Print declined 21.1%, and digital grew 5.9% compared to 2012.

As we integrate more of the solution offerings across all Dex Media markets into 2014, we will continue to focus on sales performance improvements. For the fourth quarter, Dex Media reported pro forma combined revenue of $513 million, a 16% decline compared to the same period last year. Adjusted pro forma expenses were $306 million, and adjusted pro forma EBITDA was $207 million, with a margin of 40.4%.

For the full year, pro forma combined revenue was $2.184 billion, a 17% decline compared to the prior year. Full-year pro forma adjusted expenses were $1.318 billion, and adjusted pro forma EBITDA was $866 million, with a margin of 39.7%. Adjusted pro forma EBITDA for the quarter excludes $13 million of merger integration costs and $55 million year-to-date.

As Peter mentioned, the entire organization worked diligently on system integrations, contract renegotiations, and overall management of expenses in achieving solid EBITDA and EBITDA margins for 2013. The same level of cost management focus continues into 2014.

For the fourth quarter, our total debt balance at par for all four silos was $2.963 billion. Payments made in Q4 were $220 million. This included an open-market repurchase of $137 million, utilizing $101 million of cash.

For the full-year 2013, total bank debt obligations have been reduced by $541 million. And net of a $16 million payment in kind associated with the bonds. This resulted in an overall debt reduction of $525 million.

Adjusted pro forma free cash flow for 2013 was $421 million, representing adjusted pro forma cash from operations of $451 million, less pro forma capital expenditures of $30 million. This includes merger integration cash costs of $47 million and excludes $36 million of cash merger transaction costs.

Cash on hand as of December 31, 2013, was $156 million.

This concludes the Q4 and full-year 2013 financial results. Operator, we are now ready for your questions.

(Operator Instructions)

Tim Daggett, Citigroup.

Thanks for taking the question. I know in 2013, you came pretty close to, or you actually slightly beat the EBITDA projection from the disclosure statement. Is that a good proxy to use for 2014 as well?

I think it was $836 million in 2014. Is that still a good number to use?

Tim, I appreciate the question. We've talked several times, I think, about not providing guidance and not making reference and affirming or distancing ourselves from the disclosure statements and the results put out last December. And we're continuing that position. The policy is not to look to provide guidance.

Having said that, we continue to look to improve the top-line results of the enterprise as we move forward. We continue to manage expenses and maintain margins as we look to transform the business. But absent color of that sort, we're not looking to provide guidance at this point.

I looked on the website, and I didn't see the silo-level financials yet. When can we expect to see that stuff posted on the website?

Yes. We will be posting the silo-specific statements late next week or the following week.

Okay. Great. Thanks, guys.

Mark Hetrick, Wells Fargo Advisors.

Hello, guys. Great quarter. Two quick questions for you. One, you talked a little bit about some potential joint ventures. Can you elaborate on that?

And then also, the second question being your superpages app which I was an avid Yelp user, and I think you guys have a fantastic app. And I just use yours from here on out. Any way to maybe get the word out a little bit more on the app? Mobile app?

Mark, good morning. It's Peter. First, thanks for your call and your questions. And thanks for using superpages app. We think it's a terrific app, and it's passed all the tests here. And we continue to be very pleased with that.

As far as announcing partnerships or other things, we are always looking for strategic partnerships. And I think that's the comment that we made. And so, we have great relationships today with Google, for example, and Facebook and other companies out there, and about 100 other strategic partners. And we're going to continue to look to do that and expand that and look more outside in 2014.

Okay. And any way to get the word out a little bit more on the mobile app?

I think we're going to keep working on that, but I don't want to release any plans at this point. We spent the last year merging these two together, and we're very pleased with the app, as we've announced before. It did win awards for advertising and marketing in 2012, and we continue to look to promote this in 2014.

Okay. Great. Thanks a lot, guys.

Colin Wilson-Murphy, Bowery Management.

Yes, guys. Thanks. Thanks for taking my question. My first question is, what was actual free cash flow for the fourth quarter of this year? And how does that compare to free cash flow for December 31, 2012, the quarter ended? Thank you.

