Arc Document Solutions (ARC) 22 Feb 232022 Q4 Earnings call transcript

Good day, everyone, and welcome to the ARC Document Solutions 2022 Year-End and Q4 Earnings Conference Call.

At this time, I would like to hand things over to Mr. David Stickney. Please go ahead sir.

Thank you, Lisa, and welcome everyone.

Financial me President Suri Dilo and Jorge our with and our Wijesuriya; call Avalos, our Chairman; Chief Chief the today Suriyakumar, are CEO and On Officer. Operating Officer,

only statements Please may year will on Our a fourth today that today they're a website X-K filing. ARC actual and from risks company Document press predictions release. measures press quarterly as our XX, February non-GAAP for today of uncertainties Any contain other ir.e-arc.com. our discussed based were on press and are our publicized Solutions' in release differ release information results note are This and and materials XXXX and quarter filings. call in annual earlier XXXX Investor we and result forward-looking Form results highlight that full in today's as and SEC available materially Relations at pages of reconciled

to now Suri over I'll and the Suri? CEO, Suriyakumar. turn call our Chairman

Today you, goals. full advancements strategic and our Thank David, and meeting in we welcome of reported XXXX year for significant the results strong everyone.

grew. sales operation three have our of past our impressive. in improved And as annual Our I nearly metrics. reported are earnings quarters, the We all key

solid. Our balance sheet is

is all, and high. debt growing generation in Best cash we remains Our low our of XXXX. continue will

than growing. in verticals products The us more them is not than XX of verticals services more thing sales XX industry into we $X growing. revenue growing. from and growing. of million And services only serve, of serve vertical the is these are number the Our verticals we are The in industry of number purchased we XXXX. of of each each sell The

design us. make homebuilders diversification purchased year-over-year general construction multiple from customer subcontractors, point engineers, contractors, services and another We our customer and single every of I all property grew our one in verticals Architects, the of also XXXX. should sales in base. about developers

environmental by tremendous purchased markets sales services, great safety business. well transforming graphics, together and a diversifying taken these we services, as but buying equipment from customers as it achievement scanning print itself, signage, our in all serve, progress is Far a represents alone, blueprints in with on-site This supplies.

went idea success into went an in the of a XXXX what you what the to Jorge what I'll future now we review. give Dilo -- for and or To Dilo? our call over and turn holds,

Thank you, Suri.

This spending momentum some China from the continued sales in and dragged sales domestic through the down fourth quarter were venture sales progress. our overall from North and track Our expected. the of lasted December. softened earlier most period. as well hit the American in the quarter on though there joint and for lockdowns constrained our year with into throughout then holidays COVID UK of low sales

continue scanning through sales quarter. for at were verticals serve high of segments drove year. revenue their We and also education services office, customers' color print irrespective graphics. levels the flat Retail, will industry from was demand the in similar construction size. services we Document from locations digital our Revenue many during coming think our the of of

to we If return like offices, more to see increase their customers volumes. print moderate in will a

for grew business and As We every line the themselves. results except sales. in for year, significantly supply the equipment speak

in will strategy to increased and XXXX The Our annual put grow outstanding. our have were continue sales XXXX. we help for X% us and margin place expansion profitability year-over-year in

customers spend expanding customers, for and the three Our of to go-to-market winning plan existing on focus continue new actions. annual

to sales designed more drive generation programs qualified to sales have been our leads demand teams. our First,

graphics, programs. Scan we such on new by flex and Second, educating products communicating Box our the sensory focus and innovative regarding our customers as graphics

in when August ARC's gets we more diversify marketing buyers our support overall focus better These within I industry year, different last Everything into the actions Third, to customer reach programs companies. do of we outlined expand verticals. with we selling all focus account-based market. to being our on growth primary our on strategy

increase As of types our our we the Suri and mentioned us. customers economic will continue business do market to relevant earlier, we with soften, Should service us to we business conditions verticals around momentum. the and remain diversification XX now of sales help maintain continue

and is Delighting market wider in a growth assists to win customer It referrals customers for new capturing aggressively repeat ARC customer and business. our plans. helps in our share profit is Improving is why our employee continue increase us prepared of service incentivize strategy. also new to business component win share. service business we excellent us

high-service ARC think This XX,XXX is near to promises. five-star with our evident we provider deliver from excel and reviews. online Customers as a of on those rating

more outline also healthy a point the will our remained gross out the should efficiency. quarter I to that in details and thanks Jorge While both in moment, our year, margins operational

supplies business. moderated, print a our of though we on course normal of has escalation pass Price customers as increases continue to to

we significant chain new our teams have working today. with suppliers And we seen management proactive, been the all, have better in have in and are vigilant significantly reported for supply contributing past results supply In the of improvement difficulties. We closely operations year. our to

relying their in on us to are continuing We grow efforts XXXX. help

our annual point, At Jorge? performance. for the this discussion call pass financial to I'll a Jorge of

