Arc Document Solutions (ARC) 3 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the ARC Q1 2023 Earnings Report Call.

I would now like to turn the call over to David Stickney, Vice President of Investor Relations. Please go ahead.

Thank you, Mandeep, and welcome, everyone.

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

for published results a today quarter release. press first XXXX earlier were in Our and materials website other our release press The company pages ARC Investor are on Document ir.e-arc.com. Solutions at Relations from available

predictions Any actual highlight today's risks that filings. and result annual measures today, forward-looking are as will Please in differ today and are based XXXX, materially SEC note filing. information and call on X, of we our may discussed statements quarterly uncertainties contain in and non-GAAP and that only results press our May our a of as X-K Form reconciled release

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

line Thank Today, are reported you, with that welcome, results we everyone. objectives. and our and bottom aligned growth strategy

steady. services are capital spending, plan incremental printing delivered products overall XXXX. we on digital but our Demand equipment soft printing growth during quarter. deliver affect construction ability in anymore. remains construction for can purchases, scanning have and to before, our pressure Sales printing and not and mix in printing our on-site in supplies the were of and moderate significantly grew remain further these as stated and in equipment which confident Absent strategic growth part we business We

demonstrated was income in faster sales. net Gross than the exert Our within operating continue performance margin rose sales. our despite the and overall can results leverage we X% we margins bottom-line improve cost model to as up profits drop grew,

of of opportunity stock It also greater the ensuring room Importantly, plenty cash year. we dividend than arises. also issued an equal annual us more when last our acquire to or healthy, remained own flows leaves to

call and of and Dilo the met to Dilo? turn explain the and opportunities over help how we our the for quarter review. Jorge I'll presented, now a it challenges environment To first

Suri. you, Thank

equipment and the our we and customer in revenue strategy transform continuing quarter had our for another overall not base from miss pay would of dividends. have growth. our If is Our supply services to revenue to sales,

inundated higher quarter, economic pressures. the a and design with technology employee first we including continuing challenging from with layoffs, market and [indiscernible], company, spend construction During and in the large rates, saw the also Inside was some clients. companies reduction regional banking inflationary issues interest

our Even strong, The company. to the travel conditions. were to despite expand and with their issues market negative continuing these their work market able graphics us, good show trade conditions, was marketing customers produce are saw for COVID-related for and we are customers we results color marketing Demand activities. the and increasing activities weaker behind

saw also who are We an expansion digital of looking customers high-quality for printing.

via the is As marketing business. digital printing of digital discussed but in stop delayed fears. spending before, projects in to event-driven businesses or needed such we or face times, can even more sometimes consumer doesn't recessionary sidelined be have declining printing keep Big our in

the continue talent a as companies pay play addition, in to workplace. and interior talent, culture the improving workplaces as a to attention well their order attracting hiring of to graphics part working environment and new the big In and build morale good in retain

growth well-aligned Our graphics this are digital printing segment. services interior with

contrast, manage As and interest our importantly, suppressed XX% rates noted construction in time on Customers complete industry the our earlier, and weakness large had purchases, year-over-year. our scanning to and than are budget. and neither commitment more on of recognizing most complex services imaging to strategy. an document which in plan projects on ability printing project equipment growth impact the By growth and had drive robust we

Good also company. customer to ARC scanning establish us technology-driven referrals as helping are reliable document a

in We increasing. capacity noticed their target information expenditures. to enough on demand more digitize customers documents large an further funding we at of not but regional to have are our investments that increase sales and is With a their strengthen scanning Our our production these some are centers our backlog workflows. of work capital scanning, is impact for strong, pipeline have and adding meaningful

Their We to wins that to funding On-site stable, capitalize is customers. are small we our balance see up expect for up from print and with on the and moves happy activity public we intend sector opportunity. improvement slightly volumes the of were and year. down incremental of

on-site needs margins. savings to devices make strategy sales while significant reduction to cost ARC ARC-certified is capital helping equipment enjoys Our for achieve and available improved placements customers our a and in

teams management increase successfully to able were our margin. Our gross

supply us the and upgrading in our pressures wage improve calmed in of are investments made cost the also issues the of chain production our Some quality helping to past we equipment products. production have down, and and

