Joe Walsh - CEO Paul Rouse - CFO.

Chris Mathewson - Ares Management James Monaghan - Waves Asset Management Jan Gonsey - Newmark Capital Vlad Jelisavcic - Bowery Bob Konefal - Phoenix Investment Jonathan Sacks - Stonehill Capital Seth Crystall - RW Pressprich.

Good morning, and welcome to Dex Media’s Fourth Quarter and Full Year 2014 Conference Call. With me today are Joe Walsh, President and Chief Executive Officer; and Paul Rouse, Executive Vice President, Chief Financial Officer and Treasurer. 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 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 pass code is 92843916. The replay will be available through April 02, 2015. In addition, a webcast will be available on Dex Media’s Web site 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 Paula and good morning everyone. On today's call I'll start by sharing an overview of 2014. Paul will get into detailed results for the fourth quarter and full year. Then I will wrap up with the look at some of the 2015 initiatives and share a few closing remarks.

2014 was the first full year of operations for our combined company and it was one marked by determination, challenge and change. The merger of Dex One and SuperMedia created a new company with a near national presence a large professional sales force and a comprehensive set of products design to help local businesses grow.

During the year we made progress on many fronts, integrating our corporate functions, reorganizing our sales force, improving sales recruiting and training, creating new products and redefining the brand.

We united around the goal of becoming a digital -- more digital centric organization by shifting our focus to products our clients are asking for and those consumers are using to search for businesses within their local area.

We know the clients who invest in multiple marketing solutions receive more calls, clicks and sales, so we created and enrolled out new bundled solutions that combine our legacy print products and digital solutions.

Results were encouraging with our Start Smart and flexible bundles which truly seem to resonate with clients looking for an array of marketing solutions at a clear value. In 2014 we directed more of our business into our telephone centers where we can efficiently sell our basic solutions to lower spend clients.

Our telephone sales strategy complements our traditional premise marketing approach, which focuses on selling to mid-tier and larger spend clients who often require more in depth consulting expertise.

This combination of approaches gives us flexibility to reach a variety of client types and we continue to explore the most efficient blend of sales channels. In the fourth quarter I joined the team full time as CEO and announced a new executive leadership team.

In December we announced a number of transformative initiatives designed to reorganize, refocus the company on achieving significant cost reductions. Those initiatives included the move to a virtual sales environment, automation of the sales process, integration of our core systems and variabilization of our print cost structure.

Additionally, we announced initiatives that will reduce our work force by about 25% by consolidating key operational functions and eliminating a layer of management from our sales organization. Those actions will result in targeted cost savings of 110 million in 2015.

In addition to reductions in cost our December announcement included a number of revenue enhancement measures, many of which are now underway. While we're not yet ready to report out specific elements this time, we will provide more color on our current activities at the conclusion of the call.

Dex Media closed out fiscal year 2014 with a presence in 43 states more than 490,000 clients across the U.S. and we retained 83% of our clients from 2014 to 2015, with about 38% of our clients buying our digital solutions. We signed approximately 22,000 new clients in 2014. Digital ad sales grew 9.2% and print ad sales declined by 22%.

Our digital clients spent an average of $2,900 per order. We generated $1.8 billion in revenue with 29% of our revenue from our digital solutions. We achieved 715 million in adjusted pro forma EBITDA with a 38.8% in adjusted pro forma EBITDA margin. We also generated free cash flow of $370 million.

That diligence enabled us to retire a total of 381 million in bank debts last year, bringing our current debt balance to 2.6 billion. And now I will turn the call over to Paul so he can provide more detail on our results for the fourth quarter and full year..

Thank you Joe and good morning everyone. Before I begin with the fourth quarter and full year financial results I will be referring to non-GAAP financial numbers.

We have provided a reconciliation of GAAP to non-GAAP measures in the appendix of this presentation as well as the financial schedules of the company's investor relations Web site under quarterly results. Now for the fourth quarter and full year results.

Total ad sales declined 16.7% in the fourth quarter as compared to a decline of 13.8% for the same period last year. For the year ended 2014 total ad sales declined 13.8% as compared to 15.1% in 2013. Fourth quarter results reflect print decline of 24.5% a 560 basis points difference compared to an 18.9% decline last year.