Thank you, Dilo.

the posted growth. annual More Without $XX.X growth sales X% gross achieve the XXXX. for during have of $XXXXXX overhead posted were would joint moderate impressive fourth quarters million. three cost of we line exceptional in seventh how in we the able adjust venture the the still drop we quarter, margin growth our consecutive to Chinese leverage our Our or is we increased adjustment, our for top revenue If four growth to than quarter.

scalability points. our by expanded it of speaks XXX and to efficiency Overall, structure. cost which the basis

revenue while X% grew proof nearly grew further need you If XX%. EPS

impact $X led more in per in wages roughly and As year. we a we and the materials fourth inflation's quarter drop averaged predicted that on than million quarter EBITDA to million despite the $XX for

$XX XXXX by operations million $X.X EBITDA. or be quarter coming EBITDA XXXX $XX.X narrowed the note, over more and cash flow million to and from in in between Cash from well. operations per as million Of grew we for at gap XXXX, average flow expect

grow from we XXXX, increase. operations in flow earnings also continue cash to will As

With regard cash million leases expenditures investing on XXXX our $X.X in for decline finance remains to and low. payments financing capital flows, approximately by need and will

also capital to continues structure Our improve.

cash of million is net million X the XXXX. to will pace debt, which of debt cash be of end amounts year. Our this $XX.X prior by At an from close to $X.X net reduction

a return our shares. an own In shareholder purchased as our more worth we Shareholders' continue return $X more at reached than commitment plus yield to of than all-time XXXX, to and we dividends million value. million X% $X in high paid honor

than a in in significantly our year, returned than Taken more million other $XX more XXXX together, any shareholders to history. in we or year single returned we

expect more of year. to did we forward Looking into what last do we XXXX,

double-digit in operations As cash beginning, a and value grow to achieve or that moderate EPS. flow I remain EBITDA, similar percentage at said in XXXX. I than you In sales did with growth, rate a possibly we the increase assure shareholder closing, want from returning could in margins, we our growth committed we expand to higher

back the to said, I'll Suri? turn With call Suri. that

are our we Operator, Jorge. listeners' you, for questions. available now Thank

go you, [Operator Burns, Company. Thank Sidoti to We'll Greg Instructions] & sir.

Good afternoon.

I quarterly how operating we venture, a joint far the a basis? back you environment? on And historically, from With guess, down look revenue how more much is generating if normal that from Chinese like are it

that? take to like you would Jorge, Hey

Yes.

five million revenue could past, they year, an to Obviously, basis. used about years, For just operations by providing our the the back X give divide Chinese in on compares we annual look you million $X How plus. if the amount. are be $XX it that you to quarterly to

our we business not expect that So have they're been forward few here. of truly frankly, years. or as case part And to the revenue big the move not last for be a and we

Okay.

that expectation of just business? normal is for no to level kind here? for meaningfully there's from rebound a new that So This

Correct.

line you're Okay. operating in expecting your on your for of around And still us by thoughts little just or color a you those XXXX year? top bit Can your give on next you more commentary then segments XXXX. each guidance in growth for mentioned, maybe the

take Dilo, would like you to that?

Yes.

that our in Yes, of of customers certain printing, take if adjustments segments especially release, will primary industry digital for as see makes look our you the segments stay we be in earnings customer shops, print its there you slowdown if to printing are take So we outsource some the comes as a strong. at to the continuing mentioned -- and our most forth. so

will However, their continue feel over to forth. we so -- segments in embarked the many that with we've last our or program grow diversification and customer confident other so activities marketing that years three we

part in so travel industry. activities, show companies the to higher are activities, that are large shows, -- of trade market leisure education, the meetings segments There show in and to and grow, manufacturing, are forth. continuing take especially many corporate Lots education, the trade industry, in trade regional marketing continuing

graphics we So are digital focus continuing to -- and specialized we will so for those forth. on segments

