Thryv Holdings Inc (THRY) 2014 Q2 法說會逐字稿

Good morning, and welcome to Dex Media's second-quarter 2014 earnings conference call. With me today are Peter McDonald, Chief Executive Officer, and Dee Jones, Chief Financial Officer. Some statements made by the company today during this call are forward-looking statements. These statements include the Company's beliefs and expectations as to future events and trends affecting the Company's business and are subject to risks and uncertainties. The Company advises you not to place undue reliance on these forward-looking statements and to consider them in light of the risk factors set forth in reports filed by 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 this teleconference will be available at 800-585-8367. International callers can access the replay by calling 404-537-3406. The replay pass code is 78702537. The replay will be available through September 5, 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 would like to turn the call over to Peter McDonald. Peter?

Thank you, Lori, and good morning, everyone. We appreciate you joining us on the call. Today, I will give an overview of our progress for the first half of the year, and then Dee will provide a deeper dive into the financials for the second quarter.

As we continue transforming this business into a one-stop shop for local marketing services, we are pleased to report continuing progress in the second quarter. While 2013 was all about the merger and integration, this year is marked by momentum and execution. Over the past two quarters, we have improving trends in digital ad sales, increasing client interest in our products, as well as expanded collaboration among our sales, marketing, and operations teams.

During the quarter, we advanced our effort to be the preferred marketing partners to local businesses across the country. Once again, the highlight is digital ad sales growth of 11.2% year to date and 12.4% for the second quarter, driven primarily by our bundled solutions. That is an improvement of 170 basis points year to date and 620 basis points as compared to the second quarter of 2013.

Year-to-date pro forma EBITDA was $368 million, with a margin of 38.3%. Free cash flow was $193 million year to date, and we've retired $210 million in bank debt for the first half of 2014.

I am pleased to report that at the end of the second quarter our client retention is approximately 80%, and that percentage is even better with our higher-spending multi-product clients. In addition, recurring revenues were approximately 80% to 85%, and bad debt continues to hold at around 2%. We believe these numbers indicate our clients' continued satisfaction with the value delivered by our marketing solutions.

In the second quarter, digital sales accounted for 29% of amortized revenue, up from 24% in the second quarter of 2013. Currently, 36% of our clients have a digital relationship with us versus 34% at the same point last year. With continued focus on selling multi-product approach, we believe we can continue to improve the number of digital relationships over time. When you consider the average annual spend per digital clients is $2700 to $2800 and that multi-product sales deliver our highest client retention, you can see the importance of improved digital penetration.

Our improving trend in digital ad sales can be attributed to the continued success of our bundled solutions, which we find easy to sell and clients recognize as clear value. With our sales teams fully trained on these solutions, we saw improved execution in the second quarter. Our marketing consultants' knowledge of what works for small businesses continues to grow, and they are enthusiastic about sharing that information with clients. Using exclusive selling tools, our consultants can demonstrate how clients can be found, chosen, and talked about online as well as show results they might expect.

We know that many of our clients who invest in multiple products receive increase calls, clicks, and sales. That's why we are focused on moving existing single-product clients to programs featuring digital solutions along with print and direct mail. As our clients' businesses grow, their need for sophisticated solutions also grows. That's why we offer several different solutions to serve clients at each stage of business development, from those just launching to those looking for ways to expand.

Our entry-level Start Smart Bundle is geared to clients who need to establish their presence online and get found, in the digital world. The early momentum we experienced with the Start Smart Bundle has continued into the second quarter, especially in our telephone centers.

Flex bundles, which are well-suited to midsize clients and larger client segments, also contributed to our growth in the second quarter. This offer gives our marketing consultants the flexibility to design customized solutions to fit the client's specific needs and budget. Clients get exactly the solutions they need for one single price. Dex Media Guaranteed Actions, or DGA, combines a number of digital marketing solutions into one package with real-time results and sophisticated tracking. Geared to our highest-spending client segment, DGA provides strategic placement across multiple media platforms along with free tracking of calls, emails, clicks, and profile views with a guaranteed number of actions over 12 months. The client can track their investment with 24/7 access to our client portal, which features easy-to-read graphs and detailed information about each contact type. You can find more information about our bundles in the appendix of today's presentation along with example client reports and a link to client testimonials on Dex Media.com.