This decline was attributed to client loss and more print clients shifting to digital offerings as evident in our 38% digital penetration for the fourth quarter of this year compared to 34% for last year. Fourth quarter digital ad sales grew at 4.8% compared to 5.1% for the same period last year.

The lower growth rate was driven by the national sales channel and local sales channels. It's important to distinguish the difference between these two sales channels to better understand the metric results. The national sales channel represents approximately 8% of the total digital ad sales in 2014.

In comparison to 2013 national represented 10% of total digital ad sales. National sales have been on a constant downward trend as certified marketing representatives who are third party agents choosing to substitute or sell competing advertising programs directly to these national clients.

As a result the company's focus will be to manage expenses and allocate resources to areas of the business with higher revenue opportunity. In the fourth quarter national digital sales contributed 210 basis points to our overall digital ad sales decline.

Excluding national sales, the local digital ad sales grew at 6.9%, the full year impact of national sales lowered total digital ad sales by 270 basis points. Excluding national sales local digital ad sales grew at 11.9%. The local sales channel represents approximately 92% of the total digital ad sales in 2014.

In the fourth quarter the local channel experienced some headwinds in digital ad sales from two primary drivers. The second sales cycle of digital bundles in the fourth quarter and a higher digital base.

The fourth quarter of 2014 was the second sales cycle introducing digital bundling in certain markets, making it tougher to increase the clients marketing spend at renewal time. Secondly, as we have continued to grow our sales base hitting prior year growth rates becomes more challenging.

We believe increasing focus on new client acquisitions will mitigate these headwinds. As Joe mentioned earlier we are working on enhancements to our sales process, to make it easier to sell and fulfill an order. These efforts are just starting to take place and will take a few quarters to see the impact.

For the year ended 2014 digital ad sales grew at 9.2%, a 330 basis points difference compared to 5.9 in 2013. Full year’s digital ad sales growth was driven by our bundled solutions sold as an attractive and simple entry point into our digital offerings for small spend clients. Finally, a couple of key points to keep in mind about ad sales metrics.

As we have defined this metric in the past, ad sales was intended as a leading indicator of reported revenue on a combined basis for print and digital. Print ad sales represents what has been delivered and started to build within the reported quarter. Digital ad sales consists of local and national accounts.

The national account portion of this calculation is more closely aligned with the print ad sales calculation. Local digital ad sales represents what has been sold within the quarter to be fulfilled and built in subsequent months.

This difference in digital ad sales impacts the timing of reported revenue due impart to when and how we deliver the digital solutions. The differences range from a month to several months depending on the clients business, billing cycle or marketing program.

We are reviewing all of these processes as we continue to align our sales goals to the revenue opportunity. Turning to revenue and EBITDA results for the fourth quarter and for the year ended 2014.

For the fourth quarter the company reported revenue of 433 million, a 15.6% decline compared to the pro forma results last year, adjusted expenses were 260 million and adjusted pro forma EBITDA was 173 million with margins of 40%. On a year to date basis pro forma revenue was 1.845 billion. A 15.5% decline compared to the same period last year.

Adjusted pro forma expenses were 1.13 billion and adjusted pro forma EBITDA was 715 million, with a margin of 38.8%. Now I would like to the provide more details on a few key items related to normalized expenses. There were 8 million of merger integration cost in the fourth quarter and 41 million for the year ended 2014.

In addition, the company incurred $3 million in expenses in the fourth quarter and 10 million for the year ended 2014 associating with long term incentives including the cost for the value creation program.

Prior quarters in 2014 and 2013 have been restated for these items to adjust pro forma EBITDA and the reconciliation of non-GAAP measures financial schedules.

In December, the company announced an organizational restructuring plan, a run rate cost savings estimated in the range of 130 million to 150 million, with 900 million to 110 million realized in 2015.

As a result of detailed planning efforts, we have targeted annual savings of 150 million at the higher range [Audio gap] a 110 million of savings at the higher range in 2015. In addition, the company announced the related onetime cost to achieve in the range of 70 million to 100 million.

43 million was expensed as severance in the fourth quarter of 2014 as part of the business transformation. We also expect the onetime cost to be closer to 100 million, as a result of the higher savings target.

