Arc Document Solutions (ARC) 28 Feb 242023 Q4 Earnings call transcript

Good afternoon, everyone. Welcome to the ARC Document Solutions to report 2023 Fourth Quarter and Year-end Results Conference Call. At this time, I would like to hand things over to David Stickney, Vice President of Investor Relations. 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 are 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-rc.com. our discussed based were on press and are our publicized Solutions in release differ release information results note are The 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

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

our in lines will and come David. If contemporary our declines I XXXX when strategic business lines time might Thank Watching we future company, our that easy challenges balance mix. with it. The opportunities were older efforts scanning been to that made the in business to namely there a were offsetting our color our what's progress the see year you, them. services, but more transform document have can gratifying. extremely the revenue so not-too-distant dominate to was the a see, in validated

strong, momentum, and it while was constrained was of like hikes, was interest were initiatives short of first for Capital seemed business Business market but the spending and quarter their term, on rate fairly environment much return-to-office after the sentiment country to focused improving, lost predictable the muted. general conditions activity was us due XXXX.

and build services growth the year. projects, work in prefer as event-driven long-term throughout seasonal much As color our we marketing bigger helped us

demand historical digital office to from gain documents from converting scanning for year pandemic for information The increased trend the warehouse continued to the the that documents throughout dramatically momentum with paper began storage. and and

the converted to While this the be enormous the short-term of are and is to compelling of such for and both for need decades. it likely volume service information last growth gratifying,

declines significant on-site XXXX as work success While you've seen we services in and continue from had fourth to the our to in employees in sales stabilize, began home, quarter.

hear will that from later call. You Dilo about on more this

projects purchases equipment. were justify In difficult much the large for this as of construction economic environment, to more

printing off So start, it our wasn't plan got much changing market sluggish supply follow to sales and adapt construction the a year. quarter limited the equipment ability declines margin conditions, increase of when held and But annual a steady surprise to than revenue, to managing for revenue and our drove to skilled in an fourth less gross suit. and in cost experienced in X%

take We and progress to some quarter and positioned exciting identifying made investments in the Dilo over necessary new had to the markets, the explain partners our for details higher new making of to To and of last the course, efforts hopes, comments. Jorge us XXXX for well help their new throughout call to and help we finding but perspective, products and year-end promising level the next launching services the and the turn beyond. about I'll entire with continuing

Dilo?

. in surge revenue our across our promotional color by supporting and scanning the business mentioned. driven XXXX, than printing offset services various In year-end were streams. growing our revenue, activities Suri higher lines, particularly results, Notably, in a digital services saw revenue digital color Despite we in Suri. loss fourth strategic Thank achieved this we document facing plan decline projects a by in as you, sales and XX% document demand, verticals. were successfully in scanning significant our they encouraging quarter,

services positioning printing. continued Riot, Beyond color the brands major our premier tourism printing led to print hotel a Leveraging we operations, increased markets in and show coupled all holidays, color digital vertical, and the more trade growth our in on high-quality across provider as major North ourselves with that retail, the activity brand, solutions the on-demand, in to business small attract in expanding digital contributed focus our consistent of leading U.S. much of America,

planning dedicated America, our operations. offer team level anything qualities close. production service that and North demands a companies cohesive, few this meticulous In of Achieving define a

a X Over decades, presence construction. dominant these the past honed in we in printing, market resulting plan with capabilities

applying format and are core to digital we our our to ensuring competencies consistent expertise quality and efficiency the Now white same services, color clients.

moving document The among our models clientele. their prioritize hybrid propel of trend content robust critical of work adoption space remains reduction projects for platforms. document digital scanning the further businesses and office as digitization the growing to demand

Our teams with their conduct requirements. thorough to site collaborate audits to tailor specific and clients solutions closely

seeking clients several exceeding cabinet cost-effective scanning file success in with smaller to solutions X. contracts our for a caters scanning And securing or figures improved enterprise-level has significantly past backlog. in program and production months scan-by-the-box few efficient X contract Our the our

provider are marketing advantages clients solidifying of on document the we targeted is performance actively of reputation a our and our as educating trusted scanning Through digitizing campaigns, documents, nationwide services.

