Thryv Holdings Inc (THRY) 2014 Q3 法說會逐字稿

Good morning and welcome to Dex Media's third-quarter 2014 conference call. With me today are Joe Walsh, Chief Executive Officer; Peter McDonald, former Chief Executive Officer; Dee Jones, Chief Financial Officer; and incoming Chief Financial Officer, Paul Rouse.

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 uncertainty. The Company advises you not to place undue reliance on these forward-looking statements and to consider them in light of 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 statement.

A replay of the teleconference will be available at 800-585-8367. International callers can access the replay by calling 404-537-3406. The replay passcode is 18495589. The replay will be available through November 28, 2014. In addition, a webcast will be available on Dex Media's website in the Investor Relations section at www.irdexmedia.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 CEO, Joe Walsh. Joe?

Thank you, Maria. Good morning, everyone. Let me start by saying how very pleased I am to be leading Dex Media. I come to this position with a great respect for the Company and for its accomplishments since the merger in 2013. On today's call, Peter will share an overview of the Company's progress year-to-date and then Dee will get into more of the detailed results from the third quarter. I will then wrap up with a few closing comments. Now I'll turn it over to Peter.

Thank you, Joe and welcome. Let me give a little background on Joe and get you up to speed on what has taken place over the past [seven months] (corrected by company after the call). Following the merger of Dex One and SuperMedia, our Board of Directors were interested in taking a closer look at our digital strategy to make sure we weren't missing anything. In March of 2014, we brought in Walsh Partners to take a hard look at our business and our digital strategy. Joe has a long history in this space and has been a pioneer for digital solutions in our industry. In addition, Joe was asked to take a look at our business to see if he saw any other areas of potential improvement.

By way of background, Joe has been in the industry for more than 20 years and is recognized as one of its top CEOs. He created Yellow Book and took that business from [$38 million] (corrected by company after the call) to more than $2 billion in revenue over the course of his tenure. Using a very aggressive acquisition strategy, he rolled up 77 companies in a relatively short period of time. He is currently Chairman of a public company, Cambium Learning Group, also located here in Dallas. I have known and competed with Joe for decades and he is a tough opponent. He has an entrepreneur's spirit, a passion for the business and a keen eye for creating value. He is a true winner and all those who work for him seem to love him and have a great deal of respect for his leadership.

Transitions are never easy, especially after 40 years in the industry, but I am confident that Joe is the right guy to take Dex Media to the next phase of this transformation. He has worked for the Board and alongside me since March on this business and sees real opportunity in our future. It is my pleasure to welcome him and I'm excited to see what he will do for this Company. Although I will no longer be involved in the day-to-day business of leading Dex Media, I will continue in a consulting role with the Board and with Joe for the next year to ensure a smooth transition.

Now for the quarter and year-to-date update. It's been another good quarter on many fronts. I am pleased to report that our momentum of positive digital ad sales continued driven primarily by our bundle approach. Our strategy to be the marketing department for small businesses is yielding positive results and we are encouraged to see clients respond favorably to our bundles.

Enthusiasm is building among our employees, especially with our marketing consultants on the front lines. We observed improved execution throughout the Company in the third quarter, as well as increased client interest and confidence in our products. These positive outcomes further reinforce our commitment to helping local businesses grow by providing a one-stop shop for marketing solutions.

Once again, in the third quarter, we delivered double-digit growth with our digital products. Year-to-date, digital ad sales growth was 10.9% driven primarily by our bundled solutions. Year-to-date pro forma EBITDA was [$535 million] (corrected by company after the call) with a margin of 37.9%. Free cash flow was $290 million year-to-date and we retired $314 million in bank debt during the first three quarters of 2014. Client retention remained around 80% and as we have seen in previous quarters, that percentage is even better with our higher spending multiproduct clients. Recurring revenues were approximately 80% to 85% and bad debt continues holding at around 2% indicating our clients' continued satisfaction with the value delivered by our marketing solutions.

During the quarter, digital sales grew 10.3%, a 1,000 basis point improvement over third quarter in 2013. Digital sales accounted for 30% of the revenue in the third quarter, up from 25% in the same quarter of 2013. Currently, 37% of our clients have a digital relationship with us versus 34% at the same time last year. Knowing the average annual spend for digital clients is $2,800 to $2,900 and that multiproduct sales deliver our highest client retention, we remain focused on deepening our digital penetration. By demonstrating how local businesses can get found, get chosen and get talked about using a variety of marketing solutions, our consultants are building relationships that deliver positive results for our clients and for Dex Media.