Before I move on to comments about debt and cash flow reporting, I want to mention the company's amendment was approved by the Dex best lenders. The company proactively sought this amendment to provide flexibility for onetime cost related to the organizational restructuring. Now on to the balance sheet and cash flow activities.

As of December 31, 2014, our total bank debt balance at par was $2.599 billion, retirements of principle made through the end of the fourth quarter was 381 million. When you net this with 16 million pick associated with the bonds, it results in an overall debt reduction of 364 million.

We have provided debt balances at par, and cash by silo in the appendix of this presentation. For the full year, the company generated free cash flow of 370 million representing cash from operations of 388 million, less capital expenditures 18 million. This includes merger integration cost of 40 million.

Cash on hand as of December 31, 2014 was 171 million. I would like to close with a few thoughts on the company's financial and operational metrics going forward. In light of the company's transformational initiatives and plans to reshape the business, we are looking at all performance metrics that align with the company's strategy.

In this effort we may determine certain metrics today will not serve as an appropriate measure of the company's performance in the future. We look forward to sharing more on this topic in the future. That concludes the prepared remarks for the financial result. I would like to turn the call back to Joe..

Thank you, Paul. Over the past 90 days, the Dex executive leadership team began implementing the cost savings, corporate restructuring and revenue enhancement initiatives we announced in December. New organization structures are in place, office closures are in progress as is the consolidation of our operational functions.

Our new leaders are truly impressed by the talent, knowledge and dedication of employees throughout the organization. We are very excited about potential market opportunity for Dex. Our current activities include completing the last few activities related to the merger, integrating our core systems, products and processes to a single set of platform.

This initiative is complex and multilayered, but when completed at the end of the year will have significant benefit to every function across the business. Additionally, we're working to simplify our product set to enable a more intuitive sales call and enhance client experience.

By streamlining our products in terms of features, pricing, naming, we will make them easier to sell and easier for our clients to understand. We also intend to improve the sales process with new tools that automate client presentations and shorten the time it takes to onboard new clients once they’ve signed an agreement with us.

Some of our newly redesigned print directories began distribution in key markets this month. Featuring attractive new covers and images of local landmarks, more readable print and standardized trim sizes.

Additionally, we continue to hone our distribution methods for print directories and pursue opportunities to consolidate titles whenever appropriate. Although consumers increasingly search for local businesses online, we know a portion of the population relies on print. And we believe these improvements make our directories the best available.

In addition to upgrading the look and feel of our print directories, we're also simplifying our offering to clients; we have reduced the number of print advertising choices from several 100 to seven standard sizes with tiered pricing by market.

This new simplified rate card will make the sales call more efficient and we believe it is also easier for our clients to understand exactly what they’re buying.

Planned upgrades to our Internet yellow pages portal DexKnows.com and SuperPages.com will happen in multiple phases with design refresh later this month and a more comprehensive makeover beginning in the second quarter. These changes will deliver more intelligent search results and deeper business content including photos, reviews and videos.

Beyond our core business of print and online directories and digital products we continue to monitor the moves in the local marketing and advertising space. As we consider new opportunities for Dex we believe we are well suited to compete in those areas.

In keeping with our desire to focus on strategic areas of the business we are in the process of selling EveryCarListed and expect to make an announcement within the next few days. Aside from integration and product development activities we plan to enhance the service level and overall experience our clients receive when they do business with Dex.

Local businesses have many choices for marketing solutions and we want to differentiate our company from other providers. Our operations teams are working to transform our current practices by simplifying key processes and upgrading employee training so we can better serve and consult with and retain our clients.

In summary there are a number of activities in progress for 2015 and beyond the leadership team remains confident about the market opportunity for Dex, we’re excited to see the many planned changes and enhancements come to life. With the fiscal year 2014 behind us, we’re now fully focused on reshaping the business and creating a sustainable future.

Thank you for your continued interest in Dex Media. We are now ready to take questions..

Thank you. The floor is now open for questions (Operator Instructions). Your first question comes from [Jimmy Wayne] of Ares Management..

Hi, this is actually Chris Mathewson. Thanks for taking the question.

Just one thing on the outlook for 2015, recognizing you're probably not going to give guidance, but, you know, with ad sales down 13.8%, recognizing that there's, you know, shifting now how you calculate that for digital and print, that's probably a pretty good metric for revenue declines.

