Arc Document Solutions (ARC) 2 Aug 232023 Q2 Earnings call transcript

Good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the ARC Document Solutions 2023 Second Quarter Earnings report conference call. [Operator Instructions]. Mr. of you President conference. begin Vice Stickney, Investor may Relations, your David

Abby, welcome, Thanks, everyone. and

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

quarter measures from publicized today call Our X, risks Solutions pages today ARC our our in press may Investor results release today, in and CEO, company results differ other to website are XXXX statements our release and based turn and predictions as and forward-looking we Please contain press Document Suri? of today's and Form press Chairman Relations that over will non-GAAP Suri result The in and for note highlight call a SEC Suriyakumar. at discussed August materials a were second uncertainties annual only earlier XXXX, our release. are that information ir.e-arc.com. quarterly the reconciled available materially filing. actual I'll X-K and on are on as of Any filings.

afternoon, sales thank current conditions. David. net Good in despite of Today, of a strong and to the you, you quarter terms us. for earnings softening the I'm driven Thank by happy overall joining report market

effectiveness model and its business future Our continues generating to in cash growth. sales, leveraging prove creating opportunities for

the color in compete These retail printing and investing comeback, their color as in to than scanning. a in healthy growth digital healthy in lines of X for service segment During customers demand the continue experienced aggressively are make share quarter, second more XX% to more business. markets we this demand of show

customers their employees. federal including state institutions high to to visual increasingly demand continue to show customers Scanning and converting the their as information both access. create communications to legacy are While digital clients, values using continues and corporate articulate

where interest change conditions rate other and is no hikes, on to think seen we hikes volatile months printing -- date our to segments we that hand, of diversification on catalysts become At it's the the point, conditions into new growing ahead. through rate we allowed suffer year. planned interest there has slowing likely us [indiscernible] printing and these the construction to this have same the in due plan less of industry printing, This activity to seen have the will the are revenues. construction Construction-related end in effects the dependent obvious and

that it drive support we the this the sales While year, timing make in this maintain in up growth of strong projects XXXX profitability cash in to and the scheduled will year. feel large trend we strongly overall harder pipeline strong with to with ramp drive some last XXXX can half later of the a sales and of flows

via healthy, supporting as flows value that Dilo shareholder cash for As Dilo? commitment remained annual always, to background now a detailed review. I'll dividend stock over a to our the an and turn continuing more call for Jorge and quarter, return With purchases. the

to want conditions in We coming the focused ARC challenging. quarters. the and well I are we might our prepared understand Thank maintaining you, business fundamentals you assure be Suri. But that well do strong that to ahead at on

for exceptional pride in us. During work took our proven second prioritized fundamentals quarter, we sales and with have business opportunities we we the that executed delivered. key successful well, We delighting our customers

environments digital to beyond importance we customers and are us been accelerating Notably, for them audiences By with create graphics of pleased year-over-year core enjoyable presence witnessed demand Making do and our elevating plans. several business ultimately Despite efforts. at tough their that to as market our execution We presence. our their customers brand growth. immersive showed continue services has conditions, the easy the report recognize key business of brand to it marketing always our our lines traffic expanding captivate of color rising that printing, assisting well. we their perform

saw The double-digit impressive reflecting and story scanning big customers increase, in confidence the growth for our services have the We and is our in however, an technology. quarter document archiving.

our With helped the centers, our supply and facilities down lending services printing X relatively rates recent expansion significantly a are steady work. remain On-site backlog more and scanning capital completion addressing sales and equipment better rapidly of are has in as of to we Phase deliver services our in and equipment constraints now of equipped healthy customers already remained for high. us

crucial high-quality company, print us the is for a customer us ahead output, us. possible best staying scanning latest of service. print our As printers customers competition the apart ensures receive sets and and Adopting trends technology-driven allows the technology-driven document deliver to from

flow have been disciplined portions year. our CapEx equipment the in market color refreshing of evolves. competitive to digital we We These in our projections have ensure a for cash our way advantages as market factored our been into and have upgrades

we first sales during to of With pipeline, half made our year. have the progress regard the good

have We than our borne new ratio last we higher value overall have projects the year's. of loss win improved is and

projects double As pipeline sales marketing mentioned, efforts. later remains as same of to in on up size Suri the year. this we will down force start ramp our we have the that The some good our

shown year-over-year. commendable teams Our improving results profit have by gross divisional management

labor contributed management on has material processes and as XX as a as improvement focus to cost-efficient well operational margins. Our gross in good basis fundamentals such point

our to We and the This and believe showcasing not our are and motivation business yielding capabilities, projects our in success customer Our customers. website programs. staff. who engage fostering strategies, community successfully leads implemented marketing in new commitment society in and inspired impact motivated volunteer activities attracting are a our the ongoing, demand we support recently employees of workforce. ARC, reflects and a dedication our channels. good program gen only initiative By social online our our lies also positive to in completed via we that but making At

in with outstanding efforts customers our and our our it are service. these of transform needs support market, to delight strategy meet of All addressable

and confident are this XXXX. approach remains direct head growth path strategy of the for the Jorge? company's most the that XXXX end as we to We