Our comprehensive marketing solutions are designed to provide value for local businesses. Our larger and medium-size businesses clearly appear to benefit as evidenced by the 75% to 90% digital penetration achieved within these segments. In addition, our decision to expand the telephone centers has provided an excellent platform of reaching the smallest local businesses. By offering solutions tailored for their specific needs such as our Start Smart bundles, our digital penetration among small clients has grown to more than 20%.

We are also experiencing increased retention among small local businesses, which tell us they are beginning to understand the value that can be achieved from our digital marketing solutions. As we focus on offering market solutions that represent clear value for clients from all segments, we believe our digital penetration will continue to grow.

A key differentiator for Dex Media is the strength and talent of our sales team. Our clients rely on our marketing consultants to personally guide them through the basics of establishing a digital marketing program. And with a nationwide team, we believe we are well-positioned to build those relationships and retain them over time. Our marketing consultants are working hard to reach more clients than ever before. Over the past year, we invested and improved the process for hiring and training marketing consultants and we believe the new approach is making a positive impact on sales results. Our sales, recruiting and training teams are dedicated to hiring, training and retaining high-quality sales professionals and we are seeing notable results from their efforts.

In our search for new marketing consultants, we screen for those who share the key characteristics of our current sales top performers. This new methodology has enabled us to attract a higher caliber of talented candidates for our team. New hires spend eight weeks in comprehensive training both in the classroom at Dex Media University and also in the field before joining their teams and selling to clients full-time. Our newest marketing consultants benefit tremendously from their training and are well-prepared to hit the ground running. Over the past three quarters, we have seen impressive results from these rookies who generated $56 million in multiproduct sales with an overall gain on their initial account assignments. These sales contributed $21 million in digital sales year-to-date, a meaningful improvement over the historical performance of our sales trainees. It's no surprise that improved training and early success in the field contribute to increased job satisfaction among our newest marketing consultants. Turnover numbers indicate improvement in retention of our rookies and that percentage has declined by half from 34% in 2013 to just 17% in 2014 year-to-date.

In another effort to attract high-quality candidates across the Company, we are working to build a strong employer brand. You can see evidence of these efforts on the online Company review website, glassdoor.com, where our overall Company rating has risen from 2.5 in 2013 to its current [3.6] (corrected by company after the call) out of a possible 5. Ratings and reviews on glassdoor are submitted by employees who rank their companies in terms of culture and values, work life balance, senior management, compensation and benefits and career opportunities.

As we are now in the fourth quarter of 2014, we are looking into the future by exploring new ways to enhance our marketing solutions, continue attracting new clients and expand our relationships with existing clients. Our teams are evaluating potential strategic partnership opportunities, innovation, new technologies and variations on our existing solutions, as well as new approaches to communicating with or selling to our clients. We are continually looking for ways to enhance our mission to be the marketing department for local businesses. Several times a year, we host seminars across the country during which local businesses can learn more about the latest trends in marketing. We are also proud to announce our support for this year's American Express Small Business Saturday Shop Small initiative. We will promote this event in several ways and encourage consumers to patronize local businesses this November.

In closing, I want to reiterate our confidence in Dex Media and our commitment to serving as the marketing department for local businesses. Our leadership team is aligned around key initiatives and encouraged by momentum we've achieved over the last four quarters. As an organization, we are focused on a strong finish to 2014 and we look forward to the future for a number of reasons. First, we believe our strategy to be the marketing department for local business is working. Next, our bundled solutions appear to resonate with clients and deliver measurable results for their businesses. Third, we see ample opportunity to increase digital penetration across our client base, especially within the small client segment. And last, we believe our investment in recruiting and training efforts are resulting in higher-quality marketing consultants and improved sales.

As I wrap up, I want to share a few final thoughts. After 40 years in the industry, it is difficult to turn over the reins of this business. But as I stated earlier, I am confident Joe Walsh is the right guy for the job. With Joe as CEO and a strong team of senior leadership working beside him, we are focused on growing the value of this enterprise.

I also want to thank our CFO, Dee Jones, for all he has done in managing the debt and financial issues associated with this business. I want to thank Del Humenik and the sales and marketing teams for all the work and the digital results they've gotten and the many people that I've worked with starting with the executive council and our senior leadership team.

Over the past four years, we have grown margins, we have paid down debt, merged and integrated with Dex One in continued transformation of this business. We developed a very strong team and have created a digital strategy and a business for the future. I step aside knowing that under Joe our future is in the best hands possible.