Our teams our customers. pride delivering with Customers helps online service in us at with to marketing all our reviews. reciprocating the been online programs. This memorable a immensely have strategy locations favorable take

continuing We are and our are happy and and with fine-tune marketing messaging social customers. to programs to delivery attract new e-mail the

refer our would the they to received colleague. Promoter demand our gen us our asking our we essentially putting a determine company of the score Net XX% hold some them also of force customer from American for conversions. service customers in And referrals We Score, The to us was sales overall programs in best a are driving our if business.

deal referrals a because without customers. other example, the in of printing Arabia for a we from multiyear In presence international Saudi large having quarter won in large physical all country, one, on-site

name looking verticals, also into industry and opportunities to transportation, are aviation from our customers deep a new general few. We in

all to our customers that attempt be our center services and continuously service need to every listens team Our produced customers. sold we any from make can design new what and to

throughout work marketing of to good the across team help their grow great and the operations a year. have us continue rest will departments and sales, our We

of I'll our the to floor point, Jorge? review financial Jorge At a for give this performance.

Thank you, Dilo.

first we and supply of Overall revenue growth. have quarter, year-over-year eighth our during sales, the consecutive reported fell the X% in drop equipment we exclude if would but quarter

Their strategic surprising considering and plan sales, and expenditures. decline business capital namely not that during is cost important It supply initiatives. to printing not increased the equipment note are funds contraction that for is growth our the experienced quarter, lines of the to

in The and reflecting XXX of our softness flexibility points. solid cost improvement in for basis labor higher for the SG&A by face was efficiency Adjusted profitability net income Despite Gross also year-over-year we quarter. of nearly XX%. structure. costs the EPS flat or numbers grew sales, themselves. income in operating speak as and margins up the $X.XX saw the XX% increased $XXX,XXX was delivered of year-over-year, we

in at year's million. per $X.X average first slightly in for XXXX, up quarter expect quarter $XX over or the near While year quarters. the we and this million it's EBITDA more XXXX remaining came be likely will three to EBITDA performance under last build

exceed flows cash came considering year. operations track fact We to year's million prior the in are $X year full prior on nearly over from QX that

of our more return for value. dividend our purchasing the part plan $X.XX own We shareholder remain to committed a of XXXX, stock on the to opportunistic remains our of or and open annual market

regards XXXX. decline with expect cash by As flows million and approximately year, the $X a reminder, investing we finance leases in for to financing will payments on

need acquiring purchase total interest continue as we annual for versus more are finance choosing but through available remains capital low cash leases. to with expenditures it The rates equipment rise, to

$XXX was cash, million represents reduction consistent than which year. interest as $XX $XX of than reduction our the service net debt XX, more interest of the a expense and of a Debt, from Even and X of million with will more quarterly remain years $XXX,XXX over March pandemic. cost the past of the our is of throughout start the rise rates, minimal in million

in return expand our As I our first with sharing generate the cash the last to support we is and look progress bottom-line more quarter, said to XXXX I the the In year grow regard, value. forward you focus of as we in that increase continues. good quarter. and made to shareholder

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

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

Instructions]. [Operator

of first from line comes Sidoti Please & question Greg Company. Our from the Burns proceed.

vertical down specific were a printing Can were growth the and just there digital dig that side specific, I into you how were you give much that seeing versus, were Thanks. where digital were digital was printing, much printing there down? of first. of down you within the the in to afternoon. then, And any markets business? was us just Good were printing? of growth verticals plan side want seeing how Which breakdown specific in business markets

want go that, with Dilo? or to Jorge, do you

which muted to our our bit was that of printing, digits plan single add was Yes. line, digital construction the increase printing in on color Dilo the more you graphics. the let little color in offsetting on. in part Dilo, down color? I'll and the basically which our saw quick that side the with color of a add I'll then fact results numbers, happy for we our give Overall, business. do is The the strategic single-digit Maybe graphics also a we product growth was want solid a were bit continued business

