Good morning, and welcome to Dex Media's Third Quarter 2016 Conference Call. 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. Actual results may vary materially from these forward-looking statements.

The company advises you not to place undue reliance on these forward-looking statements as you consider them in light of the factors that they cause actual results to differ materially from those in forward-looking statements. These factors can be found in our press release dated October 17, 2016.

The company has no obligation to update any forward-looking statements. .

I would now like to turn the call over to Joe Walsh. .

Good morning, everyone. Paul will lead the majority of this call, detailing our quarterly financial results, but I wanted to make several remarks. .

As this is our first call since emergence, please note the format moving forward is to review our prior quarter's performance and release the data a few weeks before the call. During the call, we will present the data and then take a few questions..

As you know -- as you all know, we emerged from our financial restructuring earlier this quarter with a strengthen capital structure. We're spending our time and energy to simplify our platforms and systems and align our practices, allowing us to remove cost from the business.

We're facing headwinds in the marketplace, and we're behind where we want to be. Year-to-date, we've met our EBITDA, but we did not make our revenue numbers. We delivered it through cost reductions. We're moving toward a new direction with an achievable, but challenging plan.

We're focused on creating a simpler company that's easier for our clients to do business with. .

I will now turn the call over to Paul, who can provide the detail about our financial results for the third quarter. .

Thank you, Joe, and good morning, everyone. .

As Joe briefly described earlier, while it is not a requirement of our credit agreement until our first full quarter after emergence from bankruptcy, we decided it would be useful to our investors and bondholders to discuss our results reported for the third -- for our third quarter flash release, which we issued on October 17, 2016.

We will begin releasing quarterly results after the issuance of our 2015 and 2016 audited financial statements. .

As you are probably aware, our 2015 audited financial statements were delayed pending resolution of a tax error discovered late in 2015 related to our -- for the year 2010 for Dex One, which was prior to our merger and creation of Dex Media in 2013. This is a complicated process, but we expect resolution some time during the first quarter of 2017.

Due to this error, we will likely issue our 2015 and 2016 audit reports on the same date in 2017. .

It's important to note that I will primarily discuss adjusted pro forma non-GAAP results. Dex Media believes that the use of non-GAAP financial measures provide a useful information to our investors to gain an overall understanding of its current financial performance.

Specifically, Dex Media believes that non-GAAP results provide useful information to management and investors by excluding certain nonrecurring items that Dex Media believes to be non-indicative of its core operating results. .

In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring Dex Media's performance, and Dex Media believes that non-GAAP results provide investors with financial measures that most closely align with this internal financial measurement processes..

Now onto Page 3 in third quarter results, client counts. Client counts have declined 13.2% for the third quarter of 2016 compared to 2015, with a 6.2% increase in digital-only clients offsetting declines in multi-product and print-only clients. The increase in digital-only clients is primarily related to our new DexHub product.

Print-only and multi-product clients continue to decline as print revenue has declined, but at a slower rate..

Now onto third quarter revenue. Pro forma net revenue. The company reported pro forma net revenue of $292.3 million for the third quarter of 2016, a decline of 19.7% compared to the same period last year..

Print net revenue. Pro forma print net revenue for the third quarter of 2016 declined 21.2% compared to the same period last year. The improvement is primarily a result of improvements to our directory products and the reinforcement of the value of our print products provided to our clients..

Digital net revenue. Pro forma digital net revenue for the third quarter declined 18.5% compared to the same period last year. The majority of this decline was driven by lower renewal of our search engine marketing products and other digital, such as our Internet Yellow Page products, offset by the growth in revenue of our new DexHub product..

Other revenue. The change in other revenue reflects our recently introduced billing fees for clients who still pay us via check. We're encouraging our client base to pay us automatically through direct debit or credit..

Now onto pro forma adjusted EBITDA. Pro forma adjusted EBITDA for the third quarter 2016 was $93.1 million, a decline of $28.4 million or 23.4% compared to the same period last year. Pro forma EBITDA margins for the third quarter 2016 were 31.9% compared to 33.4% for the same period last year. The decline in margin was expected.

It's primarily related to the continued decline of our high-margin print products..

Pro forma adjusted EBITDA to plan. As I just mentioned, our pro forma adjusted EBITDA for the third quarter was 93.1%. Our plan was $90.8 million and an improvement of $2.3 million or 2.5%. Our margin improvement was primarily driven by tight expense management as part of our continued drive to variabilize our cost structure..

Now onto free cash flow. Free cash flow for the third quarter was $62.4 million, an improvement over last year of $2.1 million or 3.5%. The improvement is largely related to the suspension of interest payments during the bankruptcy filing period, offset by declining EBITDA..

Now onto year-to-date results. Pro forma net revenue. The company reported pro forma net revenue of $906.3 million for the year-to-date 2016. This was a decline of 21.7% compared to the same period last year. .

Pro forma print revenue. Pro forma print revenue for the year-to-date 2016 declined 21.5% compared to the same period last year. As with the third quarter, the year-to-date improvement is primarily the result of our improvements to our directory products and the reinforcement of value of our print products provided to our clients..

Pro forma digital revenue. Pro forma digital revenue for the year-to-date declined 23.2% compared to the same period last year.

As with the third quarter, the majority of this decline was driven by lower renewal of our search engine marketing products and other digital products such as our Internet Yellow Page product, offset by the growth in revenue of our new DexHub product..

Other revenue. As with the third quarter, the change in other revenue reflects our recently introduced billing fees for clients who still pay us via check..

Now onto pro forma EBITDA. Pro forma adjusted EBITDA for the year-to-date 2016 was $272.4 million, a decline of $151.5 million or 35.7% compared to the same period last year..