Finally, I want to thank the Board for all their support and direction. I have tremendous respect for their insights and know they always have the Company's best interest in mind. So thanks and now let me turn it over to Dee.

Thank you, Peter and good morning, everyone. First I wanted to thank Peter for his partnership over the last several years. We have progressed on numerous fronts under his leadership. To the leadership team and entire organization at Dex Media, I say thanks. Thanks for affording me the opportunity to serve you.

Now before I provide the third-quarter financial results, 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 this presentation.

The third quarter was a continuation of our progress. As Peter mentioned earlier, we are experiencing positive results in our digital penetration across our client base with more opportunity in the smaller client segment. The telephone sales channel has been successful in implementing our digital strategy and has contributed to our efforts in lowering expenses. We continue to focus on driving down costs across the business and managing margins as we complete the year.

Now turning to third-quarter financial results. Total multiproduct ad sales declined 12.5% as compared to a decline of 14.6% for the same period last year. The 210 basis point improvement is a result of the progress in converting the existing print clients to our multiproduct bundles, as well as maintaining renewal dollars in the 80% to 85% range. Third-quarter digital ad sales grew 10.3%. The growth rate of 10.3% is over 1,000 basis points improvement compared to flat in third quarter 2013. This growth was driven primarily by the performance of our bundled solutions in the local sales channel.

Now I'd like to spend a moment providing a few key points to keep in mind as it relates to ad sales. As we have defined this metric in the past, ad sales is intended as a leading indicator of reported revenue on a combined basis for print and digital. The print ad sales represent what has been delivered and started to bill within the quarter that is being reported. The digital ad sales consist of local and national accounts. The national account portion of this calculation is more closely aligned with print ad sales calculations. Local digital ad sales represent what has been sold within that quarter to be fulfilled and billed in subsequent months. This difference in digital ad sales impacts the timing of reported revenue due in part to when and how we deliver the digital solutions. Timing differences range from a month to several months depending upon the client's business, billing cycle or marketing program.

Now turning to revenue and EBITDA results for the third quarter. Dex Media reported revenue of $452 million, a 15% decline compared to the pro forma results last year. Adjusted expenses were $285 million and adjusted EBITDA was $167 million with a margin of 36.9%. On a year-to-date basis, pro forma revenue was $1.412 billion, a 15.5% decline compared to the same period last year. Adjusted pro forma expenses were $877 million and adjusted pro forma EBITDA was $535 million with a margin of 37.9%. The Company incurred $7 million of merger integration costs in the third quarter and has incurred $33 million year-to-date.

Taking a closer look at expenses year-to-date compared to 2013, we had a total expense reduction of $135 million, a 13.3% decrease. Realignment in the sales channels and sales productivity is the primary contributor in the reduction of sales expense. We continue to achieve efficiencies and cost of sales within printing, publishing and distribution driven primarily from lower volumes offset with digital fulfillment costs. G&A expense reductions are attributed to lower headcount and benefits from merger integration initiatives.

In addition, on a GAAP basis, during the three and nine months ended September 30, 2014, the Company recorded a $29 million credit to expense associated with employee plan amendments that reduced benefits associated with the Company's long-term disability plans. This item is referenced in the GAAP to non-GAAP reconciliation financial schedules.

With respect to debt payment activity for the third quarter, our total bank debt balance at par was $2.413 billion at the end of the period. Retirements of principal made through the end of the third quarter were $314 million. When you net this with the $16 million payment in kind associated with the bonds, it results in an overall debt reduction of $298 million. We have provided debt balances at par and cash by silo in the appendix of this presentation. Year-to-date, the Company generated free cash flow of $290 million representing cash from operations of $305 million, less capital expenditures of $15 million. This includes merger integration costs of $35 million. Cash on hand as of September 30, 2014 was $145 million.

As I close the quarterly financial remarks, I wanted to note 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. I would like to turn the call back to Joe for his closing comments. Joe?

Thank you, Dee. Although this is officially just my third week on the job, I have gained a good grasp of the business and the strategy over the last seven months. Working with Peter and the Board of Directors, I became intrigued by the idea of solving this puzzle, continuing the transformation from legacy print directory business into a full-service digital media company. My mandate from the Board is to accelerate the transformation to move the Company forward quickly. With a lot of hard work and innovation, I am confident we can build something really special.

