$Y $Y.CA Stock Price Question

My prediction: Q22013 EBITDA > Q12013 EBITDA. Don't believe me? Just watch.

Yellow’s secured notes are quoted 103.25/104.25, while the company’s 107.5m 8% cash/12% PIK senior subordinated exchangeable debentures due 2022 are illiquid.

actually, there is some liquidity here: http://web.tmxmoney.com/quote.php?qm_symbol=YPG.DB

This whole post is just excerpts from my notes over at stockhouse... Note that YP Holdings did a dividend recapitalization deal in May. If Yellow Media did the same deal, that would cut interest expense $10M/year.

Stock price? Well look at where it was in 2010.

Well the stock used to trade at $6 with 550M shares outstanding on $573M of FCF.

From the FCF, back out $21M in preferred Dividends Back out $2.221B at 5.4%, aka $119M in interest payments.

You're down to $433M in LFCF.

$6*550/$443 = 7.6x LFCF

That's what it used to be.

Here is my worksheet/forecast: http://www.glenbradford.com/files/Stocks/YLO%20debt.xls

Why don't you tell me?

You should consider that these revenues are not in two forms. The revenue is a package deal. I don't think that the breakdowns of revenue the way that they are are much more than forced accounting stuff. I've worked in several businesses as a management consultant and director of finance where we sell packages, subscriptions, specific segmented services, etc.

Accounting people always get caught up on how to break down the revenue and understand line item profitability. I'll tell you that from a throughput and business ownership perspective it's all bull***** as far as decision making goes. ABC cost accounting is worthless. Value stream costing is where it is at, and as such i think that arguably these businesses can augment their digital revenue over time merely by assigning a graduated higher market value to the services that they provide in comparison to their print services... thus increasing the relative tilt of the source of revenue, just something to keep an eye on.

Anyway, the name of the game is total revenue, which at the end of the day is going to be tied to the relative value proposition of the services that the company provides... and i think that this is a 1 inch put, if not shorter. the unrelenting pessimism is incoherent babble as far as i'm concerned. a few quarters of debt destruction --- if we don't refinance first, will open many people's eyes to the fact that things are stabilizing.

if you're right, it is very interesting to see a company with its debt trading above par with a market cap to quarterly earnings multiple of 5.63x-6.14x i can't imagine that it will stay this interesting. i assume you are long. good play sir. me: so here is the deal pretty sure that Y is going to beat Q2 to Q1 EBITDA FCF i dont think that the public report people have any of that in their forecasts shit should fly this is going to be the big one. Sent at 12:15 PM on Thursday Friend O: err wts ok... Sent at 12:17 PM on Thursday me: lol Sent at 12:19 PM on Thursday Friend O: hey me: what Sent at 12:30 PM on Thursday me: lol Sent at 12:34 PM on Thursday Friend O: you said you're expecting Y ebidta to increase this quarter Sent at 12:50 PM on Thursday Friend O's new status message - 37 1:11 PM me: yes Sent at 1:13 PM on Thursday me: hmm. EBITDA, FCF, Price, New CEO, debt can be refinanced at a lower rate, etc. the market is expecting it to flop and in reality they have a royal flush Friend O: lol there clients could leave there headquarters could get nuked maybe a computer virus deletes all there files and corrupts their database and there backups catch on fire me: i'm pretty sure the nuked headquarters is priced in. Friend O: so there you go its antifragile the worst case scenario is where it is now Sent at 1:34 PM on Thursday Friend O: except the fact that the current shareholders could dump on it for a bunch of external reasons aka debtholders me: an EBITDA beat. do you know how unexpected that is? Friend O: yes me: like, people will have to revise their models. Friend O: i wouldve been happy if the revenues just declined less me: that's a 6 sigma event to them Friend O: so what makes you think thats a possibility even me: normalized G&A is $51.5M per quarter normalized COGS are 30% do the math. EBITDA goes up like $8M this quarter the odds are in its favor. i'd put odds at greater than 50% like 75% and the market is at like 1% lol and an ebitda beat is a game changing thing like, "wait a second, ebitda can go up?" Friend O: so you're assuming the total revenues aren't declining? me: no they are look at the spreadsheet you have an EBITDA beat modeled in your sheet too they did $115 last quarter we are forecasting $122M Friend O: oh yeah youre right i didnt notice that it got hiddent in the cash flow cause of the principal payment ok fine but thats a one time thing and only cause last quarter was a big miss me: no.. last quarter wasn't a miss Q4 was an anomoly Friend O: ok sure me: there was a $13.3M adjustment look back at the G&A across like 5 quarters i'd expect it to be 49-51 it was at like 38 Sent at 1:43 PM on Thursday Friend O: so q1 wasnt artificially low then because of lower ebidta rate on print revenue ehh i need to look at the actual numbers and you dont know if they're playing with the numbers to shift revenues around bw digital and print Sent at 1:46 PM on Thursday me: i'm aware that those shifts are likely happening. sow hat so what Friend O: yeah me: we are in store for an ebitda beat lol which is impossible according to all Friend O: if there ebidta rate is the same as q1 for digital then they wont beat me: why? Friend O: 111 instead of 122 me: q1 for digital is seasonaly weak also, you are doing it wrong. you take revenuye Friend O: haha me: revenue and you back out 30% of fixed costs and then you back out $51.5M of SG&A Friend O: oh me: that's what i did to check the margin math look through a bunch of reports those numbers are fairly consistent 29-31% fixed cost and 49-58M of SG&A and the SG&A has been ticking down for the last 4 quarters by like 2M each so 58, 54, 51, 49 then 38 then last quarter was 58 erm. last quarter was 38 but with a 13.3 adjustment aka 51.3 adjusted so i feel like we can expect 51.5 or lower for the normalized rate sure there could be a one time thing this quarter i'm just saying, that if things are normal this quarter, you should expect an ebitda beat by a wide margin and the market is voting that to be a 6 sigma event with their dollars Friend O: yeah

Sent at 2:07 PM on Thursday

 Omar:  still q1 there was a 13.3M one time cost. even if q2 technically is higher  the market can dismiss it because the overall trend is declining if you back out the 13.3M from q1

and go on assuming they will still go bk tmrw

 me:  Q1 13.3M cost?

 Omar:  thats what you said

 me:  that was Q4 2012

 Omar:  or was it q4

 me:  Q4 EBITDA got boosted by 13.3M

 Omar:  oh...

from what?

 me:  dont remember

then Q1 got hit by like 8M above average SG&A

 Omar:  ok

 me:  ebitda margins are in fact, higher than they were on Q1 on a normalized basis is my thesis.

and the market is saying that Q1 is the new normal

Facebook online advertising revenues are up.... perhaps the same will happen with Yellow.

Other charges that should drop off are:

• other finance charges of $5.8 MM
• restructuring costs of $6.2 MM
• recapitalization costs of $4.2 MM

The pension top-up may be finished for this year, unless they are doing something else for Telier.

Do you have a feel for the amount of advertising they did this quarter?  Those TV spots can be expensive and would affect EBITDA.

I know that those charges are after EBITDA, however, they do affect the cash flow numbers.  I suspect there will be a sizable increase in free cash flows, except for the $26 MM debt reduction payment on May 31st.

yep, overall, i think that this quarter is going to result in a significant wind in the sails of the perception that there is opportunity here.