How should we think about the flow through margin of that to EBITDA? And then obviously you have the 110 million of savings that are going to be realized this year. So just trying to back into kind of an EBITDA number. .

Paul, do you want to start with that?.

Sure.

Like you said we don’t give guidance, but what we’re doing, you could tell by -- the presentation is we’re really focused on cost and the slide on identified savings, we’re really trying to take the fixed cost out of the business to set up the business for the future and as for margins on the products it really depends on the mix of products that we’re selling into ’15 that will determine what those margins would be and we don’t disclose that at this time..

Okay. Maybe I'll ask it a little differently. So if you had revenue decline of 250 million and you had no cost savings, how much of that would flow through to EBITDA.

I know what you’re trying to get at, but it’s really the mix of the products in it that determines that margin, at the time it determines how much print was digit and what digit products were sold because they all have different margins, so I really can’t answer that question specifically because it really is depending on the mix..

But Paul let me just add that one of the focuses that we’ve had here is to variableize the cost structure as much as possible, so to the extent we have volume declines, we're going to kind of accordion the cost down with it.

So that doesn't mean we can absorb it all but if you take a look at what’s happened, even looking backwards, a pretty good job was done of contracting costs against that declining revenue..

Oh, I completely agree.

That's -- I'm -- so you can't give me a ballpark’s flow through margin, just make some -- use the same mix that we have today of print and digital, what would be the flow through margin? Is there -- you can't give me a round number? 70%, 60%? 80%?.

We don’t give that kind of guidance..

Your next question comes from James Monaghan of Waves Asset Management..

Hey, guys, thank you for taking my question. I just got a couple quick ones. As I go through the numbers baking in the $110 million of cost savings, by my math you guys should be able to generate a similar or better level of free cash flow in 2015 versus 2014.

Can you talk a little bit about what you guys are going to do with that cash? Will you continue to pay down debt? Are there opportunities to do accretive acquisitions that could potentially delever the Company? Could you give us a little sense of what you're thinking there? The second question is, how are you and your management team compensated? Can you talk about where your equity is priced and just give us a sense as to how you guys are motivated.

Thank you..

Okay, you want to start that picking up?.

Yes, right now we're not looking at any opportunities out there so it's really focused on debt repayment and we're also prepared to be opportunistic in the marketplace and at below par repurchases. .

Let me take the second question.

Our compensation arrangements are really designed to try to focus us on increasing the overall value of the business and that really cuts right across the whole capital structure and so we’re -- we have an opportunity to participate in the value increase right across and we took this gig because we really believe in the company, really believe in its market prospects, we have a lot of really good ideas about what to do going forward.

We don't have anything to announce today about acquisitions or so on, that's certainly one of the arrows in the quiver as we move along here..

Okay, great.

And can you talk about your equity compensation, just kind of where that's priced, just so we can kind of get a sense as to how you guys are motivated?.

There is a pretty detailed public filing you can read that takes you right through it, soup to nuts..

Okay, fine. I understand, thank you..

Your next question comes from Jan Gonsey of Newmark Capital..

Hey, guys, thanks for taking the question. Just a couple of quick ones.

I was just wondering, and you may have sort of alluded to this earlier, I apologize, I'm just sort of jumping on and off, you know it seems like your digital growth run rate for this quarter was a bit below, you know, the prior three quarters, they were like in the 10% to 12% range.

Just wondering if that's just like a seasonal issue because of the holidays and stuff like that.

There's sort of less going on or it’s like anything else is going on and you know if you, you know -- do you feel like the full year is a better -- a full year 9% growth is a better view of sort of the digital -- kind of digital’s growth potential?.

Thanks for the question. Just if we state the facts again, the fourth quarter growth was 4.8 and was pretty comparable with last year's same quarter 5.1%. Overall, the full year was [indiscernible] compared to 5.9..

Right..

Sequentially if you're not back on the quarter it's does kind of [indiscernible] of it, but as you’ve mentioned we're coming around second cycle of digital bundle directories, so it becomes harder -- sales on that in the second year.

And what we're doing as Joe outlined, we're returning the focus to customer acquisitions, we're also looking at new products and really the simplification of our products and also we're taking steps to virtualized our sales offices and also variablize our business so we get the highest margin possible on these sales.

