ARC Document Solutions, Inc. (ARC) on Q3 2021 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the ARC Third Quarter 2021 Earnings Report. At this time, all participants are in a 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 your speaker today, Speaker David Stickney, Vice President of Investor Relations. Please go ahead sir. David Stickney: Thank you, Nora 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. Our third quarter results for 2021 were publicized earlier today in a press release. The press release and other accompanying materials are available from our Investor Relations pages on ARC Document Solutions Website at ir.e-arc.com. In today's earnings announcement, ARC offered expanded supplemental disclosures to provide shareholders and analysts with additional information in advance of our quarterly conference call. The disclosures are largely historical and will not be read on today's call. In addition, we're conducting this call from multiple locations today which may require some additional direction from our speakers especially during Q&A. Please note that today's call will contain forward-looking statements that fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are only predictions based on information as of today, November 4th, 2021 and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. This call will also contain references to certain non-GAAP measures, which are reconciled in today's press release and in our Form 8-K filing. I'll now turn the call over to our Chairman, President and CEO, Suri Suriyakumar. Suri? Suri Suriyakumar: Thank you, David, and welcome everyone. We are delighted with our third quarter results. Since 2008, our company and the industry as a whole have been devastated with secular changes in revenues, especially related to the construction industry have no side as technology and new workflows have replaced the use of paper. We at ARC have been battling these changes with multiple reorg and restructures over the years in an effort to stem the revenue notion and put the company back on a growths factor. It has been an uphill task, and the pandemic did not make it easier. However, we now believe we have been successful in transforming the company. We're now a different company than we were in the past. We have new revenue streams from an expanded service portfolio and new customers from a much wider range of industry segments. The results of this transformation can already been seen with more and greater opportunities for growth. Our performance this year demonstrates that we're now on the right track. While a few quarters have had aberrations in the recent past, our fundamentals have remained steadfast. We have continued to generate solid cash and EBITDA, allowing us to keep our debt in control, and our quarterly dividend program and repurchase our stocks. This quarter is the perfect example. EPS grew and EBITDA was formed for the second consecutive year. Margins were solid, thanks to our new cost structure, and our cash flow performance remains impressive. Clearly, the change we have made to the company have enhanced our financial performance. But as noted, I expect our transformation to continue generating new growth opportunities as we look forward to the fourth quarter and beyond. While the design and construction industries remain a strong contributor to end. New sales are being dominated by work once we considered to be opportunistic, and by customer segments with likely never heard of us just two years ago. National retail brands, educational institutions, fitness centers, health care company, marketing agencies, and many other industry segments regularly contribute the Lion's share of our new segment. I think the variety in our customer base speaks volumes about the appeal of both our digital printing and document scanning services, as well as the effectiveness of our marketing efforts in quoting new customers. Meanwhile, our traditional customers continue to return to work and our legacy revenues are stabilizing. With regard to view of the fourth quarter, I mentioned in our last call that we don't think normal seasonal trends will play as a large role as they have historically. Our opinion hasn't changed. Demand for better visual communication more access to documents and information, pent up demand and a competitive holiday retail season are likely to push business deeper into the last quarter of the year then we have seen in the recent past and we have prepared for it. Finally, our commitment to return shareholder value is as high as it's ever been. We were buyers of our own shares in the open markets during the third quarter, and the shareholders will receive their third quarter dividend at the end of November. With that, I'll turn the call over to Dilo to provide further details on the operations of the company during the period. Dilo? Dilo Wijesuriya: Thank you, Suri. The structural changes we have been implementing in our sales, operations and customer service processes are helping us to transform into a company we have aspired to become. We have diversified our services and our customer base over the past several years. While we were successful in gaining some traction in the past, the pandemic accelerated the changes we made and create a diversified revenue from new customer verticals. Importantly, we focused on improving and growing services we can already perform in our service centers using the same print equipment and domain knowledge of our employees. Much credit goes to our divisional management teams for being nimble and expanding our solutions to a wider group of customers. Our demand gen and marketing teams are using social and other channels to get in front of new customer audiences. With social posts, we are able to show the final results of our completed project, communicate our print capabilities, demonstrate our project management skills and showcase the end-to-end solutions of arc. Not only are we watching out to these new customers in different business verticals, but they're also reaching out to us as interest in our services grow. Our ability to print an install from 150 key cities are clearly differentiating our services from our competition. With a growing need for digital document access, many of our customers have increased the need for documents scanning. During the last quarter, we introduced simplified pricing and a service to make it easy for customers to think about it. Our scan by box program is designed for small and medium-sized businesses to make use of 150 scanning production centers to digitize their documents with a simplified offering and a pricing model that highlights its value for smaller projects. Our ability to support quick and easy scan will help us to be well recognized as valuable partners when customers have larger projects. While we continue to improve the company, it has been a refreshing experience to drive a higher level of customer experience at our service centers. Our teams are motivated by the positive online reviews we receive daily. While there are many digital print competitors in the market. We believe that our ability to provide memorable and frictionless services are key to our growth. We are thankful to our customers for their continued trust in ARC. As we move into the fourth quarter, we will continue to transform our company and become the best digital print and document imaging company in the market today. Our customers are getting busy and promoting their products and services for the season. We also see a steady increase in back-to-office employees. These positive trends will help us grow and consolidate our position in every market we serve. At this point, I'll turn the call over to George for a financial review of the quarter. George? Jorge Avalos: Thank you Dilo. Sales growth continues to characterize ARC's progress, along with the sustainable leverage, new sales deliver on our new cost structure. The best demonstration of that is our sequential and year-over-year sales growth for the past two quarters. We delivered $23.8 million in gross profit, a nearly 33% gross margin and quarterly earnings per share that were not only higher year-over-year by penny, but also once that higher than in the second quarter. We were also able to build on our second quarter performance and EBITDA and cash flow from operations, both improved in the third quarter. At $11.5 million we constantly exceeded our early expectations for EBITDA, while delivering almost the same amount $11.3 million in cash flow from operations. The strength of our current and expected future cash generation easily supported our commitment to returning shareholder value, as Suri mentioned. During the third quarter, we spent a combined $1.4 million on share repurchases in the open market and on dividends. Aggressive inventory management remained a high priority throughout the quarter, not just in materials and supplies, but also in the way we optimize and redeploy underutilized printing equipment in our service centers, or at our customers location. As we mentioned in our investor presentation this year, actions like these are helping us advance towards our target of $2 million to $4 million in combined equivalently in cash additions per quarter, or about half of the capital expenditure levels prior to the pandemic. Well, each one of these measures has its own stories. When taken together, we have a company committed to returning shareholder value, growth potential with a diversification of its addressable market. In optimized cost structure, strong cash flows, but low cash need a solid capital structure, any sustainable and resilient long-term business model. All of this is becoming clearer with time. And that's why we remain optimistic about the fourth quarter, the year and the future of the company. With that, I'll turn the call back to Suri. Suri? Suri Suriyakumar: Thank you, George. Operator. We are now available for listeners' questions. Operator: . : : Suri Suriyakumar: Operator, I think we're fine. We don't have any questions in the queue. So with that, I want to thank everyone for their attention this evening and their continued interest in ARC Document Solutions. Thank you and have a good evening. Operator: This concludes today's conference call. Thank you for participating. 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.
