Merrill Lynch Advertising, Marketing, Education & Information Conference

Transcription

1 Merrill Lynch Advertising, Marketing, Education & Information Conference March 8, 2005

2 2 Safe Harbor This presentation may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of These statements are based on management s current expectations and are subject to risks, uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words anticipate, believe, expect, estimate, plan and similar expressions are generally intended to identify forward-looking statements. The following factors, among others, could affect future results: continuing weakness in the U.S. economy; increased competitive pressure from other directory publishers or media companies; changes in interest rates or a reduction in Dex Media s cash flow that could impair Dex Media s ability to service its debt obligations; Dex Media s high level of indebtedness; and risks related to the start-up of new print or Internet directories and media services. Other factors that could materially affect actual results can be found in Dex Media s filings with the Securities and Exchange Commission. Many of these factors are beyond the company s ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements, which only speak as of the date of this press release. Dex Media undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

3 3 Company Overview Largest independently-owned incumbent directory publisher in the U.S.: 269 directories published 45M print copies 1.6B Yellow page references/year (1) Core print product extended through online distribution DexOnline.com - #1 IYP site in our 14- state region for four straight quarters (2) Internet search engine and portal distribution agreements 100M internet references/year (3) Seattle WA Tacoma Portland OR NV CA ID Salt Lake City UT AZ MT IA WY Denver CO Co. Springs ND SD NE KS MN Minneapolis IA MO Effective sales channel More than 1,000 local sales professionals in 49 offices Phoenix Tucson Albuquerque NM OK Strong financial metrics Revenue stability EBITDA margins Free Cash Flow conversion Top 10 markets TX (1) Knowledge Networks/SRI 2003 (2) comscore (3) Company Logs

4 4 Delivering on our Promises Technology Conversion to Amdocs platform completed Competitiveness Distribution and Advertising Product and Pricing Dex Plus companion directories Internet DexOnline.com - #1 in region Distribution agreements Dex Web Clicks TM simple cost-effective SEM solution Financial Milestones Revenue growth in excess of 1% Stable EBITDA margins of 56%+ 0.5x of deleveraging through FCF FCF per share $3.13; FCF Yield 13.6%

5 Value Drivers Spectrum Pricing New capability with Amdocs conversion 12-month implementation Customer retention Drive advertising to under-utilized headings New Print Directory Features Ink Jet Edge Front Cover Gate Fold New Headings Spanish Language Directories Dex Web Clicks TM Right Product at the Right Time Leveraging channel & local content advantages Guaranteed clicks from over 30 different search engines Price certainty Convenient size Rescoped Dex PLUS Delivered with metropolitan directories Provides additional cost effective reach

6 6 Internet Distribution Extending The Reach of Our Customers Core Print Products DexOnline.com Internet Agreements Dex Web Clicks TM Increased Distribution Increased Usage Increased Revenue (~1% Hurdle Rate)

7 7 Financial Highlights Year Ended December 31, 2004 EBITDA, As Adjusted ($ in Millions) Dex Media, Inc. Revenue (1) $1,648.9 Cost of Revenue (1) Gross Margin (1) 69.9% G&A Expense EBITDA (1) $901.3 Advisory fees 22.0 Accrued severance costs 6.8 EBITDA, as adjusted (1) $930.1 EBITDA, as adjusted (1), margin 56.4% (1) Adjusted to exclude purchase accounting

8 8 GAAP Highlights GAAP Financial Statement Components of Interest Expense Year Ended December 31, 2004 ($ in Millions) Dex Media, Inc. Revenue $1,602.1 $42.3 $24.1 -$7.4 Cost of Revenue $5.6 G&A Expense EBITDA $865.0 $57.9 Depreciation & Amortization 30.8 Amortization of Intangibles Interest Expense Interest Income (1.5) Income Tax Benefit (31.4) Net Loss ($50.8) EPS, Basic & Diluted ($0.39) Cash Interest Write Of DFC Early Redemption Premium $383.0 Amortization of DFC Accretion on Discount Notes Other

9 9 Year Ended December 31, 2004 ($ in Millions) Significant Free Cash Flow Generation $930.1 $407.1 $1.0 $54.6 $485.4 (1) $48.6 EBITDA Cash Interest Cash Taxes Capex Adjustments Adjusted Free Cash Flow Free Cash Flow per share of $3.13 / 13.6% yield (2) (1) Excl udes investment in worki ng capital (2) Assumes full y-diluted s hares outst anding of MM and a share price of $22.97

10 10 De-leveraging Power Includes Dividend Notes 7.0 x 6.8 x 6.5 x 6.3 x 6.6 x 6.5 x 6.3 x 6.2 x 6.0 x 3/31/04 6/30/04 9/30/04 12/31/2004 Consistent De-levering = Shareholder Return

11 11 Financial Outlook ($ in Millions) Revenue Growth (1) FY 2004 Results 1.1% FY 2005 Guidance Positive first half of 05, but trending down from 4Q04. Stronger second half - full year consistent with 2004 level EBITDA Margin (1) (2) 56.4% Consistent with 2004 Level Capital Expenditures Free Cash Flow (2) $54.6 $485.4 < $55 > $485 Dividend (3) $0 ~$54 Debt Paydown (4) $460.5 Approximately one half turn of leverage (1) Excludes the effects of purchase accounting (2) 2004 Adjusted to exclude the effects of certain IPO costs and other one-time, nonrecurring items (3) $0.09/share dividend declared in 2004 (4) 2004 Excludes an additional $202M of debt paid down using primary proceeds raised in the IPO (excludes preferred stock)

12 12 Best-in-Class at Attractive Valuation EV / 2005E EBITDA Price / 2005E FCF 15.0x 19.0x 17.3x 13.0x 11.0x 11.5x 10.5x 9.9x 9.8x 17.0x 15.0x 13.0x 14.5x 14.4x 9.0x 11.0x 7.0x 7.2x 9.0x 7.0x 6.5x 5.0x Radio & Outdoor (1) 5.0x (2) (4) (2) Newspaper TV (3) Dex Media Newspaper TV Radio & (3) (1) Broadcasters Broadcasters Outdoor Dex Media Discount on EBITDA Potential upside on FCF Source: Equity research Note: All composites are market c apit alization weight ed aver ages; st oc k prices as of March 4, 2005 (1) Includes: Clear Channel Communications, C ox Radio, C umulus Media, Entercom C ommunicati ons and Lamar Advertising (2) Includes: Gannett, Journal R egister, Knight Ridder, Lee Enter prises, McClatchy and N ew Yor k Ti mes (3) Includes: Bel o Corp., Hearst-Argyle T elevision, LIN TV and Si nclair Broadcasting (4) Assumes mar ket value of tax shiel d is equi valent to 1.6x 2004 EBITDA, based on net present value of tax shiel d of $1,525MM and EBITDA of $922MM

13 Merrill Lynch Advertising, Marketing, Education & Information Conference March 8, 2005