Thank you, Dilo.

sales overall we've XX As drop was points. flexible and by in structure. exerted profit the gross grew overall achieved strategic important discipline our We most down usual million, gross areas. Despite our $XXX,XXX also year-to-date just of margins $X.X was margin over in expansion drive and the dropped but efficient improved $X.X flow The sales strong basis to collections. up heard, accounts and X%, was due was at cost contrast, $XXX,XXX from costs, variable EBITDA in up cash quarter adjusted income. our flat. increased, controlling by year-over-year helped net at By penny performance EPS $X.XX. SG&A operations assisted for Adjusted a essentially which was million receivable more than our increase

know, or capacity investors flows or equipment a market it cash to for As increase our strong existing maintain upgrade new many a allow primary should an reasons: X competitive to acquire efficiencies, of us to operational advantage ones. To our or improve in serve expand

budget as choosing equipment the more XXXX $X year But to unchanged million the finance overall of remains we $X interest to at for cash use remainder leases. compared million rates, to are approximately Our for quarter. with high per

approximately will $XXX,XXX As expense and to interest continue a lease drop payments of remain per unchanged. result, quarter will overall

pipeline. we value. $X.X million to is dividends, excess primary If used use paid summary, trend In appears the repeatedly, shareholders quarterly of we quarter shareholder than we As we we've end have more XXXX. of in will, prospects repurchase the cash during of are free time, the cash return will to $X.X and at to this about out this our the growth and cash it by maintain in returned And second optimistic our stated million our we on adjusted shares. XX% we quarter, based flow

turn solid bottom and for to cash year behind the Suri. flows Suri? we well the call the to for back of will sales XXXX. the position While a EPS lag line, may balance that, bit With us the improvements our expect I'll

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

[Operator Instructions].

comes first Your line question Greg Burns of the Sidoti. from from

a printing, of the on the the of business? of X when trying digital headwinds printing. enough and you're When of cyclical offset just segments. split between growth color sense the printing the growth might what the revenue the be rates those maybe what in get we digital construction the to side look I'm relative secular seeing are graphics digital of kind is to of construction-related And some at

Yes.

from So services. Greg, revenue color graphic on is is and the digital services printing the coming the other XX% digital printing XX% side, plan of traditional from

out the continue to continuing on are last a to couple to -- Even the segment, segment dropped in it we to will rates that some current this there. services we you stress so as in the I the quarters quarter. that -- areas, customer market currently, market us. the in growth the we conditions, the see last the couple with market you segment. grow, services good. that good will what continue Budgets in interactions grow primarily quarters. on So are think quarters. that forth. get the and is we But we conditions, quarter, color next that that see as of good definitely busier, we of we stabilization continue seen And has to for some still are in the we digital side, to segment a drop. digital when definitely Plan see printing interest coming the fairly continue know, and with That customers under kind uptick had until and been, see continue And we've when and And growth comes will printing take of

print you're the about maybe metrics you're any number lead or demand specific generating, most where sense market. might of you're gen, pipeline you give seeing maybe And Okay. talk environment. that us seeing growth other to verticals you of leads And could digital around any any share a Great. then in the then weakness conversion point if metrics of other kind the just or if verticals? the about that Can the

verticals -- in take growing is are most shows. renovating part They The continuing a customers are color, graphics single customer the that grow. digital business the are continue the staff many of accommodate of not to new There's on in. trade market, to digital offices the their not segment because continuing to the of to coming

are a hotels some retail quarter large vacation verticals. graphics got space. renovating from seen to upgrading We malls as a We many So different significantly. during Lots of second office well. tenants many type came revamp have had the their new tenants got renovating attract to and locations saw their large protect the significant wins they -- We the districts of their of we've a chain internal that completely hotel bank from of significant their we win continuing malls, school schools. also that

be to types color a it customers continuing of that the comes customer do digital -- engaged continuing who very have are to of graphics, with we money to base are good So us. spending type us, customers with well when are