quality to accessibility valued standard, customers. our provide cloud-based enables enhancement of project us labor via management, improved technology manage for solutions costs and continuous our elevate Additionally, streamline tools

significant By in contrast, yet plan from we to have new projects. printing construction observe improvement any

offered on other substantial to have positive that this revenue in indicates and in to stream revenue by we diversify we which streams. rates, witness. yet momentum in us proactive a assessment interest Nonetheless, remain our hinges promoting decline services Our showcasing

introducing within their expanding with clients for accounts. a valuable serve as our foundation long-standing and new relationship construction services Our

noted a in customer sales. decline equipment we've services, print office also behaviors with As evolve, along on-site

have a effort However, in service over our traded with the contracts key past ] our year, we constant renewing made on-site [ clients.

well our report in revenue with line. in the service achieved with bode on-site customers. we've satisfaction to for our MPS that confidence pleased maintaining and multiple continued service renewals years comprehensive successful major I'm for service solution several Their

our company Moving clear serves positive the a forward, performance revenue the direction fourth is in of headed. as quarter indication our

company digital on and printing is our color scanning every on team emphasis is expansion, is management board. driving overall Our XXX% market and

investments, and all selling strategic marketing Our primary are this staff targeted objective. strategies towards directed and ongoing training initiatives advancing

management production focus Key our service, management, for teams margin customer planning areas include of optimization and capacity.

follow our encourage We leads I social media steady are down sales investor new also LinkedIn us maintaining doubling representative community marketing online on customer other media on a to and social and efforts headcount. generate platforms. our to while

a team top fun plan. and a sustaining implement various management. assistance a We for remains for employees programs and including bonus and priority Creating employee initiatives consistently workplace secure profit-sharing support our members, environment to

is As establish prominent to document more crucial forward presence as printing, our I look we and quarter ourselves success. to conversion and dedicated our further a results. first color in a sharing inspired fostering team digital

more So at the Jorge to financials. hand this for on point, I'll over

Jorge?

Dilo. you, Thank

construction in strong equipment services on-site printing the during that sales and combined first and of period. fourth the supplies, quarter. soft during sales While the sales incremental led we in and color with of quarters, scanning plan X were signs stabilization saw to

of we're recession Suri XXXX. opportunities them good economy, for come a in a has chance to resilience and created of building rates confidence Dilo sales in the with XXXX As in to noted, a position the down, and work forecasted new capitalize favorable limited environment and our on

equipment quarter mix low-margin steady margin have the our in the year, quarter. it quarter drop of business. in we sales. as result fourth as decreased during High-margin a fourth not but fell the of unlike last plan normally the a for year, held does fourth Gross printing But did

Throughout of in inflationary the year, our we reduced on put kept leash the to labor enough dent cost and our depreciation benefits lower margin. costs that increase on even a higher of and on equipment revenue gross services. were light purchases in a scanning with reap pressures associated tight on-site sales, costs softer not And

level from of the with year left was relatively was sales bonuses, earnings commissions stable for to decrease income for EBITDA The sales and which in benefiting costs. in net attributed SG&A our increase us labor adjusted down, share year and lower the per lower an and year-over-year. a

year. affected was the cash efforts same by by was mitigated the the While themes, the from in cash of decrease flow collection half second operations strong

XXXX line drove $X.X the in the full Our helped DSO keep from quarter. dropped flow a in fourth X prior and operations, year cash increase million with which days,

are for happy XXXX. year, buyback. we of and dividend the was to $XX history and form do the the again in that full in most report it share shareholders We we of company, returned we the done million to This in to plan the ever have

improve, liquidity on and to $XX shareholder returns. capital spent million structure even after continues Our the