customers maybe to the is forth, area come off-site provide We provide to second business provide change back of growth that provide Though customers, continued segment our a all that see we from will hardware. where The the will multiple provide continue We more small grow come their we supplies. and our habit we -- hardware. where types as labor. services, we We so sell offices should that and segment. services

that bring using are continuing content that -- is capabilities their a because the can well documents employees has remote to access information. scanning workflow, companies fairly Document as their the been from strong, segment places, mobile many on a focusing of and as digitize as platform digital support into to

see are two, volatile the is transformation are which at So markets volatile, But ARC. there about the overall, for which three market certain last however, we industries the days. what in good a embarked these years we XXXX, to we've place continuing feel that -- little take as are certain

focusing are on verticals. different We

verticals, We to that continuing are on focusing multiple grow. are

same growing as and customers have are communicating vertical We we services educating also and focusing those to on the different within customers well. each that those

should we XXXX good – That's today, have be a release. in So, earnings outlined our year.

continue then, that on the you get the improvements coming that it gross target line, earnings earnings are Okay. as business? that to a is outlook the coming in operating where Like to leverage? you And from? you is on gross is have is margin, or for scale where to then from margin gross double-digit And can if the leverage the go, growth, margin there going

Jorge?

twofold. be will it yes, So,

feel metrics on most and mentioned the margins moderate including, with -- or on achieve all sales our script, our of our we growth, key could EPS. I we As growth gross key

sales better were increases. overhead, in relates like equipment. frankly, XXXX, to going growth, it And So we hampered be we we be we're moderate with as to able think inflationary depreciation we high also don't costs to think will with leverage our

costs. material in of but higher that don't cost was taken a We're We by of a going leveraging XXXX. lot some new or at now. that labor seen higher anticipate benefit up We've XXXX, structure in that away or

So cost when with to hence, dynamics, structure able should your those your gross will, growth, you moderate you if look sales cost then margins. an at seen in improvement you be leverage

be we'll be we in basis to increase in able like think, we at will plus be can that XXX XXXX? think, expansion? Now, that's points we very basis XX did don't We gross But achieve I margin points level. doable.

is to we Maybe, in our add enough that, just capacity stores. another have point

this We extra have bit revenue, bring quite to in plan that have that and year. stores XXX we accommodate capacity we of a to all

So, that margin our expansion. should definitely support

the hop Perfect. queue. back in Thanks. I’ll

[Operator Marsh [ph] Singular Research. to Instructions] go David We'll

XXXX, the guys. relative that in to speak pace activity business Hi, of year? far you realized you've to prior Could so

that? take to want you Dilo,

Yes.

obviously, of So, digital work and COVID-related however, in to printing there a had XXXX all and XXXX, a we repeat that a the was activities services growth customers. provide right, XXXX. slight the year we've nice we was that we've that in But traditional had very clean X% year-over-year of and seen normally

for areas. the two came So, sales year growth from primarily, last specific

our services able was customer to multiple our we of were verticals. verticals, First, expansion expand because to

well. to we grow was able same customers sell third as using us the the additional number verticals. to were we customer Second, the in one, services And were these of to able

as were the second may So obviously, XXXX. it we XXXX strong going XXXX, the we because very we still but first not in that growth comparing quarter. into it year's quarter But trend nominal have from should in quarter, -- growth same amount have the previous the the feel was started a XXXX, in of we

that slowest it's and day, is is to month January in end month. early tell. second quarter. mean, the in company, it. start flow at of really our we're typically I out And month slowest we the of still February. From our January February the December the makes seeing activity and the is coming March our increase too

any give comment to on meaningful too still point. QX So, early at this

relatively And the the could competitors? opposed talk recessionary of just business obviously, of mean, talk there's to other how lot you businesses a economy. market holds I up Okay. other some about the direction or a as in about environment in

shot, Do you want to give Dilo? it a

Yeah.

So slow obviously, when dictation weak, down. is spending is from economy customers little the a do

revenue however We that line changes transformed onto through. small. couple very that past the customer, is went plain and that, of the we construction-related this recessions right? in that that and that – the were we we is very in key but so recession base, paper the that time for printing the seen in company of XXXX we we client went have we So heavily very, the construction-related used activities segment did customer and in today past But forth, couple one done have through, of have unlike our recessions

going that we years. feel And products also feel And is every out. there has other be last segments They of They industry, market, They there's couple market. want a are over that do have if happened certain bullish want company therefore, to we in transformation get that, industries right? well. we to the – down are our to a that – in slowdown in are going So lots of about going to shows. their the even very trade certain to have continue to market

we So markets those want to to to markets on continue we grow those on our focus business. capitalize to and want

with done cash managing and regard sounds That working you job flow a have – Okay. great With promising. your capital. obviously, guys pretty

In of free remaining cash terms into uses guys expect us just how have forward you much we repurchase you to capacity your share tell flow as roll can program and of your you employ? other XXXX, would on positive potential what

Jorge?