The cash flow in the quarter was $109 million -- pro forma adjusted free cash flow was $109 million on the quarter. I don't have the number off the top of my head. I apologize for that.

We can get you that, Colin. It's been reported, but I'll have to get that for you.

Okay. Thank you very much. My follow-up question is, are you currently rolling out out-of-market trials for your digital products? And if so, how are those trials going? Strictly on the digital front.

Colin, we've done digital out-of-market trials in the past. Right now, covering 43 states, we're very pleased with the markets that we're in. And we're continuing to focus on our key customers and our key markets first. And really looking to grow and improve that, especially in the area of digital.

Okay. Thanks, guys.

Thanks, Colin.

Bob Konefal, Phoenix Investment Advisors.

Thank you. I have two questions. One is, it was good to see the recovery of growth in the fourth quarter on digital. And you, in the past, had spoken of integration issues. Is it fair to say that the integration issues are largely behind you?

And as you start to lap quarters in the period where you're still in the midst of your transaction with SuperMedia, that you'll start to see of reacceleration of growth on the digital side?

I think it's fair to say that we are past the -- 2013 we got through most of the issues around integration and merger of the two companies. And with that behind us, our focus now is primarily on growing the existing business. And so yes, that's correct.

Okay. The second one is probably more for Dee. You have latitude in your various term loan that to use a portion of your cash however you choose. Can you speak to whether you would think to direct your discretionary cash for debt pay down, or strategic investments, or some combination of the two? Can you give some color there?

Yes. Sure. We'll always evaluate the utilization of cash as investment opportunities may present themselves, depending upon the return and the opportunity to enhance and improve the transformation and transformation opportunities relative to this business. And so, finding a good, strong investment opportunity is always on our radar.

Having said that, we also recognize the value in economically deleveraging the business with open market repurchases and using that discretionary cash in that fashion, as evidenced by the fourth-quarter buyback where we put to use $101 million. Some of that was required to be utilized, but some measure of that was also discretionary.

And as we move forward, that evaluation will continue with respect to either of those types of opportunity, either deploying the capital in the fashion that we did in the fourth quarter with open market repurchases, or being opportunistic with respect to investment opportunities to help improve the business.

Okay. Thank you. That's it for me.

(Operator Instructions)

[Jan Gonsey], Newmark Capital.

Hello, guys. Thanks for taking the questions. Just a couple on the digital front.

You mention that the weakness in the last couple of quarters is due to integration issues. But then you were also saying you were rolling out some new digital programs, and that was also part of the reason. Can we expect, on a quarter-by-quarter basis, a bit more lumpiness going forward on the digital revenue line?

With respect to digital, we're looking to continue to drive continued growth in that piece of the business. Improvement and transformation in this business is not going to be a flash cut event. It's going to be a progression.

All of the rollouts and initiatives and programs and the products that we deploy in the marketplace are intended to enhance the value proposition we put forward to our clients and to drive that growth. We can't predict, specifically, with respect to whether or not there will be seasonality or lumpiness in those trends. There's always that possibility, depending upon what transpires in the various marketplaces.

I would say it's not a terribly seasonal business, albeit sometimes we're in different markets. And it varies what markets we're in. But that's not a tremendous impact on the rates, especially on the digital front. Suffice it to say, we're looking to drive growth and continue to progress in that regard. But predicting exactly specific, quarter-to-quarter-to-quarter movement in those numbers is not something that we're looking to do right now.

Okay. Fair enough. And then, maybe if you could talk a little bit about the competitive environment that you're seeing on the digital front? And maybe, even drilling down on programmatic ad buying. And if you see that as an opportunity for the SMB space?

Sure. On the competitive environment, I think it's an interesting environment because we think that we have a real opportunity here. Because in small and medium-sized business, it is a tough market to get to. And in each of the local markets, there are a lot of, I'll call them -- That Guy -- and that's what we've called it in the industry, where there's someone who can do social, and then there's somebody who can do websites, and there's somebody who can do SEO for local businesses.

