ARC - Earnings call transcript Q4 2017 | Arc Document Solutions, Inc.

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Operator

Good day, and welcome to the ARC Document Solutions’ Fourth Quarter and Fiscal Year-End Financial Results and Webcast. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. David Stickney. Please go ahead.

David Stickney

welcome, and Justin, you, everyone. Thank

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

call Our provisions Relations today a other pages Document earlier company risks XXXX, on actual Form fourth were President within of are in highlight non-GAAP materially I’ll February we available release now certain call website today’s release press may to and Private annual The will forward-looking the the to which in today, in that our XX, today’s Safe quarter of quarterly as Act note fall ARC for Harbor measures, references X-K press filings. year-end also XXXX Suriyakumar. Suri? based and fiscal on from contain filing. uncertainties in Reform statements publicized Please ir.e-arc.com. will CEO, press Litigation and information at Suri This materials Such and are the reconciled call that predictions release. over statements and results our result Securities our our Solutions contain are XXXX. results turn of and Investor SEC differ that Chairman, of as a only

Suri Suriyakumar

you, everyone. good afternoon, David, and Thank

regard announcement you transformation As we time, strategy. may recall, last to our with this an important year made at

more order build our the our to and services in plan to in In addition largest invest unveiled space, capture in to business. investing and provider print this revenue decline to the technology intention market to also technology in our provide our we service legacy time our minimize strengthen revenue. our was solution, share print Being

in to make short, the revenue. declining we even in So face investments more of chose

can changes would retrospect, often were took business. nature secular options I’m took pleased and shows History While challenge don’t who undertake we secular that that taps it. cripple on to trends ourselves either bold contend our we was that an aggressive In of a such executed that. drive constantly or measures move, resigned limited, this to it companies the shrinking with

doubt, quarter sales Likewise is to sales improvement the share. negative complete flat delivering marked its MPS us in year throughout established as for Both CDIM significant can work do is gain progress. we were reason with we our year-over-year welcome and achievements, delivered still measures quarter there performance work aggressive in put over every X% in overall future year-over-year fourth The best there in made well we encouraging improved trend. the quarter While of other third no were print quarter, for the fourth a the XXXX sales to believe despite foreseeable year. or counter slightly XXXX. results declined just historical transformation the same the market period, the in that to trends gave to

year-end, our technology space. inroads to refine we we significant salesforce solutions. interest adoption by began year the We the and tune effort facilities throughout make created marketing greater our On we of as front, our fine into management services and seeing level ourselves of this continue

mobile fact, Software Facility by magazine was of Tool best the this ARC Reporting for Facilities readers the In earlier voted and provider our Executive dashboard. month facilities

Our market the the pipeline certainly gained and is for sales in is have we attention excellent noteworthy.

this commercial construction in press persistence the Therefore, industry. a time, exciting real we The market. But at to require the our it same it penetrating segment market. – that and of that not release seen the technological kept has segment and we enthusiasm up purchasing the business tremendous education was it estate the all spreads bold demonstrate Yet regains who changes segment today, such facilities improve is we prospects consistently time is done of with have making challenging As decision when with I broader an have continues have execute. across towards is are verticals disrupt initiative. noted solution, and an productivity requires enormous obvious in we to anticipated we for of the progress our set and that than began a with efficient XXXX the Even we more in so laid patience. early this that and to we The accomplished new plan what management do. out and

during business aggressive year, in our cash technology very the stock in while revenue maintaining our the marketplace traction paying slowed and bought have of the Despite overall we the health and healthy debt business. relentless time back we Giving capital for in structure. flows a focus generated declines our us We company. to down the strengthen declines legacy remained financial our wellbeing believe gain and to on

As in today, stated earlier release work press I have still our cut our we out.

that our team, with success of I’m have had management we the circumstances. ahead. courage However, difficult greater such under my transformation the proud year confident even we immensely to and will I’m execute in strength

of Our our conservative print focus the as in for we experienced have volumes evident but begin we the second remains in the year additional that will past. shrinkage in the half be sales expect XXXX, progress to offset

the more we are We halfway announced than in XXXX. through transformation

in decline While growing. the printing technology volume projects of of continues and construction is use to the

building than more something doing new. We’re

as Dilo value Dilo? operational the environment With brief looking of while with overview the business in I its are who investors take exciting as before Jorge a then create to others, success of and call and appreciate this question. this your a backdrop as find conduct we’ll customers our turn finances some long-term We resources further forward we our more future. to working We I’ll do. and for our investors details to with discussion, the still the for we leveraging maintaining for and over healthy patience