So it really depends on the mix of products into next year that will basically determine what the growth rate will be..

Okay. Fair enough. And then you know, and then just sort of looking at -- it seems like the print declines accelerated a bit this quarter versus the last three for 2014.

I was just wondering -- the down 24.5%, I'm just wondering is that because of the greater focus on digital or, again, like I mean, is there anything that would kind of make us think that print declines should potentially accelerate to closer to the mid 20% range versus sort of the low 20% range that they historically have been on a year-over-year basis?.

There is nothing new or catastrophic that’s incredibly changed here within the story. There is still a lot of print usage out across the country, when you get outside of major metros and you start looking at 45 and older consumers and kind of ma and pa out across the country there.

And we really believe that we can do a better job of serving that market and really make our directories, the directory of choice. So when we look at the kind of the trend line that's there, we actually think we can do better.

I'm not prepared to guide you a specific number but one of the thesises that we came into this with is that we think we can, by publishing a better directory and sort of simplifying the way we tell that story and fit it into the rest of the multiproduct bundle that we can do better.

So we're not confirmed that this is some big leg down in the trend and while I'm not prepared to guide you and I'm sure if you've been following this business you know that we sort of because of the revenues is recognized, current sales activities are reflected two to three quarters later, this is kind of a long lag time -- kind of turn the Queen Mary around here.

But we really believe in our strategy with print and think that we can do better..

Okay, so I mean I guess just to ask it another way, I mean what would you attribute the slightly accelerated decline rates in this quarter versus in the prior call it, whatever seven or eight quarters? And you know like the mid-20% range.

I mean, was there anything that sort of stood out, you know, just this quarter?.

No, I don't think so. I mean I think you try to help us in the beginning of your question by saying was it your greater emphasis on digital and that may have had something to do with it. We've certainly have been bundling and working really hard to drive the digital part of business with good results.

We've been growing digital and digital is the higher percentage of our overall revenue at this point. And we have found that when we have multi product customers, when they buy across our different product offerings they tend to stay, and pay, and retain at a higher level and that we feel more secure with those customers when that happens.

So it’s kind of a part of the process. But we -- as I’ve said I do think that we can do better in the fullness of time with print results, we don’t imagine that this as some big leg down..

So you're not going to completely deemphasize the product then?.

As lenders and investors to this one of the biggest things that is the asset that you’re looking at, are the tremendous number of leads that our owned and operated properties deliver. Both our online directories and our print directories.

And if you’ve heard in our prepared remarks we have really specific programs to upgrade and improve those directories and make them compete harder for consumer look ups. So we have more of those consumer look ups to monetize for a longer period of time, that’s a key part of our strategy..

Okay great.

And then just -- I know I ask this like about every quarter or every other quarter, whatever, but in terms of like the additional product, any thoughts on like sort of programmatic ad buying or some of the other kind of call it new media ways of -- changing the ways that you might be kind of going to [S&Ds] with the ad sell process or is it still kind of the same large -- largely overall strategy is just the [indiscernible] different sort of bundled, based on needs?.

Thank you very much for that question, I am going to make that the end of this question. The market place is changing with all the technologies taking place from real time bidding to the migration from online, desktop type screens to mobile, marketplace is moving very quickly.

There is a lot of new inputs and signals that you have to work with now and we’re looking at all of that and we came into this with some I think really exciting ideas and part of the reason that the board brought us in was they believe that we had a great strategy and a bunch of good ideas about how to better serve our clients and do a better job here.

And we’re working very quickly and very hard to bring those to market and get going. We’re not quite ready to talk about that. But you will see some innovation over the next year or two we’re not just going to kind of run the same business and cut the crap out of the cost of side of the business.

We’re going to innovate and we believe there is a sustainable bright future for the business and part of that is going at the market in some different ways.

Next question?.

Your next question comes from Vlad Jelisavcic from Bowery..

Good morning, guys.

Just a question, was the initiative to bundle digital ads your strategy or was it the strategy of the prior leadership team?.

That strategy has been in place for a while, so was in place long before we got here and it’s yielded some great results.

As I mentioned earlier, when customers are in more than one of our products, they tend to retain at a higher level and they tend to get more clicks, more calls, more leads, more sales and so it’s been a pretty successful strategy..