We continue to believe our competitive advantage is being the one-stop shop for marketing solutions from search to optimization to text, mobile, social, video, loyalty, and reputation management, to traditional media such as print and direct mail. We are the trusted marketing partner to more than 0.5 million clients, with more than 35% of those investing in digital services. Many business owners don't have the time or desire to become marketing experts. With Dex Media as their marketing department, our clients are better equipped to navigate the complicated world of promoting their business. It is exciting to see our more than 2000 digitally trained sales professionals help local businesses reach more customers. With a presence in 88 of the top 100 MSA markets and 43 states, we are highly accessible to our client base, and the potential for growing those relationships remains strong. As we talk to clients about renewing print ads, we also demonstrate the value we can deliver with digital. While we are currently focused on selling to our existing client base, we also recognize the vast opportunity to grow market share by acquiring new clients.

With the improvement in top-line trends, we remain focused on managing expenses and adapting the client experience. Our employees work hard to continuously improve execution to give the clients the best service. Dex Media is filled with extraordinary talent, and our employees are dedicated to the noble cause of helping local businesses grow. From recruiting to hiring to training, we continue to progress each quarter. New programs implemented last year led to continued improvements.

Using the characteristics exhibited by our top-performing marketing consultants, we revamped our recruiting efforts to attract higher-quality talent. And, once new hires join the organization, they benefit from enhanced training out at Dex Media University in Dallas.

We're also organizing our workforce for improved efficiency. Earlier this year, we centralized our telephone sales operation into four major hubs. Within the centers, we can serve entry-level clients with our simplest products more efficiently. In addition, we use a team-oriented approach to provide real-time training, coaching, and incentives for our marketing consultants. Our telephone centers continue to impress us with their performance and sales results. The telephone sales strategy complements our traditional premise marketing approach, which is focused on selling mid-tier and larger spend clients who need more in-depth consulting and expertise. With these two sales approaches working hand-in-hand, we have reduced sales expenses year over year. It's also worth noting that all of our sales regions reported positive digital growth for the quarter and year to date.

While we organize for efficiency, we have also tested new market approaches -- features and enhancements to our existing solutions. Our digital marketing team stays abreast of technical innovations and remains in constant communication with our distribution partners to stay on the forefront of change. In all areas of the Company, Dex Media employees are focused on providing the best solutions and services in our industry.

This May, we announced the appointment of Del Mumenik as Chief Operating Officer. In this role, Del is responsible for all client-facing activities including sales, marketing, operations and technology. By bringing these functions together under single leadership, we can accelerate our speed to market with products and continuously improve the client experience. Del has been instrumental in developing a number of transformative Company initiatives, including the most recent quarter's digital ad sales growth, major product improvements, and client experience initiatives. We look forward to his continued innovation for Dex Media.

I'm proud of execution from our employees in the second quarter and the momentum we are building with our digital ad sales growth. We look forward to the future for a number of reasons. First, we believe our strategy to be the one-stop shop serving as the marketing department for local businesses is working. Next, our bundled solutions resonate with clients and deliver measurable results. We have continued opportunity to increase digital relationships within our existing clients and attract new clients. We are investing in recruiting and training to enhance our performance; and as a result, our marketing consultants are more qualified and knowledgeable than ever. Last, we are organizing for efficiency to provide an excellent client experience.

In addition, we continue to look and pursue strategic partnerships that would potentially enhance our position in the marketplace; enable us to improve the marketing solutions we offer and help grow our digital business. While we have no new partnership to announce on today's call, we are continuously looking for opportunities in this area, and we will keep you updated.

In closing, I want to reiterate our confidence in serving as trusted local marketing partner for local businesses. Thanks for your continued interest in Dex Media, and this time I will turn it over to Dee.

Thank you, Peter, and good morning, everyone. Before I provide the second-quarter financial results, I will 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 this presentation.

The second quarter was about continued progress in digital performance with our bundled solutions. In addition, we focused on realigning the sales organization, sales productivity, and cost management across all functions, allowing us to continue to lower costs. We also completed a debt repurchase in June 2014, reflecting our focus on efficient utilization of cash. As we continue to evolve our marketing solutions, we will remain focused on also gaining efficiencies in the business.