Dilo Wijesuriya

improving were see line fourth to the Thank happy you, CDIM the We quarter. Suri. revenue in

same other projects base. customers, improved continues new format white team construction successful digital to penetration move the our new While and of sales in printing in towards to services been have customer their acquiring workflows, print

drawings other construction on of customers. selling but services, existing just grow. focusing engineering and in continued use to are environmental print specialized to and architectural graphics our We color The

traction investment more are efficient We the change print more our and color lines of printing recent and services smart color tracking. red less more project has It form expensive color and advantage in in use services. new and of in in to market seeing grow in become our helped the continue robust our penetrate to country share of will the and we us and in win this print our technology Project sharpen more has remains competitive to to activity print many market. parts

new our supplement valuable add to SKYSITE to continue We workflows platform.

and documents secure to services finding out and cloud ARC. our sometimes technology with to the workflows, and prove sell the strengthen sales SKYSITE technology this construction project play build able us By proprietary software a we life out to management as practical of of services use into were also based be tools close was management. good position print, As national to to a customers base. working customer few on outside who being customers a throughout greater source are more far digital and comprehensive in flat MPS year-over-year usability to of who team use file are revenue of project. our scanning hands put computing pure able our Customers, other in impossible. contrast, the environment offer print the we our products position They support exports flexibility and for

Abacus our improve to offices. technology, continue a customers’ key managers differentiator middleware at It We in offering. the our that our remains print MPS

we to print Our reduce and manage make and sort it of is customers continuing strategy assist environment to easier them habit. unify printing to

used are into aim revenue Our facility digitize our a and paper to a small though services, mix their by format. of part customers digital our content

and convert the coming print them teams quarters. Our and building a we to hope are in sales pipeline of technology strong opportunities

to I’ll in us. Our how the over turn continuing numbers. customers in difference strategic a market Jorge sales Jorge. the are run investments we look the approaching I progress in XXXX. to call through how weaving making now our to are clearly and forward

Jorge Avalos

in declined where hurricanes the our noting Items Thanks, during we of and by in but print declines negative the effects the driven by the improved in XXXX quarter, performance the Dilo. the flooding year, business. X.X% also worth in Sales for seen is Historically, fourth our managed year-over-year achieved Yet, teams the our in especially the CDIM and past. fourth soft reduce in business. quarter to the we’ve declines traditional the regards significantly quarter, very our to MPS sales.

improved anticipate the As call, not we we those our a sales effect discussed from didn’t what country. up saw, over coming to quarter. Instead all what. third areas did in emerge in catch we events see our on last by we weather the And affected

our was for sales X.X% leverage by gross our their which increased were year considerably labor. ability Our Also were investments primarily on negatively cost China, and fixed equipment and margins by lower lower challenged SG&A made rose we the XXXX offset G&A XX.X%. marketing. impacting to our and carry margins margin. in lower It effect sales in cost with sales cost in by

we XXXX, As remain employment and focused XXXX we a in on caliber during other offset of sales company force. did additional aggressive areas the marketing help costs driven throughout of to managing by expenses will higher

earlier, health senior continue million. to our adjusted flow in characterized leverage ratio $XXX,XXX was $XX performance lower sales, light As only our our financial very and from by of to year-over-year. allowed Suri declined our cash in us pay operations despite This in decline noted XXXX $XX.X strong manage in debt flow, cash down of EBITDA

X.X is in and Our ratio, payments EBITDA agreement times credit were on of cash total than U.S. XXXX current debt more our $XX million. to net

our ability at And the cash gave balance million the $XX us the position stock strong X.X also end have the purchase of still to fourth cash Our during own year. sheet million on of quarter. shares of

at our tax agreement favorable the up revaluation remember rate principal far impairment, provide we tax million in the third capital a result, to you quarter amended results XX% reduce a to company more included $XX.X end more our the our of financial $X.X federal in flexibility $XX.X even end XX%. credit that relaxed would senior As annual amendment covenants we lowered positive structure. with required reform remind year On and applicable in non-cash our that goodwill act $XX.X interest our is XX included to The million rate the its just from million reduce basis it results by year from July. wrap our also deferred assets the to to due note, and the or points corporate million payments tax look that important to I

the act those will a historical perspective your rate From tax for we estimates reform you that cash the year. for XX% tax have effective model to our more for in further future. Finally, Also than charges still for impairment XXXX lower new we foreseeable at our do for taxes goodwill the not million we several expect meaningful $XX next operating the disposal, paying losses will of be years. though tax not

a we will healthy a a growth. do place maintaining Our challenged healthy transformation while in new us remain balance XXXX has will to business us preference create Suri? is drive strategy our and debt financially a sheet work transition. environment. been has maximizing sound so during our to throughout down to cash operating that and base that as by maintaining of growth new renew Clearly, paying This help flows,