Yes.

business said to on. the see were we've our printing we happy of XX-plus Jorge So with way the about been digital We've that today. serviced customer verticals easiest focusing when that, side

those of verticals from color us. bought All services

happy, when of that customers. can types level able we the provide, digital our of we service can are recognize happy that to very very are all say So that them of provide the we we printing for

improvements marketing, they work, So interior color doing trade for services using show they for our offices. graphics, their continuingly are are

vertical, printing saw to for small digital some we that of rates level. building some it with is customer was renovations, that that slowed interest see saw will We the subcontractors, continue a the and the very the vertical that of every the the down therefore, printing we slowdown because That the work a especially Area used up. activity construction for area at market city local permitting So amount we reduced. growth good work us to area. going

customer of little So a bit that's the side. on color

Our investor. the proceed. [Matt comes of Please Burmeitser] next [ph], from private line question

to diversify expand continuing customer Congratulations the on and base. margins

possibly possible the private it now interested strong Given the Board of maximize to a a equity the of flows With lots strategic company. business, that seems value dry time management the cash the is conducting all at and to the the opportune strategic business shareholder conducting by in sale? powder is for in recent markets, review an review and strength company's sell in

strategic hesitancy a go comes process? conduct why hurt. then review, nothing the If nothing's not it, to And there if of through is

to get your want Just perspective. that thoughts on

as that's I a to this, now, strategic are need review we right Well, you the But a do can in a do because, to continuing see past. don't we very or we opportunity company, an tell not question gotten a well. have

coming Cash strong. We in way. our flows are have growth

see all we balance have debts to so don't build very this we go sheet. We good continue on a out business. are and very Our aspects, can good a but need to from there,

do have we Mandeep, question? another

Our the David proceed. from final Singular Marsh Please question Research. of line from comes

guys. Hey,

revenues comments quarter Could represented banks and it was in specific Obviously, basis into bit. a Just your challenging a perhaps you banks wanted the of to year-over-year particular. what about talk quarterly and a about in what 'XX little banks financial services performance services FY financial that sector? drill on looked percentage in and for like

Dilo?

Yes.

banking very the to small. sector exposure Our is

lot fact, we with large printing don't or us banks a In of the and have banks working other services. for national

we In if is work we small. banks And fact, exposure the are very the the very, some activity fact, for working forth. we of of local with, our some or so regional in very, with marketing banks and mostly

is very, for very it's very vertical historical segment which come. But a the us time in that develop had However, continue we amount. based segment to small on to small to a performance,

[indiscernible].

questions? have we further any do Mandeep,

question of Burns from Please next line Our proceed. Sidoti from & Greg Company. comes the

look buyback? I share now? And directly, you buying What status Just you current guess, in your aren't on terms more And at more of maybe that? Thanks. the one you like, was buyback. what how why stock do the assess back of

our increase million approved to to million happy just to roughly that of Board left. $XX our share be from $XX I'll million which buyback we $XX have report

time definitely But the at we're looking in in answer question, open and shares. So market. very do first strategy we go it's that's thing. quarters. ended, to to there end the Unfortunately, to to part open And good quarter the coming of of out your had the market shares buy to opportunistically definitely the it's still go a out way our the quarter, second here something the little buy into

can very are But when Greg. we Fundamentally, about when being opportunistic and company, of trade. buy we as we have as can a Yes. obviously, a it, we lot small restrictions to

but right, we absolutely, reasons, opportunity continue those we'll the the cash have hand, have market For that. to do limited we to is sometimes when in access if

participation. your Thank conclude ladies This and call. for you, does today's gentlemen. you Thank

may You now disconnect.