And so, there's a lot of these smaller cottage-type competitors out there who are very close to the clients and who are having -- I would almost say, is the main competitor. There's not one single competitor out there of any significance that we run into on a daily basis. And so, it's really the small ones, which is why we believe we have an opportunity because of size and scale and because of the different technologies that we have to really make an impact and win share in this marketplace.

So, that's the competitive front. I wish I could tell you there was one key one out there because that would be easier to go against, but that's not really the case. As far as other approaches, program buying, there's not a lot of activity in this case at this point. So, not much to report there.

Okay. Is it fair to say that over the next coming years or so, there could be opportunities to potentially consolidate some of these smaller competitors that have different skill sets and different core functionalities?

When we look at those type of opportunities in the marketplace -- a roll up or combining strengths with other players, albeit big, large ones or small ones -- we're always going to evaluate the type of opportunity. I think there are some folks that are providing good, strong services to their client base.

We've got a set of assets and a core set of products and services and a back office engine that we think could match up with some of those folks. And as those opportunities present themselves, we're certainly going to look at them hard.

Great. Thanks. Then one last one. On the print side, it looks like the rate of decline there is decelerating. Is that something you think could potentially continue over the next coming quarters? And on that vein, has your retention rate basically stayed in that mid-80%s type of range?

Yes. As to retention rate, it has been fairly consistent, especially with respect to the print, in regard to both clients and revenue base. There was some slight improvement in the fourth quarter with respect to the print side of that.

Some measure of that is mix in markets that were worked in that quarter versus some of the other quarters. There's a little bit of that influence in that number.

We were pleased to see that we at least got a tick of improvement in that regard. But I can't say that just using fourth quarter as an indication is necessarily the approach to take because there is a little bit of movement amongst the quarters, depending on what markets are worked.

Okay. Fair enough. Thanks so much. That's it.

Seth Crystall, RW Pressprich.

Yes. Good morning, gentlemen. I wanted to quickly follow up on the print deceleration of that decline. That's been going on throughout 2013. So looking at the fourth quarter, that was still a nice continuation.

Not using the fourth quarter, but really looking throughout the whole trend of 2013, could we expect a potential continuation of that? And not using just the fourth quarter, but the trend. Or do you think it stabilizes at this point?

Just going back to the bankruptcy docs. I think you had been using, and I know you don't want give guidance, but I think it was like 18%, 19% was your guidance, going forward. So just want to know if that's trending the way you expected back then?

With respect to print specifically, look. We're not looking to provide guidance.

I think, again, we were pleased with the improvement that we saw in the fourth quarter and the full year in those low-20%s. We are always looking to improve against that, and we do believe that some of the programs we're putting out will, in the longer-term, help with respect to print. And the way we are selling bundles and the multi-product approach and the value that ultimately does come from print, in totality, with respect to those products and bundles that we provide to the marketplace.

And so, we're always looking for improvement in those numbers. But I'm not looking to provide guidance or explicitly call out where we think that's going to go. We're not where we would want to be, as you might imagine. But really, we're looking to ultimately improve multi-product growth. We realize that really getting growth and driving new in that aspect is going to be centric to more the digital side of the house. But in the meantime, we're looking to preserve print as much as we can.

Okay. Great. Just a follow-up on an NOLs. Can you give us an idea on what that might be at this point? Where they reside, and how that affects cash taxes and maybe even tax sharing among the different silos?

Yes. As you may recall from prior documents and disclosures, the NOLs sit primarily at the RHDI silo. There is basis in the West and the East, and then a small amount of tax asset on the SuperMedia side as well. As you can will see from the 10-K and the documentation.

As a total enterprise, we expect that we are going to continue to move towards being a non-cash taxpayer and being closer to zero as we anniversary around the merger and get past some of those integration or those activities where you can't fully utilize those tax assets across the whole base. But we are getting there, and we're moving in that direction. And I expect that, as we move forward, that cash tax payment for the total enterprise would be minimal.

There will continue to be a sharing aspect and movement between the silos. The primary movement within the silos is between SuperMedia and RHDI and the other silos as to utilization of first the basis, and then secondly the NOL. And we'll continue to see that tax sharing relationship.