Okay. Perhaps I misunderstood but I thought that, in your prepared remarks, you attributed some of the weakness in fourth quarter digital sales to some changes in the digital bundling strategy. .

No, I think -- that was probably my remarks. What we were referring to is that we came upon the second cycle, so last year we sold the bundled package to a customer and we were back to resell them, now we can’t sell them -- we’re selling the same package to it becomes harder to get growth, isn’t like it’s a new sale, it’s a renewal..

Understood..

Having said that, there's lots of new customers for us to still sell which we're out there doing..

Understood. And then you mentioned that you are planning on announcing some type of asset sale in the next few days. I wasn't sure what type of asset that was..

It’s EveryCarListed, which is a very small niche vertical product that we owned and it’s non-material..

Okay. Understood. And then, Joe, you mentioned that you're focused on paying down debt, but, you know, as you know, all of your bank debt matures at the end of next year.

Can you share with us your thoughts about how to address those upcoming maturities?.

Sure, we’re aware of that and we don’t have anything to announce right now about exactly what we’re going to do.

We are working really hard to improve the operations of the business and make sure that this business has a bright sustainable future and people would want to invest in it and lend to it and work with us and beyond that I don’t have anything to announce right now..

Your next question comes from Bob Konefal of Phoenix Investment..

Thank you. I have a couple questions. One on the top line.

Has any of that sort of deceleration of digital and acceleration of print declines related to the potential disruption caused by the work force reduction or was that a non-factor?.

Just based on the timing, I wouldn’t think looking back to the fourth quarter that it had that. I think you can look forward to that in the future, because obviously you can’t make that level of change without a little blip in the radar. And that really occurred more sort of in January. So look, we're working through it.

And we’re making really good progress. And we’ve got a lot of momentum in the organization right now. But it was a hard set of changes, designed to really variabilize the cost structure of the business and make some onetime fixes that really needed to happen for us to have a simple efficient operations..

Okay. And then I wanted to at least attempt to understand the tie between the $100 million or so that you're laying out in cash to execute the -- these cost saves and the actual sort of flow through of the -- of the savings, that chart 10 or at least the chart on page 10 shows $71 million of 2015 headcount reductions.

So you laid out 43 to save 71? Is that the right way to think of at least the severance piece, and that cash is already out the door?.

Well, the annualized savings will be close to 87 million, but the savings that will be reflected in '15 is 71, correct. And the 43 million does relate to that..

Okay.

And then with respect to the cash outlay, the other approximately 57 million or so of cash outlay, how does that flow through in 2015? Is it sort of front loaded? Is it spread out over the quarters? And does the sort of flow through of the savings on slide 10 here, are those more geared toward the back half or the -- are those spread out throughout the four quarters as well?.

To answer for the remaining costs, it's more or less throughout the year and some of that related to the facility closings, will actually stretch into '16, some of it goes a little further. But the headcount savings 80% of the headcount has been -- is off the payroll as of February.

So we're getting that savings now and the office closings, at the end of this month we’ll have closed 76 of those 107, and the print and distribution we've already made those cuts so we're going to get the cash benefit of that before we get the expense benefit because of how we amortized our cost to match it with revenue.

So that's actually -- right now the savings is occurring and the digital vendor -- we've already negotiated that contract so we're getting the benefit of that right now with digital vendors..

Okay. And last question is sort of tied to the print distribution comment you just made.

Is 26 million copies being eliminated a substantially larger than usual number that will sort of flow through to an accelerated decline on the print side in future years? Is -- of a revenue decline of print?.

We don't believe so, we believe there was an opportunity here and by the way they've been sharpening the distribution count year in and year out.

We sort of brought a philosophy that said, let's really look at the data -- let's look at the call count data, let's look at who is using these directories and let's make sure that they get a book, a really good book, a high quality book that they can really use and they'll prefer using.

And really a lot of these distribution savings are coming from multi-copy distribution into businesses, delivering into high rise apartments that don't really use the book anyway and you have a hard time actually getting all the way into the apartment, a lot of the urban centers.

We really are focused on home owners; quite frankly that's the power user of the printed telephone directory.

So, we really -- we did a lot of work to sharpen up, who we deliver this directory too and we believe that due to the improvements that we made in the directory itself, we dramatically increase the type size in the books so that the target audience which are older American can actually read the thing.