One is segment that larger is of sluggish companies, some bit. bad expenditure their continuing companies their a the to technology curtailed. little have times, has Budgets been of coming a reduced be out technology the

improve see we the about I should rest marketing quarters markets So the the technology couple otherwise, see the our are the again. happy companies think to of we are and But of to when results in the we in marketing well, activity. from -- that are with next back happy market, we continuing conditions do coming

just lead program last year-over-year rough second I -- customers. we among that sales And in inbound as the seen well. XX% in look, our numbers We about growth down was said, mean a marketing year-over-year, we see really think We've are digital activities had campaigns. I doubling meetings those as we I our question marketing leads our your and well. growth on week. about as just a

the and a to to them to organization leads, is in actual So final perform court out an inbound take and really in leads our be into and win. we continue there helping the well sales it to converting then

overall, program with as marketing well. the happy So

stock going Okay. back guess, market Great. of your have? capital I lastly, And terms other your maybe the I just and you what then plans in allocation forward between you might stock and What's in were dividend priorities any are -- kind of the this buying know quarter. past

dividend, at pretty a look a quarter, been the million $X year. million we've $X.XX we quarter, a roughly When $X Yes. consistent,

do million about we So stock get this stock What we more today, $X.X don't is we aggressive with as communicated did anticipate changing buyback year buyback. for used we the that.

And as plus So free flows used return mentioned, would when XX% cash for we dividend, are roughly of there, you to our be the the value. just delta crunch on number the being the excess shareholder stock. numbers I know

from next from Your of question Research. line David comes the Marsh Singular

for about on percentage kind just is typical what your have in business that the the comment, those leads quarters? up leads and year-over-year. one what growth XX% follow of in couple of the Dilo, about you leads of new cycle successful question Can you to and Just converting first conversion about talk into been conversion, in last

Yes.

So leads XX variety that we are as I picked my types earlier doubling we get the year-over-year a of activity. in down continuing well. And type different about has each our of up we as digital And XX, said since of on commentary, we almost really leads marketing from services. services, offer see

after our programs a just market e-mail of go try go market. we really it. we We for So certain segment all cater, how don't prospects, marketing do with service. the and specific That's or after and one buyers segment one

The get. it services to different we leads close are very very that are services different for leads for time the different. rate the diversified So close pool we takes of and that receive

of get them close standard get closed example, a of are for inspect, small we and go weeks because pricing. basically. those within so can We real those purposes marketing quite forth, For scanning we ready we converted to couple a because leads format work type we document quickly. and of leads, A digital that once bit quickly have

opportunities of leads documents, a HIPAA-related bit where like and the larger type scanning has enterprise those Some conversation, projects so inspections of big a public or require of back institute type company forth and forth. more some little

a color us rehaul they of to part couple a may take that some require office make a maybe weeks larger that the to it, for months for couple close. will month, a complete opportunities of take their close, of So months X.X of of us to

There's Once it cost, understands punt it is truly are it a pushed some of right? down -- might the customer -- some And requirements. leads the not that budgetary don't we say, that type that getting due up of sometimes to the deals win, work. back don't they what our for -- of margins, quarters let's it's don't below the that to pick win of and at okay, new want year, back we couple some So perform in right? we and of the are

that the we local at number our the competition a are go might probably good. leads we But not overall, of the of comfortable. are Some leads receive, that quality

good. Our in are engagement is good. The sales of speed those get lead of to also front leads a

win we on for improve focusing improving. are ways to Right to So rates. overall, rate. challenge we -- want We always look our win ourselves there currently of now, are improving our

win So in things that's ourselves challenge side. on quarter taken a have marketing side. third that well upon do are sales the we among But overall, our we leadership going How more? the senior

really to a pretty sheet bit inventories to you commit turn guys front. are job of last capital like to have mean, on some I particularly that the obviously, at I want forward level grow think Jorge, sustainable down Inventory work the couple the going levels -- I to helpful. levels back? some great for construction working mean, this a if the a do That's is minute. comes historically for years. balance the low perhaps of of to very of capital if -- I going forward? or you inventory you're going mean little did

down The might quick is, or vary this and new a I up is not bit sustainable. answer but little dramatically. quarters, our it between mean it's level

management leases touching would do capital And exactly year? off on perspective. from leases. again How roll finance the much working very certainly good the expect news this That's a then on just you

the add $X down to will pay range. million million probably of worth million $XX roughly leases, somewhere in we'll $X Roughly, we

that range. make math there, So that sense? if $X the you million Does in just do

guess, steady. to And your is rate you the higher, I interest guess in your expense of it interest you kind mentioned remarks, -- going being remain just Yes, I when does.