And then the SuperMedia silo, if you'll recall, it was $0.75 on the dollar for those elements being used. And that will continue. We don't expect to see a change in that. And as to utilization and being able to utilize the assets, that's progressing as we had anticipated.

Okay. Last question. Any thoughts in terms of being able to try to do some sort of global refinancing? And take out all the silos so you don't have all the different covenants and issues with them? And just have one facility out there?

The facility's assessment of the capital structure and getting to an optimal capital structure, and you're right certainly, administratively and management-wise, with respect to those multiple silos, it would certainly provide for ease. But you can imagine the complexities in that regard and in accomplishing that and executing against it. So I can't say that there's anything specifically on the radar right now with respect to accomplishing that.

We're focused on transforming the business and driving cash and paying down debt and deleveraging in an efficient fashion when those opportunities present themselves. Certainly, always looking to evaluate various opportunities to improve the profile. And getting to a single tranche would be one of the things. But execution aspects and complexities around that, that's not that specifically in the works at this point.

Okay. Great. Thank you very much.

Jonathan Sacks, Stonehill Capital.

Hi. Could you please discuss a little bit the difference in performance between the different silos?

Excuse me. The silo-specific financials are not going to be out for, like I said, the end of next week or the early part of the following. There's some measure of variety across the respective silos in the markets in the area. Some of that is just seasonal and moves. When you go back and look historically across those silos, there has been slight differences in various periods. But over the longer-term, they tend to and have tended to move in a fairly consistent fashion. And sort of move back together. Ups and downs within the respective markets on occasion, but for the most part, moving in a consistent fashion.

We don't expect huge or major swings amongst those silos, but we continue to monitor that, and we continue to drive for improvement in all of the markets. And managing those and trying to drive performance in each of the respective silos and in totality. But over the longer-term, if you look back historically, you don't see major swings that are permanent in any fashion with respect to any of the individual silos.

Great. So said differently, would you say the market environment and trends are broadly similar amongst all the silos?

Yes. I think that's fair to say.

Okay. And how about any other insight into variations you can give us on different geographies, or even urban versus rural?

Yes. Sure. We've spoken in the past that with respect to the opportunities that are out there, I think you see the urban markets moving more towards the digital side faster -- or we did. And in some respects, that continues. But what we have seen is a little bit of stabilization with respect to the print side of that business, relatively speaking.

And then the more rural markets have been a little more stable print market, a little slower to adopt the digital solutions. I think some of the Start Smart and some of the lower-end-type bundles that we're rolling out will allow us to improve in the penetration levels with respect to that set of markets and those clients and drive growth there.

Over time, I think the marketplace is going to follow consumer behavior as it has in the past and always will. And I think, generally, you're going to see those markets trend directionally in the same fashion. The speed at which they move one way or the other may vary, but I think directionally, you're going to see those all move in the same fashion. And the solutions and activity in the marketplace that we put forward to drive value is going to be consistent across those markets albeit with a little bit different flavor and a little bit different emphasis, depending upon where the marketplace is at the time.

Okay. And then, a more general question, which is something you had discussed in the past. But a refresher would be helpful. The revenues and cash flow that you report today were generated by sales at some point in the recent past. Roughly, what's the lag there, do you think?

Well, if you think of when we report ad sales, we're reporting generally, sales or publication and production of products in that particular quarter. And it will flow over -- that will flow into the income statement. For example, fourth-quarter results will flow into the income statement over the following, on average, 10.5 months.

If you think about it, if you use a mid-quarter convention and you look forward with respect to, on average, a 12-month period over which revenues and ad sales flow into the income statement, it generally completes its cycle in that 10.5 months. So if you look back, revenues for 2013 were mathematically, or theoretically, generated. Half from activity and sales activity from 2012, half from sales and activity in 2013, to blend to the amortized results that flowed into the income statement.

