Joe Walsh - President and Chief Executive Officer Paul Rouse - Chief Financial Officer.

Analysts:.

Good morning and welcome to Dex Media’s Second Quarter 2015 Conference Call, which will include prepared remarks only. With me today are Joe Walsh, President and Chief Executive Officer; and Paul Rouse, 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 factors that could cause actual results to differ materially from those in the forward-looking statement.

These factors are listed at the beginning of this presentation a well as in reports filed by Dex Media with the Securities and Exchange Commission. The Company has no obligation to update any forward-looking statement. I would now like to turn the call over to Joe Walsh..

Good morning, everyone. I’ll start by sharing an update on our strategic initiatives for 2015 and provide some highlights of our progress during the second quarter. Paul will detail our quarterly and first-half results; then I’ll wrap up with a few closing remarks. We have a clear mission at Dex Media, to help local businesses thrive.

We help local businesses stand their ground against national and regional companies that are outmaneuvering them online, particularly in mobile search. As the marketing department for our clients, we level the playing field by giving local businesses the tools to win.

We see a clear and currently unsatisfied need in the marketplace for local businesses to link directly with their customers, attract new business and continue to grow. Our offerings fill that need and are resonating with our clients. This underlying mission forms the basis of our go-forward strategy.

Across every department, we’re working diligently to reshape and redefine our company. During the second quarter we made considerable progress on the five strategic initiatives I outlined in our first quarter call. First, we continue to simplify and automate our processes across the business by consolidating our core systems.

In the past three months, we achieved two critical milestones. We consolidated our two print fulfillment systems into one platform and we consolidated our two repositories for advertising graphics into a single system. These steps eliminate duplicate processes, and help minimize errors and reduce costs.

Later this year, we will launch a new client facing mobile app for Apple and Android devices. This app gives our clients 24/7 access to review program results, update content, view and pay bills, and get in touch with their client service representative.

Each of these milestones brings us closer to our goal of enterprise-wide consolidation by the end of 2015. Second, we focused on differentiating Dex from our competitors by improving our legacy print products, simplifying our digital product suite, and introducing innovative new products. We’re making steady progress on our print results.

Our second quarter numbers indicate our actions are gaining traction and flowing print decline. The rollout of our newly redesigned directories continued from April to June with attractive new covers, larger and more readable text, expanded buying information and standardized trim sizes.

In addition, our new simplified rate card and efforts to streamline distribution and consolidate titles are making us more efficient. We’re excited about our innovative new products. DexLink helps clients manage digital customer lists, schedule appointments online, and communicate via e-mail and text with their customers.

With DexHub, clients manage their online presence on a single platform that adapts to multiple devices, desktop, tablet, mobile, and Facebook. Although, we’re still in the early stages of rollout, we’re pleased to report that the sales of DexHub have been brisk. In the third quarter, excuse me. Number three.

In the quarter, we continue to shift from a product-centric approach to a client-focused approach. As part of this transition, we now offer dedicated, highly trained digital experts who guide and assist clients in managing their marketing programs.

In addition to the Platinum account tier launched in April, we recently introduced a Gold tier for slightly smaller accounts. Our new service model rewards and retains our best and most profitable clients. Number four. We work to enhance our service to existing clients. We recognize the significant opportunity to acquire new clients.

Our long-term strategy features fresh and innovative approaches to client acquisition. We began testing some of these approaches in the second quarter, while only a partial impact to the quarter. We did experience a nice uptick in new clients. DexLink and DexHub are both compelling entry-level offers for our new clients.

Our marketing consultants are excited to sell them. We have also retained KERN, a multi-channel acquisition and customer relationship marketing agency to assist us in attracting new clients and generating demand for DexLink. Number five.

We’re working to transform our culture into one of shared purpose, positive energy, collaboration, and client service. This summer our executive team crisscrossed the country to share our vision and strategy with all employees in a series of road shows.

In each location, we encountered employees who deeply care about our clients and the future of the company. Though some may have entered the room with a degree of skepticism, they left energized and aligned with the changes we’re making to create a new Dex.

Although, we’ve made considerable progress on our core initiatives, we still have a lot of work to do, including addressing our capital structure. With the help of our advisors, that work is now underway. I will now turn the call over to Paul, so he can provide more detail on our results for the second quarter and first-half..