Yes.

excess You If know down use rising you're modeling doubling pay we cash my the same I because but that's any all I debt they're now, beauty use have the essentially right? about to rate, interest company, interest this bank the our rates, revolver. hear don't

have leases, really capital dropping. are just as just we those you So mentioned,

$XXX,XXX So our $X.X a a be interest will expense year. around million about quarter,

environment, say year. that be expense year very that this I companies in anticipate their could that and this to will flat is next interest going think we year-over-year, stay few and

very point share And lastly, I repurchase just count bit just No, a ticked a that's the would ticked the little with talk strong to a concur. company, definitely bit. share little count for guidance numbers The us of the bit Right. continue think one I share Or something that? a to about wanted sequentially, diluted that bit basic activity. little up we Is closer to there? those is give little how about Will there kind to else in a of about terms of another? X the going of just that think way sort you forward? merge should Could down

if close is. dictate question the of are, equation dilutive while how the options and your starts really shares When basic dependent and what to get dilutive, it's then Depending outstanding on diluted will It's stock out really or they're the what your answer because closer the product they hard that not price of is dilutive. restricted are price together. and they stock are on

quarter. keep commit specific as can't to organization could We're quarter drive down. million in what to and to an attacking second shares number So a next could I is on and is $X.X over delta keep tell fourth the you my But I commit committed said, I -- into in in what year. quarter, market. and from our We number I stock that you committing like here that we're going the back that that third to to to I want be going perspective, continuing that the we're up greater. up it's buyback open price of bought but number,

during you the average are price -- disclose per share can to quarter? able what repurchase the And

was under -- a $X $X. little Yes, it

Instructions]. [Operator

the comes Lisa of question Primack Glenn next from Your Investment from line Group.

a have of in I quick expense, increase Jorge. couple interest like by really no way, I ones. that the

think starting Infrastructure Bipartisan in see the to the you any flow on Do projects next First, you'll your inbound months? XX Bill. in

Yes, certain plant one good example definitely. infrastructure I'll projects. certain We've is Idaho. there's you to for built back come Boise, a seen And states just give in being funding chip that the brand-new

a of that. have we So piece

larger new some significant who been renovations, airport AECOM, we've are similarly, customers our or taking seen awarded also have of well. part as in sized spending projects So infrastructure like

from projects. just down trying beginning. for this think are and [indiscernible] is certain Things I So -- roll states the just back to to the

X there coming be those more will in to lot I the year, next contractors. years, So a large think work down

That's great.

I one. shows quick Second segment. a don't if as track trade know you market

so, the it of year is And the first typically in the year? half or stronger the half back of

Usually, the a the September those right? quarter, national of a trade national there period. through in Florida shows for period, one is place level, things condensed. quarter or noticed the of It's October market-driven. levels then while a are again, are shows, But show big But are are that larger shows than are very Vegas, the first regional quarter up. major organizations. is regionally And is pandemic another So takes the trade very since that first is more the second big at shows end that we've there popular, smaller picking national

going okay, there every -- every comes because is week it So typically on season month, a city, right per every there's convention se. to every is big something every don't every hotel, us, month we now, region, show big season every trade when for if think trade show center, trade shows, about,

So good just the at show had that's there's more hunt opportunities. to activity trade that market. happening past, unlike the see in But business. for where We we

boards you're because Vegas and advantage do let's print you you in follow-up a just having segment national some all in then the market that's the printing consistent? of show, say, at that everything economy to you else And have the like for big and some then the an Okay. of think to be want thing presence in Atlanta, and

done high a show There's trade competition. leg there's a this But but quality are the work country ours. time. to work person that up, believe has to than mines, because quick it -- the it for there's locally comes done mean better no well-established companies better comes We when turnaround, who no and we there doesn't fierce the have get work long nobody when around competition that to -- in company

that can we we a to features specific we that have benefits types that we good So market provide. of and And chance. feel

last right. margin but margin? don't I not, the one, answer the line, know, And then which gross gross scanning reported does product maybe have that or the does higher All -- a than

scanning overall, we a the service our the separated line. margin our product performed very margin lines product all have center, gross of within by we don't Since work But same similar gross line. report

that's -- the I So we would like so -- you think to we about how would have margins.

further call David There over back Mr. at this you. are the to I no questions time. Stickney, turn

we for Abby, good company care. interest evening. to talking much. in Thanks, Thanks appreciate very tell you in about quarter and We our Take and everyone, continued Have forward next to a so your much and night. thanks, interest the look Bye-bye. and it your you this about stock, with progress.

today's concludes call. conference This

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