Suri Suriyakumar

Jorge. Operator, ready you, questions. for now are we Thank the

Operator

Thank Our Aman will first from FBR. with you. come question [Operator Gulani Instructions] B. Riley

Aman Gulani

taking question. for Thanks my guys. Hey,

So sort what with for of business, you do for MPS transition MPS the a I growth? to number new customers think good guess the is

Suri Suriyakumar

were asking many how is question. we So, the that grow to business, customers we indeed MPS have you’re basically should if the

Aman Gulani

Yes.

of we pretty that quarter be business. should customers, XXX see much that some to in This flat growth sort in segment? number added sort What looking at you of

Suri Suriyakumar

got it, Got it.

understand now Okay, the Yes. question. I

revenues MPS two from mean, buckets. comes largely speaking largely, from I our come So

adding the We customers insolation. have these who MPS global smaller – then are about customers believe like customers MPS new you big client. the And you’re sign we revenues, a up talking global are which also actually have which if

works. actually two, just new it So between that’s those get customers we how would

we So signed ones sign quarter. Dilo? deal many quarter, the small ones How are every like last the

Dilo Wijesuriya

about XXX’s. Something

Suri Suriyakumar

depending So we somethings sign the quarters on some a XXX, market maybe XXX quarter XXX space.

the global sales will a on come time, global growth less how exactly and Even So very obviously client, what after is we know after we get Then industry the course, happen just though depending specific solutions. sometimes the will Interestingly answer is, large that seen nature XX well. MPS customer of which we revenues no for as cycles us why. you customers. that print revenue tell as I’ll call because give just from which those be there’s add client printing they months works. be year will we year, same this I months, of [indiscernible] the the sign XX whatever a a the

combination of whether customers specific small customers or So these customers and of number, the customers. small acquisition there’s they no so the are large

hold you growing we that. would more the chance idea at can quiet set is, you you even it The Jorge. to can there least all to If that say without then a do business, aggressively is current on

Jorge Avalos

there in GS the plus movers Yes. in And are we give here the customer to mentioned, key you bring point or mean, I think and number. sit always we’ve can said has specific as accounts. accounts a I that past our point regional big out $X those the million characterized the needle been revenues. we’ve And in Suri

could So part of of that they small XXX up one We that growth should there. won’t strategy those is, customer the get make in get to feel in. bring of have big larger on our customers customers we the a one but revenue

of mix of that day kind maintaining customers So answer help at the question? day day. Does the of customers it’s your that the a the be to smaller large and to end got

Aman Gulani

It Yes. certainly does.

front, of MPS growth in that we big to those of you terms see where in do that be customers the guess regional able in can XXXX. So convert that I think have sort you on the business in might pipeline some

Dilo Wijesuriya

Yes.

we the us. many as sometimes global more in mentioned last as large focus maybe So large global strong clients Because necessarily that focus regional pipeline on clients we clients regional also don’t and we’ve large creates well for we who fairly a on as revenue opportunities clients well. have quarterly,

we during of we which continue all year. a closing to And have the coming and deals, – growth So many, have we good see in very in pipeline will some all, the towards year. have we a are many those

Aman Gulani

Got it.

then faster at pace? sorry, what you technology helpful. are AIM the Okay, of just sort sort your for that’s AIN And sort very – business, steps taking adopt of clients

Suri Suriyakumar

Right.

