ARC Document Solutions, Inc. (ARC) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the ARC Document Solutions Q1 2021 earnings report. At this time, all participants are in listen-only mode. After the speakers presentation, there will be a question-and-answer session. . Please be advised that Today's conference is being recorded. . I would now like to hand the conference over to David Stickney, Vice President, Corp. Communications and Investor Relations. Sir, please go ahead. David Stickney: Thank you, Lee. And welcome everyone. On the call with me today are Suri Suriyakumar, our CEO; our Chief Operating Officer, Dilo Wijesuriya; and Jorge Avalos, our Chief Financial Officer. Kumarakulasingam Suriyakumar: Thank you, David. And welcome, everyone. It has been more than a year operating under the pandemic, but the business conditions have ebbed and flowed just as they have in any other year. After exceeding expectations in 2020, we knew we were headed for a rough start to 2021. And we communicated as much to you in our last earnings call. All things considered, I am pleased that the company remained resilient and responsive in the face of the pandemic effects in January, as well as a week of terrible weather in February. Thankfully, March sales came back strongly and reestablished our momentum. Absent the disruptions in January and February, we are confident that our sales and EBITDA would have been consistent with our fourth quarter performance. Sales in March reflected the pent-up demand from our existing customers, as well as from our aggressive marketing efforts throughout the quarter, as Dilo will outline later in the call. Construction activity finally got off the ground and has been increasing ever since as indicated by forecasts and sales data from the AIA and building trade organizations. The push to get students back in school reinvigorated the education market, a new, but well established, customer base for ARC. Retail opportunities are increasing with a steady reopening of the economy and scanning work is on the rise as businesses have recognized how vital it is for work from home or hybrid working arrangements to have 100% digital access to documents. Dilantha Wijesuriya: Thank you, Suri. We weathered the strict shutdowns in the UK, Canada and several states, as well as the harsh weather conditions during the past quarter. We adjusted our operating conditions and focused on the immediate needs of our customers during this period. Throughout the quarter, we continued to strategize and execute on our marketing plan. As customers work from home, we are connecting with them via our e-marketing programs and social media. Most customers are looking for new and improved ways to manage their print requirement. Technology-enabled print services are key and we continue to pay attention to what our customers need. We were very happy to see the government's stimulus package for the education industry. Many of our educational customers are taking advantage of the funds to get their schools ready to reopen. Our ability to consult, design and print high quality graphics on short notice has enabled us to secure multiple graphic orders. Our quest to diversify our customer verticals is continuing. It is clear that every customer vertical has a need for high quality printing, scanning of documents and management services. Our marketing campaigns are helping us to reach a wider audience and communicate our breadth of services. Jorge Avalos: Thank you, Dilo. While our top line suffered from circumstances we couldn't control, our bottom line results remained strong throughout the quarter. Gross margins stayed above 30% as we leverage the efficiency of our cost structure. Our EBITDA margin of 14.2%, a 130 basis point increase over the prior year reflects the strength and sustainability of our operations and profitability, even during the quarter when sales were low. Likewise, our earnings per share were in line with prior year's performance at $0.021. And we have demonstrated over the past four quarters, ARC's ability to generate cash flow from operations remained very strong at more than $5 million for the quarter, a $2.5 million increase as compared to Q1 of 2020. Our cash balance remained at approximately $50 million, despite paying down our debt by $5 million in the quarter. And our leverage ratio, net of cash, is below 1, an all time low despite a year of dealing with the pandemic. Kumarakulasingam Suriyakumar: Thank you, Jorge. Operator, we are now available for our listeners' questions. Operator: David Stickney: Thank you, Lee. And thank you, everyone, for your attention this afternoon. We appreciate your continued interest in ARC Document Solutions and we look forward to talking with you next quarter. Take care. Have a good evening. Bye-bye. Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
ARC Document Solutions, Inc. (NYSE:ARC) Exceeds Q1 2024 Earnings Expectations
ARC Document Solutions, Inc. (NYSE:ARC) recently held its Q1 2024 earnings conference call, revealing a notable performance that exceeded expectations. The company reported quarterly earnings of $0.06 per share, which was above the Zacks Consensus Estimate of $0.05 per share. This outcome not only demonstrates an improvement from the previous year's earnings of $0.05 per share but also signifies an earnings surprise of 20%. Such a positive earnings surprise is a critical indicator of the company's ability to outperform market expectations, a factor that can influence investor sentiment and the stock's future performance.
In addition to its earnings, ARC Document Solutions also reported revenues of $70.79 million for the quarter ended March 2024, surpassing the Zacks Consensus Estimate by 1.57%. This revenue growth from $68.92 million in the same period last year indicates a solid upward trajectory in the company's sales performance. This marks the second occasion over the last four quarters that ARC has exceeded consensus revenue estimates, highlighting a consistent ability to generate higher sales. The company's financial health is further underscored by its valuation metrics, such as a price-to-earnings (P/E) ratio of approximately 13.26 and a price-to-sales (P/S) ratio of about 0.42. These figures suggest that investors are willing to pay a premium for the company's earnings and sales, reflecting confidence in ARC's profitability and growth prospects.
Despite these positive financial outcomes, ARC Document Solutions' stock has seen a decline of about 16.2% since the beginning of the year. This performance contrasts with the broader market, as indicated by the S&P 500's gain of 8.6%. However, the company's current Zacks Rank #3 (Hold) suggests that its shares are expected to perform in line with the market in the near future. This outlook may be influenced by the company's financial ratios, such as its debt-to-equity (D/E) ratio of about 0.59, which indicates a moderate reliance on debt financing. Additionally, the current ratio of approximately 1.56 suggests that ARC maintains a healthy balance between its assets and liabilities, ensuring financial stability and the ability to meet short-term obligations.
Looking ahead, ARC Document Solutions' future performance will likely be shaped by trends in earnings estimate revisions and the overall outlook for the Commercial Printing industry. The industry's current ranking in the top 20% of over 250 Zacks industries suggests a potentially favorable environment for ARC. This positioning is significant because industries ranked in the top 50% tend to outperform the bottom 50% by more than 2 to 1. Furthermore, ARC's enterprise value to sales (EV/Sales) ratio of approximately 0.56 and its efficiency in generating cash flow, as indicated by an enterprise value to operating cash flow (EV/OCF) ratio of around 4.34, highlight the company's strong valuation and operational efficiency. These factors, combined with an earnings yield of roughly 7.54%, offer a compelling case for the investment return that shareholders might expect, positioning ARC Document Solutions favorably within its industry.