by Our million. cash $X.X balance decreased

debt $X net Our only decrease. a representing $X.X million million, was

adjusted stands leverage EBITDA. X.X at ratio Our only

had stems expense P&L California our address before from obvious for property year, made end its the that the gas been we we site it. remarks, a station gas well need used XXXXs acquisition before that on station removed we expense. Finally, demolished during to purchased storage remediation long The the our involvement. tax before for our include the an and in been we have The outlier

the plan and extensive monitoring on did of asked property, so, were approved, quarter requires more turned a site. and this ground the and in XXXX Several ago, a detected create further now we additional petroleum fourth for years to plan. was remediation but the We up risk plan much

worth points expense. emphasizing Three about this are

this to of has with operations. do none our First,

time, will our given importantly, And Second, in project. rules accounting hamper any but our property this expense don't require to we reliability is in meaningful flows the of own. the only or a extend establish a most service now. operations over of to period it center expect third, We year cash long way and us this

attention to our Turning XXXX.

and variety in our serve and is encouraging anticipated economy is and and grow. The growth strategic seeing industries the of in are backlog to we rates, from of declines interest We robust. opportunities our continues services benefiting customers pipeline

made growth. to in point, lies in our forward ahead back I'll to look sharing We've marketing progress you turn people to XXXX with what drive coming investments quarters. prudent this in mind, At future and With call Suri. and the equipment we in the also that

Suri?

ready Operator, . Jorge. Thank you, now from for our questions listeners. are we

& Greg go Sidoti to We'll Burns, Company.

saw plan of construction stabilization you the quarter. the noted I in guess And printing you signs market, fourth some

barring at we level? I look that do to potential the rates business that for you that know you feel down, stabilized think get side interest going the like -- should down a you potential would the but How into in rates interest further of business? has declines part higher, catalyst lower going a about As business 'XX, do be of

you definitely and some actually to the going start plant rates segment our be it's interest the go drilling for said, of kick business, Yes. down, if helpful of construction will the Like Greg, revenues. it

going stable, don't I muted. Dilo, and any think However, move, it's think it's don't to if to the is just different. it's which I be you unlikely, going to interest do rates be agree? probably do going

is do always lag if the to No, in interest place. a I to construction go even X- thing think designs, and second new the in new see there's rates quarter, the other down put X-month to

that So in I well. timing as just mind to keep wanted

another question? Greg, did you have

Yes, sure.

more on the are your dividend strong business? around increasing How capital X be guess priorities. Just this or the position. in think the cash a What accelerating do your remains capitalization cash net probably year, you'll flow allocation and about buybacks? share if for I the you thoughts maybe return

And Both I judge operations Yes. that? I of talking back mean we how So will operating that returns How obviously, did year more flow that cash market of buy to from to business view. improve, opportunities, cost already an everything or mean, continues to is we if we whether as went those pretty of cash. do the was good that of of which the good. then was a shareholders? to up. what back last shares from based Greg. shareholder on it amazing should -- our is I decide year, XX% conditions, the going deploy depending also on point it's course, we to

we something like choose make mind. to investments to . might in We want in would some So Jorge, business. add the bear that that? you it's to to

all and stable to at reducing cash I see everything with even did XX%. generate, mean and allow that Yes. that. stay do on and we I shareholder to But we my did, don't us we still more. grew level we we after script, returning the by I value, think cash will mean obviously, million almost I flows Like us pretty mentioned we mean $X

for bright us. is future So

which thing. options, good . is We have a

David And to from which Marsh, comes next question, Singular we'll go Research. our

Can of like in looks you share kind you that it the little average... give an you where repurchase update repurchase over do used a of equity us program? the what's fourth you puts quarter. So have regard a on the sense to with your And just

It question? not that very is you could clear. Sorry, repeat

I under think you every we it's another little worth million We saying think the I is but $X.X question, did, we available share million-ish approved of about repurchases. board clarify, right, share were the repurchase. don't answer had repurchases different. the And have a I if $X quarter still plan. just

more there's in quarter. first opportunity until Sometimes the about quarter doesn't more third versus the open Think March. to buy open one. another window

