R.H. Donnelley: ad sales improve sequentially from prior quarter, down 0.2% from first-quarter 2006

By Lisa Kerner

Charlotte, N.C., April 26 - R.H. Donnelley Corp., expecting "modestly positive" ad sales, reported "a solid start to 2007" during its first-quarter earnings call on April 26.

"Ad sales improved sequentially from last quarter from a decline of 1.6% to nearly flat as the business process and the systematic elimination of transition issues continued to drive performance in our AT&T and Dex markets," chairman and chief executive officer David C. Swanson said.

"We are encouraged by the trajectory we are starting to see."

System integration issues had plagued the company to some degree, and the downturn in the housing market also affected Embarq sales.

However, Swanson said the integration issues will be fewer when AT&T is modernized this summer, as it already uses a sales force automation tool. In addition, R.H. Donnelley's diverse customer base insulates it to some degree when various markets slow down.

"Our sales force is better prepared today to demonstrate to advertisers how we can help them grow their business," Swanson noted during the call.

Swanson also announced what he called a company milestone: R.H. Donnelley's latest branding effort that takes advantage of the Dex name and Dexknows.com brand equity that represents about two-thirds of the company. The Dex name will be extended into the AT&T and Embarq markets in a phased approach beginning in June. The company name will remain the same, but "not outwardly facing," Swanson said, with Dexknows.com becoming the company's "brand promise."

"We intend to build a powerful brand identity that will enhance our competitive position and can be extended to new products and services we introduce in coming years," Swanson stated. .

The Cary, N.C., Yellow Pages and online local commercial search company reported first quarter 2007 free cash flow of $131 million, with advertising sales $747 million, down 0.2% from the same period in the prior year. The company repaid $131 million of debt and remains on track to achieve full year 2007 guidance.

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