To achieve that mandate, I've assembled a dream team to be the new executive leadership of Dex Media. They are a great combination of talent from within the Company, as well as some of my long-time colleagues from the industry. The team includes Mark Cairns, EVP of Operations & Client Services; Michael Dunne, Chief Technology Officer; Ray Ferrell, General Counsel and Secretary; Gordon Henry, Chief Marketing Officer; Del Humenik, Chief Revenue Officer; Paul Rouse, Chief Financial Officer; Debra Ryan, EVP of Human Resources; and Gary Shaw, Chief Information Officer.

Over the coming weeks, my executive team will focus on completing an intensive planning process for 2015 and beyond and while I'm not ready to disclose all the details of the plan today, I can share three main focus areas. First, we need to further variablize the cost structure of our print directories and Internet Yellow Pages. Second, we need to accelerate digital revenue growth and third, we will bring new products to the market and address the needs of local businesses.

In closing, I'd like to thank our outgoing leaders. First of all Peter, for introducing me to this incredible opportunity. After many years in this industry, I feel I've been in training my whole life for this moment. Peter and I have been colleagues, competitors and friends for decades and I admire him greatly. I want to recognize and thank our CFO, Dee Jones, for his many years of leading our excellent finance function and for overseeing the reduction of debt. My thanks also to Frank Gatto, outgoing EVP of Operations, for his many contributions and leadership over the years. Although Peter, Dee and Frank are all moving into retirement, they won't be completely free of us as they will continue serving the Company in advisory roles over the next year. Thank you for your continued interest in Dex Media. Operator, we're now ready to go to Q&A.

(Operator Instructions). Chad Quinn, Bennett Management.

Good morning. Dee, can you comment on the -- as we look at margin decline, EBITDA margin decline, can you talk about or quantify the digital investment that runs through the income statement rather than a CapEx number?

Well, as you know -- and Chad, thanks for the question -- we don't break out margin specifically to the individual product segments. There's a lot of pieces that go across both platforms, but the bulk of your expense and your investment in digital flows through the operational aspects as opposed to the CapEx side of the house depending upon what you're doing. But as we've said in the past, margins on digital and our individual digital products and in aggregate are positive and we're continuing to see improvement as we scale that business and as we look to scale it further, we're looking for a continued margin improvement in that aspect of it.

Certainly there is a mix shift that's going on between print and digital and causing some margin compression as we've talked about in the past, but we continue to look to manage that. The pace of that has been relatively slow and we'll continue to look for expense opportunities, as Joe has alluded to. I'm sure he and his team are laser-focused on that as we move forward and the digital aspect of that will certainly be a factor as we look to improve those margins.

Okay. And just one final one from me. The EBITDA adjustment for the retirement plan amendment, can you just comment, Dee, on the cash impact of that adjustment? Is that simply a non-cash item or is there a cash impact to that number?

First, let me be clear. That adjustment is in the GAAP financials. It has been, for lack of a better term, outboarded relative to the pro forma adjusted results. So it's not in the pro forma adjusted EBITDA of $535 million year-to-date. That is external to that, so that credit flows through GAAP financials, but not the pro forma adjusted financials. But that credit is a non-cash item as it was recorded. It benefits future cash flows. It's an elimination of future outflows that would have occurred otherwise without that adjustment.

Okay, thank you.

Jen Ganzi, NewMark Capital.

Hi, thanks so much for taking the question. Just a couple quick ones. I was wondering on the print decline, it seems like it's accelerated a little bit, a point or so. I was hoping that you guys could talk a little bit about that. Is that just sort of normal fluctuations or is that representative of your strategy kind of emphasizing digital and moving more towards the digital product?

I think what you've got to realize, especially with the print component of that, is you're in various markets at various times in different quarters. The quarter itself, yes, we saw a couple -- a point, point and a half type movement in that decline, but you've got to remember, third-quarter markets are different than second-quarter markets, different than first-quarter markets. So I think there was an influence there. Certainly as we focus more on the multiplatform strategy and approach, there is an influence or an impact there, but I wouldn't say there was a -- we're not viewing third quarter versus second quarter as a disparate performance or impact of anything of that sort. I think it's more about the markets we were in in those particular times.

Okay. So it's just the normal sort of fluctuations versus like a larger trend of accelerate, slightly accelerating print declines?

Yes, and that's how we see it.

Okay, great. And then just it seems like the last couple of quarters, you've been roughly in the call it 10% to 12% digital growth rate. Is that a fair run rate going forward if all goes well? Is that how we should think about that?