As Peter mentioned earlier, this quarter was about gaining momentum and the execution of our digital strategy. For the second quarter of 2014, digital ad sales grew 12.4%. Total multi-product ad sales declined 12.5% as compared to a decline of 16.2% for the same period last year. The digital ad sales growth was driven primarily by the performance of our bundled solutions. We are pleased with our progress in the conversion of existing print clients to our multi-product bundles, and in our ability to effectively maintain steady 80% client retention and stable client renewal dollars.

Regarding the digital ad sales trend in the presentation, I want to mention a sales reporting methodology change as a result of ongoing merger integration activities, which led to a small restatement in digital ad sales from 8.5% to 9.6% for the first quarter.

Now turning to revenue and EBITDA results for the second quarter, Dex Media reported revenue of $474 million, a 15.1% decline compared to the pro forma results last year. Adjusted expenses were $300 million, and adjusted EBITDA was $174 million with a margin of 36.7%. On a year-to-date basis, pro forma revenue was $960 million, a 15.7% decline compared to the same period last year. Adjusted pro forma expenses were $592 million, and adjusted pro forma EBITDA was $368 million with a margin of 38.3%. The Company incurred $8 million of merger integration costs in the second quarter and has incurred $26 million year to date.

Taking a closer look at expenses through the first half of this year compared to 2013, we had a total expense reduction of $103 million, a 14.8% decrease. Sales expense savings can be attributed primarily to greater efficiency and productivity as a result of some realignment in the sales channels. Cost of sales expense was reduced as we are able to leverage economies of scale from printing, publishing and distribution processes and vendor contracts. In addition, we are getting cost reductions from lower volumes. G&A expense reductions were driven by headcount reductions and efficiencies gained through best practices associated with merger integration and other initiatives. As you can see, we have been effective at achieving cost reductions through the first half of the year across all functions.

As we mentioned on our last earnings call, first-quarter expenses and margins were impacted by a favorable one-time item of approximately $10 million associated with settlement of a liability with one of our publishing agreement partners. I should note that second-quarter expenses and margins were slightly impacted by several unfavorable one-time items recorded in the period totaling about $5 million, including, among other items, a settlement of a small disputed item with one of our telco partners, a write-off of some paper inventory, and certain benefit cost true-ups. These items primarily impacted G&A.

Now onto debt payment activity for the second quarter. Our total bank debt balance at par was $2.517 billion at the end of the period. Retirements of principle made in the first half of the year were $210 million. When you net this with the $8 million PIK associated with the bonds, it results in an overall debt reduction of $202 million. We have provided debt balances at par and cash by Silo located in the appendix of this presentation. Included in the numbers just mentioned is a below-par debt repurchase effected in June which reduced par debt by approximately $54 million through utilization of cash of $46 million. Year to date, the Company generated free cash flow of $193 million, representing cash from operations of $202 million, less capital expenditures of $9 million. This includes merger integration cash cost of $27 million. Cash on hand as of June 30, 2014 was $146 million.

As I close the quarterly financial remarks, I would like to mention we will be posting the Silo financial statements to the investor relations section within a week or so. In addition to the normal posting, supplemental schedules for adjusted pro forma EBITDA by Silo will also be provided. Operator, we are now ready for questions.

(Operator Instructions). Mark Hetrick, Wells Fargo.

Great quarter. Really felt your digital growth for the quarter was real impressive, and recently it seemed like Yelp seemed to struggle a little bit in the local market with the digital growth. How do you feel that Dex seem to differentiate themselves versus other competitors?

I think Mark -- this is Peter -- I think we said in our prepared remarks, I think that this one-stop shop kind of approach to local businesses is a winner. And local businesses don't want to see somebody from each of the different variable digital companies out there with one solution. And so bringing our strategy that has all of it kind of aggregated together seems to give us an advantage, and our clients -- local businesses want to just see one person a month versus many different vendors out there trying to sell whatever their product might be.

And Mark, I would also suggest to you that with feet on the street, 2000 sales professionals and relationships established with over 500,000 clients and businesses out there, I think we've got a base of business to operate from and transform into the digital space.

Great. Thanks a lot, guys.

Chad Quinn, Bennett.

Good morning. It looked like the average value for order is trending up a little bit. Is that a function of broad-based price increases that are pricing, or is that more a function of selling more bundles at a more attractive price point?

You know, Chad, I would suggest it is probably more the function of selling bigger programs and larger programs in the bundled solutions that we are putting forward as opposed to straight-up pricing on individual items. We're always evaluating price opportunities, but I will say in this market place we are more focused on moving the clients up the chain as far as what they are buying and getting them into bigger programs that will provide a better value. And the bundled strategy that we are using is right in line with that.