We eliminated all the little tiny ads that frustrate you, because you can't see anything, there's no buying information in them and you can barely read them. We basically only have a couple of kinds of ads, big ads, really big ads and giant ads.

So it's going to be easy for consumers to read the directory and it will be packed with the kind of buying information that they're looking for. We repackage the directories and put them in much sharper looking covers that are kind of tuned for the community and have a nice hometown feel for them.

Basically, our intent is to compete for every single directory look up that’s out there, both in print and online, with way better directories. And we believe that those changes will energize and excite the advertiser base that's out there and we actually think that we can do better in terms of print decline going forward, not worst..

Okay, very good, thank you, that's it for me..

Your next question comes from Jonathan Sacks of Stonehill Capital..

Hi, I have two questions about your digital business overall. I guess the first is can you help us explain which products constitute the bulk of digital revenues? So you have DexKnows and SuperMedia.com.

You do Facebook, you do Google ad words and things, but in terms of the digital revenues that you have today, which products comprise the bulk of that?.

You just put your finger on a couple of big ones, we're not ready to breakout in minute detail, but those two IYPs -- Internet Yellow Pages products are a big part of our base and as I said, I think we can do a better job with those and get better results for our clients out of those directories by the facelift that we're bringing through and the consumer experience reshape that we're doing in the second quarter.

So we're pretty optimistic about what can happen with those directories and then there is obviously -- you touched on it, there is search engine marketing where we sell key word campaigns across Google, Yahoo, Bing and really using our merchant platform really across the whole web.

So those are two giant areas and then of course we build websites for customers, we do search engine optimization, on and on it goes. We claim listings and manage people’s content marketing across the Web. We do work in the social space. We do work on Facebook and others. So, we have a complete product line.

But the first couple you named are certainly very big and very important parts of the mix..

Okay.

Is it fair to say that IYP and FCM comprise the bulk of digital revenues today?.

Yes, I would say those are probably the biggest couple of pieces, although the others are very important too..

Yes. Okay. Thank you.

And then my second question is, can you help me understand the relationship between the digital relationship percentage that you quote and the digital revenue percentage which you quote, so I think for 2014 you said 38% of your relationships are digital or have a digital component, and 29% of overall revenues are digital? I guess if you made simplistic assumptions and just took those two numbers, that might imply that, of your 38% of customers that buy digital products, that their spend is something like three quarters digital and one-quarter print.

But of course the first one is measuring a number of relationships and the second one is measuring dollars and there could be different dollar size spend per customer.

So can you just in some way give us a better sense of what that digital print/mix looks like for those customers who are spending on a digital product?.

That’s a really great question. You put your finger on really a leading indicator there. What we’re doing is we’re more deeply penetrating our customer base every year.

We’ve got things like our Start Smart Bundle and other simple entry level offers that we’re bringing customers in the digital, we’re bringing them online into these multiproduct smaller bundles which give us an opportunity to stair-step them up into higher spend product ranges.

And so that’s really -- that should give you some sense of the progress that we’re making and the growth that we believe is in our future..

But is the four-year customers who are buying digital, for, let's say, the typical customer who has some digital component, is the bulk of that person's spend in digital? I would have guessed it was in print. But the numbers seem to suggest maybe the bulk -- the majority of their spend is actually on digital..

I think that it’s skewed a little bit because you’ve got some customers that have giant digital programs with us and I think that’s skewing the number a little bit.

There are some customers who are managing very big campaigns for -- across the Web, with search engine optimization that we’re doing on their Web sites and then we’re doing big search engine marketing campaigns and some of those I think skews the figures a little bit..

And do you have a significant number of customers who are digital only or is that a small percentage?.

It’s a relatively small number; we think it’s little under 50,000..

We have time for one more question. Your final question comes from Seth Crystall of RW Pressprich..

Yes, thank you for taking my call. I have a few questions actually, if I can get them in. You talked about the sales -- the digital sales being down because of the second bundle and it's harder to sell through.

Does that mean that new products and the next bundle would be with new products or will it continue to be weak sales because selling through bundles will get tougher and tougher to customers inside?.

We have lots of innovative ideas that we’re introducing and we’ll be bringing fresh products to market fresh services and we are pretty optimistic about what we think we can do in terms of growing that side of the business.