As you guys know, we haven't provided guidance in the past and that policy has not been adjusted with respect to that. I think we certainly been clear that we're focused on digital growth, on driving digital performance in this business. We're not at a point where we want to say this is what those growth rates are going to be as we move into the future. We are not looking to provide guidance in that area, but suffice it to say we're going to continue to focus on that piece of the business as a very important part of the future of this enterprise moving forward and continue to try to drive as good a growth in those areas of the business as we can.

Okay, fair enough. And then just sort of lastly, just following up on the first question, obviously, it seems like EBITDA margins on a pro forma basis fell more than the past couple of quarters and it just seems like it's maybe a bit more than the mix shift because that should have been similar to the last couple of quarters, similar sort of rates of decline. Is there something else going on in there that we're not seeing like in terms of increased investment or increased training of the sales teams or something like that? I'm just kind of curious why such a large drop-off in the EBITDA margins on a year-on-year basis versus the first two quarters.

I think you do have to be a little bit careful looking at quarter to quarter to quarter type margin assessment in this business. As we talked in the first quarter and second quarter, there were a couple of one-offs influencing both of those quarters. I tend to look more at year-to-date margins as a gauge there and we're in that 38% range with respect to year-to-date margins. Certainly there has been some contraction and we are further -- you've got to remember, we are further removed from the integration and the merger aspects. So your synergy impacts were a little greater degree as we flowed through the last quarters of 2013 and the first couple of quarters of 2014. We're still seeing those benefits and the results of those, but the incremental effects of those synergies is starting to slow.

Having said that, I know that the team here is going to be focused on -- with a fresh perspective looking at expense opportunities and expense initiatives to continue to try to manage margins as effectively as they can. I think there's probably more to come in that regard later on after this planning process that Joe alluded to is completed. So I think there's no less focus on margins and driving improvement or maintaining those margins as we look forward, but I do think you're seeing an effect of a slowing of the incremental benefit of synergies as we get further removed from the merger, but expenses and managing that piece of the business will continue to be a focus.

Okay, great. So perhaps as the new team identifies more cost cuts, you could see a bump-up in margins relatively speaking potentially?

Well, I mean we're looking to manage the margins as effectively as we can. Again, we're not looking to provide guidance at this point in that regard. But certainly expense control and margin management is a focus as we move forward.

Okay, thanks so much.

Colin Wilson-Murphy, Bowery Investment Management.

Yes, thanks for taking my questions. Joe, going forward, do you anticipate providing a range of financial guidance similar to what Dex One used to provide?

We haven't planned any changes in guidance at this time.

Okay. And Joe, as we continue to migrate from print to digital, as the quarters continue to roll through, do you anticipate at some point breaking out for us the separate business line items certainly as it relates to revenue, but maybe even on the cost side as well?

We're diving right now into a planning process looking at the future. We will certainly make note of your request and think about it, but at this point we're not planning to make any changes in guidance.

Okay, thanks, Joe.

(Operator Instructions). Seth Crystall, RW Pressprich.

Good morning, gentlemen. Thank you for taking my call. I just had a couple of questions. Just following up on an earlier question concerning the decline in the print media, their sales. I mean I realize that the quarter is down, but the whole year, it's been trending down. So I know quarter to quarter makes a difference, but I think there seems to be an obvious trend since the fourth quarter of 2013. So is there anything more at stake there than just each quarter has different things going on because it seems to be a trend of now declines for the past three quarters?

I think as I look at the first couple of quarters, I don't know that I'm seeing -- or I would characterize the performance on the print piece in that same fashion. I would characterize it as being a relatively stable decline in those results through those quarters. Certainly there are some pluses and minuses within the results of those two periods or those three periods or three quarters.

I think as this business transforms, with the strategy we have to provide the clients with the best solution and the best programs that includes a multiplatform solution, we recognize there's going to be a certain trend line with respect to print. We're certainly looking at every opportunity and finding ways, new and creative ways to manage that and slow that and have impact on it, but I wouldn't characterize that -- the performance in the first nine months of the year as being increasing declines. I think I would view that as sort of a stable level of decline that has some pluses and minuses within the respective quarters.

Certainly there's an influence on the product set and consumer behaviors and how those move and migrate and advertising dollars following those, but we're certainly looking to manage that in the most effective fashion for the client value proposition and for the results of the enterprise.

Okay, great. Joe, I know you've been there for a while, but welcome to the team. I have a question really for you in terms of what you did at Yellow Book and the 77 acquisitions. I mean how do you view the playing field now and what has changed? And these acquisitions would might that be part of the strategy?