Okay. And Peter, you mentioned the partnerships. Can you maybe talk about this point, with your product offering, what you see as being the ideal partnership to sort of enhance your product offering? Obviously not naming, maybe the target, but what they would offer and how that would help enhance the portfolio of Dex assets.

Chad, I think the way to think about this is we've looked at probably 50 or so companies out there. We have prioritized them as we think of the opportunity and where there could be synergies and opportunities on some of the products that are out there and some of the coverage that they have with their clients. And as we continue to look at them, and I think you could think about this, we are talking to everyone in this space looking for opportunities and partnerships. And I wish I could tell you more at this time, but right now we have nothing to report. But you could say that everything out there is kind of fair game the way we're looking at it.

Thank you.

Colin Wilson Murphy, Bowery Investments.

First, are you currently rolling out any out-of-market trials for your digital products? And if so, how are those trials going?

No, we are not. And we have tried this in the past, and we had limited success, and given where we are we have stopped those. We have a tremendous base of over 0.5 million clients; many of them are still in need of our digital solutions, and that's where the focus is today. And then once we do that, there's plenty of clients in our marketplaces that are familiar with our brands, which will be our next kind of focus.

Okay. And if an SMB customer receives one invoice where print and digital services are not broken out to the client, how do you internally allocate that revenue between print and digital for financial reporting purposes?

The print and digital attribution is based on the market price of the individual stand-alone products. GAAP essentially requires that you attribute that revenue on the basis of how your stand-alone products in the marketplace are priced. And we have plenty of a la carte pricing of individual products across that in order to establish the relationship there. So it's a pretty clean methodology to attribute revenue between the two. And basically to the degree you're giving any discounts across a bundle, you proportionally assign that discount to the respective products that's on that basis in the sales function. So -- and in the numbers that we report from an ad sales perspective. That's essentially the basic attribution methodology. There's a few exceptions depending upon the makeup of the individual products. But as a broad answer, it's essentially proportionately attributed based on a la carte pricing in the respective market.

Okay. And your bank debt matures in just over two years in December of 2016. What is your plan for addressing your balance sheet?

As we move toward the end of 2016, there's a good bit of runway and activity between now and then for performance of the business to continue to improve and evolve. That's where the focus is right now is driving the performance of the business, maintaining efficiency, and utilizing cash in an efficient manner between now and then. Exactly how that plays out will be a function of a lot of variables including how the business is moving and what the prospects are for the business at that point in time and how the Capital Markets view things. But we will continuously look at that and assess the various alternatives that may be available. I would tell you we are still focused on the interim period at this point and driving performance and efficient utilization of cash.

Okay. Thanks, guys.

(Operator Instructions). Jen Ganzi, Hillmark Capital.

Just curious, it seems like your print decline was a little bit faster than last quarter. Is that attributed to -- you know, because the digital is obviously also much better than last quarter. Is that because more folks just switching into digital? Can you talk a little bit about that?

If you look at the sequential quarter performance on the published revenue report, you did see a little bit of an uptick in the declines on print. That's a function of several things. Mix and markets that are within the quarter, the driving of bundled solutions across the footprint, and what markets you are in with respect to that, those types of activities. I can't sit here and tell you there is one single factor that drove that change in the print declines; I think we were in the high 19% versus 21% to 21.5% in this quarter. We are working to mitigate those print declines at the same time trying to drive and transform the digital business. We do believe that the bundled solutions will over time help the print aspect of things and the performance of that because from what we have seen, the bundled multi-product solution, which in a lot of cases does include a print component, allows for better retention and a better value proposition to the client. And as we move forward, we will continue to press in that regard. But I can't sit here and say there is one single factor driving the print decline.

Okay, got it. Thanks. So would you think that if next quarter had a similar kind of strong digital result, you also might essentially see a quicker sort of north of 20% print decline?

Well, as you know we don't provide guidance. Just suffice it to say, look, we will continue to focus on all aspects of that sales number and the sales line. They'll ultimately get to multi-product improvement, which would be inclusive of both elements of that.