Thank you, Joe, and good morning, everyone. Before I begin with the second quarter and first-half financial results, I will refer to non-GAAP financial numbers.

We have provided a reconciliation of GAAP to non-GAAP financial measures in the appendix of this presentation, as well as the financial schedules on the company’s investor relations website under quarterly results. Now, onto the company performance compared to the guidance provided last quarter.

Reported revenue for the second quarter was $387 million, which was slightly below the low-end of our guidance range of $390 million to $410 million due to the underperformance of the digital channel. Adjusted expenses of $228 million, a 23.5% decline compared to the same quarter last year.

As a result, adjusted EBITDA in the second quarter was $159 million with a margin of 41.1%. This exceeded the high-end of our guidance range of $140 million to $150 million and a margin of 35.9% to 36.6%.

The results for the second quarter 2015 included an in-year true-ups to estimates of certain employee related costs, including medical and dental benefits. These true-ups favorably impacted our second quarter 2015 margin of 41.1%, and reflect a one-time adjustment, however, do not impact our year-to-date margin of 38.1%.

Lastly, free cash flow for the second quarter was $84 million, which exceeded our guidance of $70 million to $80 million, primarily due to lower business transformation costs. On a year-to-date basis, reported revenue was $793 million, a 17.4% decline compared to the same period last year.

Adjusted expenses were $491 million and adjusted EBITDA was $302 million with a margin of 38.1%. Total expense decline is primarily driven by headcount reductions coupled with lower variable costs associated with lower revenue. Total revenue performance has been impacted by the Digital and Print ad sales declines during the prior two quarters.

While, we expect the Digital trends to continue in a near-term, albeit at a reduced rate, our previously discussed strategic plan is expected to deliver sustainable revenue and continue to drive efficiencies in our – in managing our costs.

For full-year 2015 guidance, the company is expecting reported revenue to be in the range of $1.475 billion to $1.525 billion. Adjusted EBITDA is expected to be in the range of $510 million to $540 million with the margin of 34.6% to 35.4%. Free cash flow is expected to be in the range of $180 million to $220 million.

Now, for the second quarter ad sales results. Before diving into the numbers, I would like to remind everyone that there is a lag due to the pace of amortization and when our sales initiatives begin to impact the top line on both the Print and Digital sides of the business.

As a result, we do not expect to see our current initiatives impact the top line positively until the latter part of this year and early 2016. Total ad sales declined 22.5% in the second quarter versus a decline of 10% for the same period last year.

Print ad sales declined 22.8% as compared to a decline of 20.5% for the same period last year, however, was an improvement over the first quarter of 26% decline. Last quarter, we mentioned enhancements we’ve made to reinvigorate and simplify the Print Product and these initiatives have started to show positive trends.

We are seeing some early signs of improvement in the print ad sales sold for the third and fourth quarter publications, which will flow through the ad sales and advertise revenue in the latter part of this year into next year. Digital ad sales declined 22.1%, as compared to an increase of 12.4% for the same period last year.

This primarily resulted from the – from sales performance and lower renewal rates driven by churn across all product categories. Now, for an update of our business transformation initiatives. We are on track to deliver annualized cost savings of $160 million.

As of June 30, 2015, we have recorded a total of $67 million in costs to realize these savings. These costs include $45 million of severance of which $43 million was recorded in the fourth quarter of 2014.

$8 million for system consolidations, $12 million associated with leases, and $2 million of other expenses recorded in the first and second quarter of 2015..

Cash on hand as of June 30, 2015 was $191 million. Now, I would like to turn the call back over to Joe..

first, slowing the decline of our directories and streamlining print distribution; second, simplifying and enhancing our line of digital products; and third, introducing innovative new-wedge [ph] products that attract new clients and create recurring streams of revenue.

These product changes are supported by excellent service delivered by dedicated digital experts. Above all, our new culture drives these crucial changes in our business. Our employees are energized and aligned with a clear mission to help local businesses win. Thank you for your time today..

Q -:.

This is the conclusion of the call. A replay of the webcast will be available at 855-859-2056. International callers can access the replay by calling 404-537-3406. The replay pass-code is 97076207. The replay will be available through August 27, 2015.

In addition, the webcast will be available on the Dex Media website, in the Investor Relations section, at ir.dexmedia.com. Thank you. And you may now disconnect your line..