Well, it's not a part of our immediate strategy; that's for sure. We want to go to work on the existing business. We see some opportunities to improve and we're excited about accessing those. Backing the camera up and thinking about the big picture, there is obviously a commercial logic to consolidation; there's no question about that. This business responds really well to scale. It's a business that's relatively easy to operate at scale. I'm certain I'm on record as having spoken to the industry a fair amount about the consolidation that ultimately will happen within the industry. But we've got some work to do first, so we're getting focused on that.

Okay. And just last question. I mean I guess the 900 pound gorilla is really the debt on the balance sheet. In the past, management said that you've got some runway to get there before the debt matures at the end of 2016, but can you give any comments about if that's something you're going to focus on in addition to running the business and how you might work to make that situation better?

You said it well. Certainly a 900 pound gorilla, it's right there; it needs to be thought about and addressed. And we're taking a look at what we think is possible to do with the business in terms of its overall performance and cash flow. And I don't know, Dee, if you want to add any comment?

Certainly we're always looking at opportunities within the capital markets on how we might address or improve that capital structure profile and that's not a new thing and it's certainly not something that we're going to lose focus on as we move forward. We are looking for opportunities as the capital markets move and change and adjust and as our performance moves and changes and improvement I guess of that capital structure and that profile are certainly going to be a focus.

Okay, great. Peter and Dee, good luck to you in the future.

Thank you.

Thank you.

Bob Konefal, Phoenix.

Thank you. I want to go back to the quarterly trends real quickly if I could. And I guess does the slight deceleration in digital growth fall under the same category? It's sort of the cadence of the go to the market for digital or is the cadence of digital different from print or is it similar?

Well, the cadence of digital is a little bit different, but I would suggest to you that the performance, we're not concerned and don't see it as a slowdown or a decline in the performance relative to the digital growth rates. I would note for you that it's a 1,000 basis point improvement over third quarter last year, which was flat and we're in very similar markets, if not the exact same markets this time versus last -- versus a year ago. So that degree of improvement is certainly noteworthy. Double-digit growth in the digital business is encouraging to us. We're certainly looking to try to continue to enhance that. I think this quarter was another consistent performance period for us relative to the prior quarters and on the digital front.

Okay, so, notionally, we should be looking more year-over-year than quarter-over-quarter sequentially it sounds like?

I think traditionally in this business that's been a more appropriate view to take as opposed to the sequential. We certainly look at the sequential to make sure that we're looking to maintain momentum and continue to drive that and I believe that the third-quarter performance allowed us to do that. We still feel like the momentum is there and the ability to perform and deliver on that digital front is very much still there.

Okay. And then the second question is arguably more for the new team, Joe and Paul, and the three strategic priorities did not include dealing with the balance sheet. Is it fair to say that that is in fact a strategic priority with the debt structure maturing in 2016? Is it a strategic 2015 priority?

Yes, it's certainly on the table. I hope you can appreciate our operational focus at the moment. We're really looking at the business and looking at opportunities within the business to optimize its performance, but we haven't missed the balance sheet; we see that.

Okay, fair enough. Thank you very much.

Colin Wilson-Murphy, Bowery Investment Management.

Yes, thanks for taking my follow-up. With your bank debt maturing in just over two years, and it sounds like we have some new and innovative ideas as it relates to investing in the digital product, and we know that the current covenants do not allow for a great deal of spending flexibility, do you anticipate on reaching out to lenders to start a dialogue to potentially proactively solicit changes to the docs?

At this point, within the confines of those credit agreements, I wouldn't say that there's limitations in regard to the normal types of initiatives and activities that would need to be undertaken that are being considered. I don't believe there's going to be activities that are considered here at least in the initial wave of planning that the team is going through that are going to require that sort of a reachout.

Having said that, there's always dialogue with lenders in that community in assessing opportunities with respect to the capital structure and you mentioned the date of 2016. And we haven't lost sight of that and there will be a focus on considering any and all opportunities relative to that debt structure. But as far as limitations on some of the initiatives that would be under consideration as to the business, I don't believe those limitations exist within the credit agreements or that we're going to be hamstrung in regard to anything we're looking to do with the business relative to covenants or limitations from the agreements themselves.

Okay, thanks, Dee. That's helpful.

That was our final question. Thank you for joining Dex Media's third-quarter 2014 earnings call. You may now disconnect and have a wonderful day.