$XX a that still in extends million we stock out available our more repurchase Yeah, years. have couple program

plenty of availability there. there's So definitely

million. commitment. dividends, obviously kind made forward move plan approval about to to The Obviously, Board with quarterly of second regards part We giving XXXX. year. is dividends that's we we $X.XX $X into a in a that We're dividend those continue fully as

and that overall So, was our script we value in in two in all-time beat $XX as for of that those company I we high an XXXX, returned XXXX. combined over expect million meet said or my which shareholder to

hopefully that answers question. So your

Yeah. That's really queue. I'll back guys. hop Thanks, helpful. in the

to back Greg Instructions] Burns. [Operator We'll go

Just couple of had a follow-ups.

what services you maybe mix AEC percent the give of revenue what diversification is other revenues just that business there? about document providing those You're customers? within legacy to your talking kind of is some of Like, the verticals. Can that newer like traditional us – you're the of versus reproduction the

Yes. Go ahead, Dilo.

Yes.

you take scanning, provide; services XX%. about that last the graphic came type completely verticals provide. do almost the of XX% we that digital that from in traditional the subcontractor probably we scanning, key five provide them services has XX%, and past AEC we if work verticals plain other architects document that construction would those Rest about for work and the of say and engineers probably years. we comes client color a over printing. So services, on-site that's good changed I that it from signage But supplies of today

vertical in to find place then net expanding do the And have verticals a markets, from that does Is you programs Great. commentary happen? it and new target-specific specific made just programs does into you markets? that Okay. go vertical how you, new marketing dedicated happen? you're how wide to casting expansion or companies around like Like

strategies So a couple held we of that up.

into see certain customers focus we right? is engine customers of that we our visit to or are programs. that to is SCO busy who the vertical through from the certain gen customers our different thing for We particular or customers parts customers -- look right, And and quotes have have this verticals at website ask when get available our busier drive types have okay types team, website, a central that there marketing are that have we getting we these busier period centralized of of stronger are getting we due then realize we in of marketing our three period buying are Who data very sites a data they what say, -- certain able and are to national at right? the types a really to we that since strong makers that we are? first on that The demand they of in visibility types Why from the more during for as or the Who decision active quotes? or ask buying? good time, us, have look data

program we here. centrally management So we organization that a our marketing centralized and data have data within now, because have a available

So okay, that that specific or at know, we focus. want targets vertical to are by we looking that then these

presence, then buyers, and so do little forth, to as a do we national the price manufacturing we interview from we to Arizona, us research Michigan in because this and understand somebody it buy, and So from have right. the buyers' personas, did buy did bit more why why buy the what customers, they are points able company the to compare what the we --

we So able get customer information programs that target really build that and vertical. and marketing to then are specific

And those to We list. amount churn keep customer we purchase available that customers strategies customers. and certain is a also -- have data churn customer that We continue on where the market we that marketing to to list. we of

opportunities to So how vertical. that's different select verticals that market try and and we and that expand within continue

Okay.

cut it's used the the at open-ended? agnostic really right that tie at Like it's mean you're this you've this to now completely this like was I mean not you've industry divorced point levered I kind or more to verticals. where -- it business construction point at So point? vertical or and of be

nothing because construction services and even our than buy before. we customers, construction train our salespeople they when they specific salespeople, within training from us when train we anymore, called the for there's purchased onboard Because Absolutely. different

So our is different completely training now.

have in within show them the So we the we unlike -- buyers same opportunities, because multiple office past we well. have as

HR So the versus the staff staff, project services the managers, us. buy IT from different they

in same been is to the to markets the to for us. miles train the continue very that's to So multiple has how idea helpful very, look and where diversification

to Thanks Great. Okay. ARC.

hand further additional to to for remarks. David no closing or There things I'll appear Instructions] Stickney any questions. [Operator be back

Take with appreciate we'll Lisa. attention this evening. Document We Solutions Thanks next you thanks quarter. And for interest talk in Good continued everyone ARC night. your your and care.

That today. all for does Thank you conclude your conference. participation today's

disconnect. may You now