So time. borrowing $X.X buy the we weeks in truncated be that to million have range other opportunities X to year, very for we of your mentioned Did earlier. shares, that X, for answer overall, XXXX, But period Suri question? that expect

of share just give ask what repurchase? was at us price it of I Yes. the just part was a Yes. you the per you, other average sense

to $X.XX The to Don't under in repurchase, quote it $X.XX was that. it close me range. was $X, but that exactly, pretty it's and

the just particular incremental strengths started back strong early side. that a from half as And helpful. part here of the maybe 'XX, -- That's of have business of in verticals you Yes. show it. industry fundamental started that kind 'XX? during earlier turning to to of there more have the Are didn't to Got 'XX then performance

And the side, you particularly from the know away have construction that verticals there there any movements. rate bit talk But that could strong about hinges other on interest expectations are particular we little obviously, a in any you for of kind -- that coming year? are verticals other which,

Yes.

market impact thinking sentiment is to sure shows based seems that business market if is it the So that will be looks the the obviously, on going are like stabilizing. that, be segments the deteriorate. on to of I going forward. to a have positive. it's case, to going the more much the now, And mean, and it It's -- Nothing we're sure that? what's like other a your is active Dilo, obviously, that perspective we going going market right positive on

Yes.

really holiday X season, if QX very, are quarter. at business retail the seasons, in obviously, segments different customers of you're the very busy, the different because mall types our segment looking business helped or think operations. specific strong fourth company, get there that I the of was X towards us retail, Those in customer mall

the verticals our share. as are you see we XX almost organization, we back is continuing But track see grab are see verticals, categories. of overall, when bump all know, one a we track the in in we all about marketing. is marketing, trade that up. we A show every is of lot that company to bump work things to They they trying extra Because market

all the looking that's in that pretty verticals sign think is I positive new So we see that everybody much for because business business.

So digital with graphics verticals. well services our digital marketing bode customer that's color where and those

going talk leases bumped kind just a it operating and about Can And a finance very looking is of last here, just debt kind term. what's what you just your Jorge, at then expectation of months? item. XX it the another and for of -- one next long That's there like for sheet, liability bit balance me, on the little helpful. just up looks side up the like bit the bumped housekeeping looks kind leases and

leases, I'll the Yes. regards with went We off the $XX were XXXX, actually ended the In start we at to the million. that end year one. $XX easy of at down. year, finance million.

either for potentially more. So bit range staying of or in dropping little a that that kind

perspective. sheet So from big not a balance there shift a

this In to regards a renewals. product the just facility is operating leases,

I next a the is a but stay buildings the in December, books, X rules renew lease my liability for new shows going to now bigger it's on up a okay, if I annual Our of I'm all same. have my annual my say, X-year rent the that accounting as years, one it say, expense rent building, stable, but stays in pretty and

worried it's a make of -- So to gross Nothing impact my financials be that about Does going I P&L. sense? an like kind just sheet have that from there. on your a this balance up is on would

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

your printing stable, strategic next plan foresee I just is net outlook wanted business? construction up do XXXX, the you growth the to for driving year areas follow with for if growth

given definitely we been activity feel especially the we so, the have having Well, with customers. yes,

definitely in like to I we will will think would that be Dilo, . improve. it going the to you add

take look strategic line growth overtook business if I QX proxy, printing. in Yes. drop you our as mean at a a plant the

definitely, printing see So strategy, in fully specific if the push our are initiatives. behind building that XXXX, plant we'll stabilizes But growth. we focused building on our those growth

fully call, are that. And our as all said I the behind teams in that, management

putting been in we've years, X last we that. enjoying of things place, the are benefits and the certain Over now

I'll there for questions. time, closing further Stickney remarks. this any to no or David at additional And Mr. hand back things are

Thanks, your meantime, in quarter your with to first We -- continuing early Lisa, reach soon and the you and to good about progress. appreciate call a and with tonight. us May. forward our to . evening. any Thanks, interest In us talking encourage everyone, on look ARC with have we for thank questions you, attention in out you our

for conference. that you again, your participation. does once conclude this all And Thank

may disconnect. You now