Okay. That's helpful. One last question. I was a little bit surprised to hear you say when you were discussing competitors, that you weren't running against anyone consistently in all areas. And I was curious if you could touch on AT&T or YP Holdings, I think it's also called, and perhaps Yelp, which I recognize is a different product. But I'd be interested to hear your thoughts on both of those. Thanks.

Jonathan, as far as YP holdings, or former AT&T, their core footprint is actually in different markets, for the most part, than ours. So I think there's a real advantage of being the incumbent in a marketplace where you've had long-term relationships with the local businesses.

And so, yes. They are a competitor in some of the markets, but when they come into our markets, so to speak, or where we had the legacy footprint, what they're doing is they're out-of-area. And they don't have those same relationships.

And over the years, I think that having that relationship has been a real asset to us as we've leveraged that relationship in taking the customers that were print customers and sharing and keeping again, local businesses who are looking for only one provider, they don't want to deal with two or three. So if we can provide the same services as YP could, then that works in our favor. We also have a relationship where we do sell, in some of our markets, the YP product. So there's a good relationship we do have with them.

As far as Yelp, we don't really come across Yelp that much. And when I go around the country and I talk to the salesforces, they rarely come up on the radar as a competitor. And I think it's a different thing. Usually the reviews from Yelp and all the information on Yelp, the content that's gathered is different from selling the advertising solutions and tracking the results like we do.

So I think that, in one case, we have a relationship and there's a difference in markets. And the other one it's a different type of a product that's being offered. So it's really the That Guy that's in the marketplace that seems to impact us most.

Great. Thank you so much.

Colin Wilson-Murphy, Bowery Management.

Yes, guys. Thanks for taking my follow-up. Dee, how much was RHDI compensated in 2013 for the Company's tax sharing arrangement?

Colin, I don't have that number right off the top of my head. It will appear or be evident in the silo-specific statements when we do get those filed.

I do want to go back real quickly, I apologize for not have that number in front of me, but I do want to go back to your other question. You had asked about the cash flow comparison, the fourth quarter versus fourth-quarter of 2012 earlier, and I do have that number now.

The number for Q4 of 2013 was $109 million. The number in Q4, when you do the pro forma combined entities of it, we weren't merged at that point of time, but the combined entity's fourth-quarter cash flow last year was $141 million.

Okay. Great. Thanks, Dee.

Phillip Pennell, Mariner Investment Group.

A couple of things. One, is there a quarter which is higher in terms of your annual revenue that's received from your advertising customers? Or is it pretty smooth across quarters throughout the year?

It's relatively smooth. When you look at the four quarters, they range, probably, anywhere from 23% of the base of sales versus up to, say, 26%, 27% of the base of sales in a particular quarter. So there's a little bit of variability, primarily driven more by print publish cycles than the digital front.

As far as the income statement amortization effects, just the nature of the accounting that we do, it's going to be pretty straightforward and pretty smooth across the quarters. You're not going to see fluctuations in regards to amortized revenues as you move through the quarter because of seasonality of any sort.

If you look at the basic quarters, the only one that stands out a little bit -- third-quarter is a little bit lower publication quarter, in an aggregate sense, than the other three quarters, which are all somewhat consistent. As a general view, I would say it's pretty consistent across how we cycle and handle the revenue and manage the flows and the canvass activity with the client base.

Great. And Peter, addressing the quote unquote, That Guy issue, has the market become less platform dynamic? And by that, what I'm saying is, are we closer to returning to an equilibrium where it really becomes more relationship driven? More or less the way it has been historically speaking?

I think clearly, relationships are important. But I think the fragmentation -- a lot of these That Guys are good at one or two things. They might do a website, or they can do SEO, search engine optimization. And I think that our full suite, the one-stop-shop is what local businesses are looking for. And all the research points to that. And if you think about the service that we can give because of our scale, I really do believe it gives us an advantage.

It's a hard thing to put all of this together, and I think what you're seeing is we get better and better in execution. As I said, last year was very much focused on integrating two pretty big-sized companies. And we're pretty much past that. And now, it's a form of execution. And I think that the team that's in place has learned a lot. As I said in my remarks, we've got the best practices from each company. And I think that's turning out to be a very positive thing for us, and that's why we're excited about 2014.