Okay. That's helpful, thanks. I was wondering for your digital side, are you seeing -- I guess maybe could you talk a little bit about some of your win rates against sort of these kind of more sort of digital-only companies, or more local guys like how do you guys just on a broader basis how do you guys stack up when you're kind of trying to sell your digital solutions? Does having the print property help and give you guys a much better win rate than your competitors? Maybe just talk about a little bit about the competitive environment there.

When we go out to see clients, I actually think that they are pleased to see us because if you can picture yourself as a small business owner trying to run your business, and you've got -- and I think it's an area of 30 different people calling you a month trying to sell you a different product in digital, it gets pretty frustrating. And so when we come in offering that one solution, we think that's what's really giving us an advantage. And to be able to get them and take care of their website and management reputation, get them on Google Places, to do all the different things we do is refreshing for them. And I think that's why we are having the retention rate of 80%, why we are having recurring revenues in 80% to 85% rate, is because they see value in the complete program. And all the research says local businesses want to have one person come in and give them a one-stop solution, and that's what we are doing. And we think that's why we are effective.

That's helpful. Thanks. So I guess have you seen any ability to sort of win new clients, sort of new SMBs that get like either just digital only or a bundle that weren't previously involved with the Dex?

Well -- right now, because of the size of our client base and the opportunity we think -- we look for the biggest opportunity, and the biggest opportunity is to continue to penetrate the existing client base and move them from a single product buy to a multi-product buy which includes our digital solutions. And once we feel that we've covered that, we will be opportunistic in looking at the local small businesses or the next -- more of the verticals I think that you'll see us going to try and drive new opportunities and new clients.

And Peter mentioned the Start Smart Bundle a little earlier in the call. We have seen success with new business with respect to that as an entry-level product. I think you'll see us continue to focus on driving those types of solutions to bring in new clients and gain further success there. We need to continue to further scale that and drive better results in that regard, but we do believe we've got solutions that will work and will continue to work and allow us to grow the relationship with those clients after we do get them in the door. So absolutely a focus for us in moving forward.

Okay. That's helpful. Thanks. And just lastly, to your existing client base, I guess do you get other than I guess how you see return revenues of around 80%, 85%, I guess for print-only guys that are upselling to digital, is there a way to sort of get a sense of what your win rate is for those particular businesses versus any sort of competitors that may also purchase them?

I think we are working with our existing base of clients. That retention rate and that factor, I think our win rate -- it would imply to me that our win rate relative to competition is pretty strong with that sort of a retention factor, especially knowing the client base that you're dealing with. When you can hold 80% of your client base, you know that they're -- and especially with limited budgets and certain view from a small and medium business as to what they're going to spend on advertising, I would venture to say that we are pretty strong against the competition in that regard. Small to medium businesses are going to continue to test and try things. But I think what we have found is that especially when they are dealing with single product solutions from other providers that we have a good success rate in continuing to hold onto those clients.

That's helpful. Thanks so much.

Bill Sutherland, Emerging Growth Equities.

I wanted to ask just a couple things on the sales force, maybe this was mentioned and I missed it. But the sales force, the headcount as it stands at the end of the quarter is a change from the year end. And any commentary on churn? Thank you.

We mentioned in the call that we've got about 2000 sales professionals. That's inclusive of actual media consultants as well as the sales management and training and some of the other support functions that go with that. We have found efficiencies within the sales organization over the course of the year. As we've adjusted our sales approach and realigned channels to match up with the product set and the demands of the business in trying to find efficiencies, we have had good success with our telephone channel in getting at performance and results, and that does allow us for a little more efficiency and allow us to shift some of the resources between the premise organization and the telephone organization, allowing us to get at some headcount reduction. Best practices as a result of the integration of the two respective enterprises has allowed us to find some additional efficiencies. And the overhead -- as you would imagine, the overhead aspect of that sales headcount is seeing some gains in synergies as a result of integration.

I guess you're saying that for the quota bearing numbers are down a little bit, and you're just getting more productivity per rep.

What you're seeing is we have seen some efficiencies in rightsizing the sales force against the approach in the market and rightsizing against our base of clients. So, yes, we've seen a reduction in several hundred range over the course of the last six months to a year and gaining efficiencies there. It's not just a function of productivity within it, it's also a function of getting better training, folks getting more comfortable with the solutions, and more productivity from the respective sales channels and the mix of sales channels that we are utilizing.

Okay. And I have one other one. This obviously mobile usage is just going off the charts. And I'm curious to what degree your bundles are starting to include mobile capabilities like digital presence, loyalty, opt-in text marketing, that kind of thing. Thanks.