Pro forma EBITDA margins for the year-to-date were 30.1% compared to 36.6% for the same period last year. As with the decline in the third quarter, the year-to-date decline in margin was expected and primarily related to the continued decline of our high-margin print products. .

Adjusted pro forma EBITDA to plan. As I just mentioned, our year-to-date pro -- our year-to-date adjusted pro forma EBITDA of $272.4 million. Our plan was $269.7 million, an improvement of 2.6% -- $2.6 million or 1%.

As with the third quarter, our year-to-date margin improvement was primarily driven by tight expense management as part of our continued drive to variabilize our cost structure..

Now onto free cash flow. Free cash flow for the year-to-date was $117.7 million, a decline of $70.1 million or 37.3% compared to the same period last year. The decline largely related to our lower cash flow from operations as a result of lower EBITDA, offset by suspension of interest payments during the bankruptcy filing..

Moving on to Page 4. Pro forma adjusted EBITDA reconciliation. There are couple of items we should -- we would like to point out. Reorganization items and fresh start accounting adjustments had a large impact on GAAP results, and their exclusion from non-GAAP results will make the reconciliation look a bit odd for 2016.

The large gain of reorganization items of $938.5 million for the third quarter and $859.7 million for the year-to-date, resulted primarily from the elimination of old debt in our bankruptcy proceeding..

The adjustment for fresh start accounting of $82.4 million in both the quarter and year-to-date results primarily from fresh start accounting requirements to eliminate deferred revenue from a predecessor company's balance sheet.

This revenue which would have been recognized as it was amortized into revenue by the predecessor company cannot be recognized by the successor company. Management analyzes and runs the business based on pro forma adjusted results, as we have previously discussed..

Moving on to Page 5. Free cash flow reconciliation. There are a couple of items on Page 5 we'd like to highlight. Business transformation cash expenses reflect onetime expenses such as severance, office closures and system transformation expenses.

Working capital continues to be a source of cash through the natural decline of receivable balances as the print side of the business declines through tight expense management payables. Capital expenditures for the year-to-date period were in line with last year.

The timing of the payments year-over-year resulted in higher third quarter payments versus last year..

A quick word on restructuring versus organization -- reorganization pre- and post-emergence. Capital restructuring charges reflect professional fees related to the planning for the bankruptcy filing, but incurred before the filing on May 16, 2016. Reorganization pre-emergence charges reflect payments made during the bankruptcy case.

Reorganization post-emergence reflects payments made after emergence, but related to the bankruptcy case. A good example of such fees would be professional success fees..

Moving on to Page 6, net debt. We made significant progress during the last 2 months since the bankruptcy emergence in reducing our debt. We were able to repurchase from excess free cash flow, $29.5 million of par value debt and an additional $32 million committed for a total commitment -- committed repurchase of $61.5 million.

After giving effect to the repurchases and cash on the balance sheet, net debt is reduced to $503.6 million..

In conclusion. In summary, year-to-date, we have met our adjusted EBITDA pro forma plan even as we've manage the company through a successful, but time-consuming bankruptcy process. .

Now let's go back to the operator for questions. .

[Operator Instructions] And we do have a question from Marla Cannon of Fortress Investment. .

Just wanted to see if you can give us a little color, additional color, on the multiproduct customer decline. .

You want to take that [indiscernible]. .

Yes, the decline in multiproduct really is related -- the majority of our customers have dual customers, and so its print declines. They also take along some of our digital customers. So it's really related to that, the decline in our print product -- print product customers. .

Okay.

And then with regards to the debt repurchases that you made, do you plan to continue doing that just depending on where the debt is trading or what's -- can you maybe give us some detail on the strategy behind that?.

Well, where will -- it's beneficial to the company, right? If we're able to buy back our debt below par, so we'll be opportunistic as we proceed in the future. .

Okay.

And are you able to shed any color on whether or not you've made additional repurchases since the end of the quarter aside from what's pending?.

No. No, I'm sorry. I can't. .

There are no further questions at this time. We do have a question from Chris Mathewson of Ares Management. .

Hopefully, I didn't miss this at the beginning of the call. But could you -- Joe, could you maybe kind of talk us through how you're thinking about 2017? There's obviously disclosure statement with the plan and that sort of stuff, so maybe kind of shed some light on how you're thinking about that for us. .

Google and Facebook. Everybody else is struggling basically. It's a very tough environment, and so we're trying to kind of move beyond leads. We're getting much more deeply involved in the business operations of the local businesses that we serve.

We've got our DexHub product, addresses a lot of their needs to try to help them keep up with the big national and regional enterprise plays that are rolling up a lot of industries across the country, helping them be more competitive. So we're working hard to continue to improve and develop that strategy, that playbook.

And that's our area that we intend to put focus on and grow. So Chris, I guess as a wind-up, we've got obviously a print business that's been declining. The search engine marketing part of our business is a business that had been running unprofitably for the company. We've really radically restructured the way we offer that.

It's more of a boutique service going forward. We expect it to be a smaller revenue contributor next year and smaller still the year after. We're sort of reducing our reliance on SEM and putting more focus on our kind of beyond leads direction. .

Okay. And then any color on kind of initial thoughts on EBITDA for next year maybe? I mean, we are in November, and there should, in theory, be pretty good visibility in this business given -- particularly on the print side. .

Yes. I mean, there's obviously -- as a part of the restructuring there was a long-time plan put out, and we're working hard to deliver against that. I don't have any guidance for you at the moment, but you'll know that plan.

And we've had lots of other conversations about the work that we're doing to streamline and take costs out of the business, and we're not done. There's a lot more to do. .

There are no further questions. .

Thank you, operator. I think that's a wrap. .

Thank you. That does conclude today's conference call. You may now disconnect. .

Thank you very much..