So I think service is the differentiator, and the relationships are a differentiator. And as the world becomes more fragmented, trying to get economically to that local business is more difficult. And we're very fortunate to have thousands of people across the country, in 43 states, in key markets.

It would make sense and if I read between the lines of what you're saying, it would appear to me that effectively, what you've seen across the last four quarters -- and hopefully, obviously, building into the fourth quarter, and now we're well into the first quarter of 2014 -- and you've seen this, quote unquote, equilibrium, more or less start to impose its will on the market.

I would think it would be more and more difficult for these one-off shops, or single-service providers, to expand their footprint, given that they are probably going to be more relationship driven within the markets that they have direct knowledge, they're so-and-so's cousin or whatever. As opposed to Dex which, once you get better at providing those tech services, can then expand your footprint within the people that you've historically done print with. Which makes sense, in terms of you seeing the print burn, if you will, slow down some.

That's just me trying to read between the lines. Is that reasonably what you are seeing? Do you feel that you're seeing this trend build, going into the first quarter?

When we look at the marketplace in that regard, one of the difficulties in this business and it's even more difficult with the digital side, is building scale and driving scale while continuing to provide the level of service necessary to satisfy the client. We've got some measure of an advantage in that we already have a measure of scale, with over 200,000 clients in the digital space, over 580,000 clients to start with in totality. So that scale and managing that scale is something that we've done for years.

Doing it effectively with a high level of service, and executing against that as the marketplace moves, and trying to be nimble and flexible is the key when you combine with that. And then, as you mentioned, we do believe that there's a measure of leads and value that the print provides, that comes along with our digital solutions in the multi-platform sell. That provides us an advantage that is unique to us, relative to those smaller players that are in the marketplace.

So there's always going to be the small competitor out there that is looking to service individual and one-off type clients and services. But as far as being able to do it at scale and do it en masse and doing it with the level of assets and value proposition that we do, we think we have an advantage in that regard.

One measure that from an internal perspective, that would give you some idea about what's going on, I would think would be employee turnover. Have you seen turnover slow down, which would suggest, to me, that the people that are addressing this specific market have become more accomplished at what they're trying to do and you seeing the results of that? I'm just curious about that?

From a turnover perspective, it's actually improved in the last year. And I think it is driven because, I think, the marketing consultants in the field believe in our product and the value propositions we're putting together. And as we've talked about the bundles -- we really have a compelling value proposition because at the end of the day, if you think about local businesses, all they really want is leads. They don't really care where they come from.

They don't want to get involved in all the technology, in all the different avenues, whether it's management reputation or it's SEO or SEM. They really don't care. So if we can bring them leads, and if you think about -- I call it the secret weapon -- the Yellow Pages, there are still people that use Yellow Pages. And there's still value coming from those Yellow Pages. So if you take the leads from what we can get from the print directories, plus what we can get from all the search and digital products we have, we can put together a one-stop shop, compelling value story at a price point that's attractive to local businesses.

And I think that's why we saw some improvement here, and that's why we see the salesforce, or the marketing consultants, with a higher retention rate. And I would say that, if you look at today versus a year ago, I think we have a better quality group in the field representing the services that we provide.

And that raises a good question, too. Obviously, it's going to trend with GDP, in terms of ultimate sales. Because like you said, your retailers, they know sales. That's what they do, and that's what they want to do. They don't want to sit around and click on a computer and try to build a website or be their own webmaster or whatever.

But I'm wondering have you seen any noticeable slowdown in Q1 because of the weather? Has that had a big impact on the Company?

We've looked at this. And we've calculated the days where there's been -- because we've closed more offices in the first month. But that's a temporary thing. Like all business they're looking for a good, solid value proposition. And we can bring that to them. And we can bring results, and we bring good services. And when you keep doing that, and you keep creating a good, quality experience for the client, good things will happen.

Great. Thanks for the answers.

Thank you. That does conclude the Q&A portion of today's call. We thank you for your participation. You may now disconnect your lines and have a wonderful day.