Several of our bundles do include a lot of the components that you made mention of. If you look at the appendix in the construct of the bundles, you'll see text marketing in there as an example. You'll see mobile websites as an example. So we recognize the importance of mobile as a part of the complete package. Identifying the proper channels and the proper place and the proper source for the mobile traffic and the mobile activity that's going to convert to a transaction for your advertiser is what I believe to be the critical element as we look forward. And sourcing, that activity from a consumer perspective -- sourcing the right activity from those consumers that's going to translate into a lead or transaction for your client is going to continue to be more and more important in the mobile space. And as we look at our network and our set of partners and the solutions that we provide, staying at the forefront of that is going to continue to be more and more important.

So those capabilities are in flex bundles if they are requested?

You can get mobile solutions that include a mobile website, you can get text marketing, the other components, our search activity, and the activity that comes from the consumer behavior. We can get our clients and do get our clients in front of those consumers when they are searching on a tablet or they are searching on their iPhone, and we'll continue to drive in that direction as we move forward.

And in our search products, we also have the capability and we have relationships with mobile partners for a traffic distribution deals. So the local business is really buying a presence or way to get found on the Internet, which is both desktop or mobile devices.

And we've got our app and that aspect in the mobile space as well, and it provides a good measure of leads and revenue to us as a result of those leads coming across that. And then you got to look -- you have to look broader than that at all the various traffic sources where we aim to get our advertisers content.

Okay. Thanks for the color.

Seth Crystall, RW Pressprich.

I had a few questions. The digital relationships have grown from 34% to 36%. Is that actually the percentage of your current customers that now have at least some digital component to the sales?

Yes, that's what that number represents is the proportion of clients that we have a digital relationship with of our total base.

Got it. Because I'm just listening to you -- you are focusing now on really moving your current customers to digital, not really maybe pursuing new customer so much, and I'm just a little surprised in the year it's only gone from 34% to 36% if that's where the focus has been. Can you maybe provide a little color on why that is and where you think that number should be going to?

Well, when you look in the space, you see a wide range of folks as far as what proportion they have. I think the importance of that number is the reflection of the magnitude of the digital presence that we do have in the marketplace. When you think of our base of over half -- 0.5 million clients and that 36% and moving in the right direction in that regard, I think it demonstrates the magnitude of our presence in the marketplace with digital solutions.

We believe that as we move forward and our pitch to our client base is that we believe that all of them should have ultimately a digital presence. I don't know that you'd ever get to 100%, but we believe a multi-product, multi-platform solution in today's day and age is the best solution for the client. So we're going to continue to drive and transform that.

You've also got to remember that we do have some headwinds in the print space, and we are working to overcome that and mitigate that, and that has an influence on the overall performance and movement of that number. I think we've made good progress in the amount of revenue that's coming from multi-platform solutions and in the number of clients that is coming from -- that are moving into a multi-platform solution and will continue to drive that. Can we get better at it? Absolutely. And that's what we are looking to do every day.

Seth, let me just add that when we look at this internally, there's a lot of different ways, and when we look at our larger clients, the top 10% or 20% or the top 30% of those clients, the penetrations are much higher. But again, as Dee said, with our base of over 500,000 clients, a lot of the smaller clients are the ones that are opportunities as we see it going forward. And the Start Smart Bundles, we are really making a difference there.

Okay. Great. On the expense side, I know on dollar terms expenses have come down, and I guess that's good detail to keep that moving the right direction. On a percentage basis, though, your expenses are higher as a percentage of revenue. So I might just guess that that's going to continue to be a focus of the Company to keep knocking that percentage down even though the dollars have come down.

When you look at that, you look at total expense -- you see 14.8% decline in expense versus last year, versus the same period. You see 15.5% or so decline in amortized revenue. That tells you that we have come pretty close to holding those margins and holding those relationships. And that was one of the benefits that we held out when we talked about the merger. And the combination was that it was going to allow us to take further steps at getting at inefficiencies and driving expenses out of the business.

However, we have also talked about the fact that as this business transforms from a print-centric into a more multi-product platform solution, that we will see some margin contraction as we move across the next period and the next few years. We do expect to see a little bit of margin contraction area, but at the same time we are continuing to look at efficiencies across all the business. I think thus far this year and over the course of the last couple of years, we've done a pretty good job of trying to hold margin in the face of the revenue declines that we've experienced. And I think the year-to-date results and $100 million of expense that has come out thus far this year, I think it shows a good effort with respect to that.