But your question is pretty smart, where if we never change and we just kept selling the same tired rag every year, you’d be unable to gain the increase and really keep it moving.

But part of the impetus that we bring as the new management team is we’ve got lots of new ideas about new ways to serve clients and how to tap into high growth areas within the sort of digital marketplace. So we do not intent to just keep selling the same old tired bundle, we’ve got a lot of good ideas there..

Okay.

Just to follow up on the question that John just had, in the digital relationships, the 38%, which I guess means 62% of your customers don't have any digital relationship, is the expectation, I guess you're going to -- the assumption is you'll transition and get more and more, but is there a certain percentage of those that you'll never get either because they're having a digital relationship with somebody else or they just don't need digital?.

They’re probably is. We don’t have any way to know exactly what that is. But we look at the whole pot, we look at the whole pie, there is a gigantic amount of money being spent on advertising by small businesses and we have a tiny percent of it.

And while it’s nearly 0.5 million and it’s nationwide and we’ve got a big sales force and we’re proud of that and everything. We’re looking to gain share. We’re looking to grow. We’re looking at the opportunity to edge out into other high growth segments and really build this business.

And part of the reason this management team came together was to do just that..

Okay. And then I just -- a couple quick questions from the slide on page 10; you talk about the identified savings, the facilities that you're closing.

How many facilities do you currently operate or will you be operating at the end of, you know, 2015?.

We’re just chatting amongst ourselves here to give you the exact number..

I'm just trying to get an idea of how significant closing 107 will be..

We’ve got approximately 70 that will be closed by the end of this quarter -- by the end of this month so far..

Yes, 76, so the vast majority of the offices are being closed. So we’re really going to some key facilities, so the idea is to shrink the number of facilities as close to a few as we can over time..

I'm just going to say just to make sure that you get a clear picture. The sales force had a local sales office in most major market and lot of minor markets all across the country.

And we had a sort of -- I'll call it 1980's system of driving into the office and meeting with the manager and then kind of going out in the field and we really believe in a more virtual approach, where the reps are based that their house -- the field reps are based at their house and are able to go right to calling their customers, isn't really is much drive time, as much face time and this is gone over really well with the sales force.

There has been a great reaction to the idea that they're able to focus on what matter which is serving their clients and not as much with sort of the overhead of working in a company and going to an office. So not only do we have the overhead savings of taking the office out, we have the pickup of sales time and sales moral.

And we end up I think with a lot more of a contemporary 2015 sales culture. And for years we've been arming our sales force with fabulous digital tools, they really have their entire office in their briefcase all the time.

I mean they're able to get access to the information, the client, anything they want -- have been able to for years, so there really isn't anything that they needed that office for. So, we're pretty much -- this is all the part of variabilizing the cost structure and making a linear operation.

So, we're going to have a number of important operating centers around the country that have operational functions in them, but we really won't have those sales offices anymore. So that's been the primary change..

And I guess productivity is expected to go up because they won't, you know -- they won't have that overhead cost, also, but I guess they'd be working from home and have more time to sell..

Yes, that's right, there is more time and there is the job joy, you just have a better job if you're not having to commute to an office to check in, let’s be honest..

Okay. Last question. Just also on the print and distribution, you're going to eliminate about 26.3 million copies.

How many do you -- just to get a magnitude of 26.3, what that means that do you currently print and distribute?.

The starting point is around a 100 million. So just to give you a kind of an impact -- order magnitude. And again I just want to underscore here, it's not like we're going to high usage consumers and ripping the directory out of their hand and therefore we're going to have less usage.

We have been able to -- by looking at the call count data, looking at the research that we've got and based on our prior experience in this business, we've been able to sharpen up our distribution maps and really focus on those home owners that are the high usage segment.

And we're taking some of that savings that we derive from publishing less quantity of directories and pouring that back into publishing much higher quality directories, with giant print, big ad, buying information, packaged in a great way, delivered really well. So that the consumers got something that they will prefer to use and choose to use.

And we believe that we can have better print directory results going forward because of these changes..

Okay, great. Thanks and good luck..

Thanks. .

I think that's our last question..

Yes, it is. This does concludes today's teleconference. You may now disconnect your lines at this time and have a wonderful day..