Fundamentally, comes up. So time can phases which asked described which And developed of are a technology is largely coming technology. it’s we have There as over that projects in for period of that in that our projects buildings, question. actually new technology the many many fronts, new archive then good be pieces, which business. used new in facilities, for a is thing which which not several platform are are been bit that’s facilities we quite these for exists refer And front, that AIM space, then as the we for doing just to use is buildings, built the you used same last management. a new business, but we where building what already have that technology know, year also the as you

if platform. want time, manage for they if the can building build new, for same That they can store to documents space. the it. if customers, documents is long they somebody the a use the thing. So something same Or want their period they of use Or is the to building, same to use the use they

using we That’s we existing very address are the different being are of new introducing getting that So management multiple using needs the fronts our we from salespeople are and we And customers. and to concept created, well. customers. is that technology to what dashboards facilities new is received training talked doing our what about on salespeople, we that software

XXXX, our little Jorge. more we if you hoping – in what lost revenue million right $XX plus terms a year are whole acceleration. revenue about we’ll The idea is So is last get we our in of erosion, take

our do one that. how you So offset number is, objective

itself. the drive to way to the is, offset business share continue in market print So that

$X it. meantime technology ways might at the million what in to be, million, then look are revenues that million, So is seeing reducing or in we and starting maybe which adding means that happen are $XX offset some to $XX of the trends or whatever

like do accelerated. on is challenge This But have of built. the we our use speed actually and So regarding picture if XXXX. we to we that based basing technology big erosion sense? and make strategy though, The that. have chance work seems of better we XXXX a the the our may that’s that. are the plan information all Does on XXXX, It

Aman Gulani

I a sense. guess quarters? yes. improvement than faster business of to Yes, CDIM turning That due the growing Is the that to largely previous there. a it. Got little makes bit then business, color

Suri Suriyakumar

That to is not customers the the was we customers. products sell, what selling approaching addressing. legacy CDIM the business. we’re Dilo that’s The business to driven newer also existing that Yes, but by And primarily what is way, legacy selling business. is those only

give – in Dilo, business terms Dilo example. you add In print even and to like some terms of would that?

Dilo Wijesuriya

Yes.

So success we came quarter last – from folds. the two

secure win one more project projects additional may is traditional spending, we First also able focusing to customers. on the and base

new other us we’ve plus, been also newer for projects customers give able that services. existing So from to print revenue secure

our about construction environmental talked I signage, customer. safety signage, for graphics So

is we to the on do project, planned printing normally get. idea we win only not what is reprographics, focus work when that the – So a

We goes project, dealing if phase the project. into that also a or whether focused of the on it’s other is site a projects it or construction design services, on

So And client our same of many the to to idea throughout our is all we in hope during quarter. last penetrating I sales them of has the been well. to sell successful that continue team print as base, and think XXXX services

Jorge Avalos

the of probably the that of Dilo stabilization. other and one with the our there, mentioned, frankly, growth black large-format business attraction an us color in further, as and decline. part encouraging the you our mentioned it position Dilo add case was getting moderating that really that flatness drop And traditional And bigger that was white. thing that black And reprographics to was offsetting and that driving just CDIM in wasn’t white driver the with a was

we’re other side to fruition. So protect print business to coming once again, that gives are the us some encouragement of doing the that things

Aman Gulani

Okay, helpful.

last it me serve I’ll for question Okay, and pass on. then

stock, the in repurchasing maybe now? fourth of Did QX? you is quarter with where in the stock further it some You bought see price the

Suri Suriyakumar

certainly the given know said, possibility. whether I Especially price. the you it like I stock mean QX. would don’t that’s be

which Our of that And drive The we bank. down remains get agreed to have the focus back of very, cash first they on focus we was a debt and the is extinguished flow years reducing which don’t has with a being through might been now. very we that the very – Right as year, exactly well. had us wanted rates, I approval. because the for think if had actually several is Last with on situation reducing now, and allocation, lots the served based that allocation, to bucket that. debt. attractive it and try we’ve And the what we good, go we’ve aggressively renegotiations, bank

Jorge Avalos

exactly there mean, to I this And if that’s No, obviously, that’s have just another on that’s Yes. to we But definitely to get the add. bucket right. board for stock buybacks. Noting would then our on approval. a trajectory, we it if banks, continue go radar. I’ll back require something

Aman Gulani

Got it.

I’ll I on. all got. pass that’s Okay, have it

Suri Suriyakumar

All right. you Thank very much.

Operator

[Operator further questions time. Instructions] No this at

David Stickney

call. Justin, interest much Great. thanks the quarter. Thank us Very in for Bye-bye. to tonight’s your and you, Solutions. much. ARC on And we look next so appreciate joining Document everyone forward with continued Thanks talking

Operator

conclude thank thank That call. today. for conference does today’s do participation you. you Well, your We

Arc Document Solutions (ARC) 27 Feb 182017 Q4 Earnings call transcript