You know, I agree. I think you've done a pretty good job, surprisingly better than I thought originally. Just want to know, make sure there's still focus in that area. Last question, just on the bank, and I know it was brought up, and I appreciate you really driving the performance and utilizing cash effectively and efficiently because that's I think the best way to manage this business. But could you let us know if you have had potential discussions with anybody in terms of refinancing bank debt? I know in past calls you have said that ideally having a global bank facility instead of tranches would be ideal. It's just a question of trying to manage that, and I'm assuming that would take quite a while to put together. But have you had any kind of discussions along those lines that you could share with us?

We will continue to evaluate alternatives with respect to the capital structures while we move forward. We are in mid-2014. We've got a good period of runway here between now and then. We are a year and a little more, 15 months, removed from an integration and a merger, and we are still driving the benefits of that integration and that activity that we work with our lenders to get effective. And I think we've got to continue to show performance and performance improvement relative to that. And over the course of the next year to two years, we will continue to evaluate and see where the marketplace goes. You know, we are always having conversations internally about capital structure and how to use cash and how to improve that relative capital structure position. And we will see as we move forward.

Okay, great. Thanks a lot.

(Operator Instructions). Sam Sekine, ALJ Capital.

Just a couple of questions. Following up on one of the digital relationships. So if you have 36% of your customers with relationships, of the 64% that are not, do have a sense of how many are signed up with other digital marketers versus how many are just not using digital products at all?

I don't think we have the market intelligence to that degree. What I would suggest to you is that the bulk of those are probably in the lower-end clients of our base as far as the monthly spend. And I would say that as we work that channel and we work that group, we do find that a lot of them don't have a digital solution of any substance. And we see that as a good opportunity.

With the lower-spend client, I think that there's a lot of education process that has to take place with that base. And I would suggest to you that that's probably the biggest hurdle is more about educating them as to the value of the multi-platform solution in order to capture that wallet share. I don't believe it to be a competitive element that got them not buying a digital solution. I think it's more of an educational process and a demonstration of the capabilities and what those solutions can do for their business.

And then on that note, just the average value per order, can you maybe speak on the difference between those -- if the 2700 is kind of the average, what does it look like if it's print only versus a bundle?

The print only versus the bundle, it just depends on the client. We've always seen this business, and it's been fairly consistent in the 300 monthly range as a spend for clients. And I think we are seeing a little bit of contraction in the spend in the average spend for the print client base. As the digital solutions and the AVO in that space have moved up, I think we've seen a slight decline in the print AVO. But it's still a meaningful spend for a small to medium business when you look at the average value per order.

But there is a wide range. We talk about averages in the 2700, 2800. We talk of overall averages 300 monthly or 3600. But there's a wide range, anywhere from $50 a month up to several $1,000 or more than that for some of these clients depending on the solution. So there's a wide range of responses there.

But there's still good value in the print, and I think there's advertisers that truly recognize that and are willing to make the monthly commitment and the monthly spend to get at those leads. But we do think that also represents an opportunity to move them into even better solutions with a multi-product solution and capture that wallet share that they do want to spend. Small to medium businesses are going to continue to spend advertising dollars. We've got to get the solutions in front of them to continue to capture that wallet share.

Just a final one from me. Can you maybe speak on the territory overlap, maybe like what percentage you guys overlap with a YP or a hibu?

With YP, I don't know the exact proportion, but there's probably 10%, 15% of our market. It's relatively small, and most of that is simply more contiguous type property than it is direct overlap with YP. With hibu or Yellow Book, there's more overlap with Yellow Book in the respective market places with them having been the history and the legacy of those enterprises, them being an independent across more of our markets, so there's a little bit -- there's more market overlap with hibu than there is with YP.

So with YP, then, do you foresee maybe sometime down the road maybe another merger?

You know, we are always looking at opportunities in the industry, and even broader than that within this advertising space and the digital space, and we will continue to evaluate those. We've advocated publicly that we believe consolidation in the industry can provide some benefits; we haven't changed that perspective.

Great. Thank you.

At this time there are no further questions. We thank you for participating in Dex Media's second-quarter 2014 earnings conference call. You may now disconnect.