DexOne Sees Signs of Hope, Concern in Business Environment

DexOne (the company formerly known as R.H. Donnelley) announced its first-half results this morning, and as with SuperMedia, there were signs of life amid otherwise negative results. The key number to watch for directory publishers is ad sales. DexOne’s first-half ad sales were down 13 percent, and the company says ad sales were stronger in the second quarter than the first as key metrics like business creation, renewals and bad debt have shown improvement. However, DexOne has also adjusted its full-year guidance down somewhat, from a 12 percent to 15 percent ad sales decline to a more precise 14.5 percent to 15.5 percent range of decline.

One reason for the somewhat lower full-year guidance is that some of the company’s largest and most troubled markets close in the second half, most notably Las Vegas, which is sold in the third quarter.

Other items of note from today’s earnings call:

— The company is in the process of searching for a new CEO, following longtime CEO Dave Swanson’s retirement earlier this year. W. Kirk Liddell, who leads a three-person interim executive team, said the company has identified several strong candidates for the job, but will “take as much time as necessary” to find the right replacement for Swanson.
— Second-quarter ad sales were 910 basis points better than Q2 2009, and 550 bps better than Q1 2010. Still, the company expects some weakening in the third quarter and has guided lower for the full year.
— The company has seen substantial improvement in bad debt as a percentage of revenues, the result of strict credit policies as well as attrition of weaker operators from the advertiser ranks, leaving a higher share of credit worthy customers.
— Renewal rates are at 70 percent and increase is at 12 percent. The company pointed to this metric as evidence that the company really needs to focus on new customer acquisition in order to get back to top-line growth. During 2Q, new business added 5 percent to net results.
— The company shared that large accounts are retaining at a higher rate, but reducing spending, while smaller accounts are churning at a higher rate, but those that remain are more likely to increase spend.
— The company revealed that its largest markets are expected to perform 5 percentage points worse than the company overall, while its smallest markets will beat overall results by 5 percentage points.