ARC - Earnings call transcript Q2 2024 | Arc Document Solutions, Inc.

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Operator

Thank you for standing by. My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to the ARC Document Solutions Second Quarter 2024 Earnings Report. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. would Stickney, to Vice you. I over the Thank David to President, Instructions] now turn like call [Operator Investor Relations. ahead. go Please

David Stickney

Thank everyone. and John, you, welcome,

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

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

assurances of made that given the the carefully proposal with advisers. reviewing independent consider and the be it ARC's C-suite a assistance proposal by Before the receipt regarding No formed proposal its proposed to financial details in $X.XX response review any transaction The by any continues an Acquisition committee independent directors was results, of non-binding legal or a transaction if of terms by and relating with transaction a of disinterested share to Group committee, and documentation, consisting will the Directors, accordance that that that note at a definitive a executed private transaction of at and disclosed transaction should such outlining company the investor. Board regarding all. documentation special will per be will we has in private submitted purchase In the price its transaction cash. accepted be proposal, our and of a Group consummated Acquisition to of to of any special a second consisting was going that can entirely our quarter evaluate be

we released XXD release you Relations been ir.e-arc.com. information, information this available additional call. will has Investor on further No be direct website the For the nor and at X-K, on press to ARC's Form

We with I'll the Chairman customary at this remarks. And Suri? will CEO, now call turn continue Suri to our point, and Suriyakumar. our over

Kumarakulasingam Suriyakumar

margin execution success, construction due again, share. David, good per and Thank everyone. by quarter despite to weakness sales our second supply. continued the interest strategic you, gross grow business responsible Net and of for and uncertain high conditions once in were, earnings The afternoon, as excess did objectives the caused commercial in our adjusted our rates to the

with Our in in despite overall growth base upside archiving Onsite plan with Scanning potential strategic a decrease provide future. focus believe printing and to pace expected. will color printing. services sales the line slightly, digital as contribution fell of success the at we to drove steady our continue it to outsized continued sales but grow sales an making healthy top digital a

equipment we points our adjusted in our and force in that exceeded growing we have customers basis our to in we new our as in uptick stabilized to our past sales investments made ability workforce XX and by buying the an While in programs. year-over-year. Throughout and also overhead costs, new margins leverage and marketing have increase quarters, expectations gross it several own sales we several rate supplies, interest incremental saw an With high believe environment. a habits

the were efforts, pleased inconsequential, While of generally costs were these quarterly SG&A with results. part new on growth and must trial initiatives putting to sales be not boost we our

and the first and is our it gratifying, the a strategic been execution. Our testament half to of performance has decisions in the year company's

in continue second to remain While the we on of long-term market the half focused objectives. we year, difficult our conditions expect

their in For Dilo activities about I'll the now for Jorge and details ask our quarter, Dilo? comments. second more

Dilantha "Dilo" Wijesuriya

second The the under sales want current plan is in nearly Suri. the solid execution you, X% who of extend Achieving momentum to our Thank we company's to and built condition quarter. the appreciation has our continued, volatile transformation the economic quarter growth to our staff year. commendable. in remain growth committed the first I business my demonstrating for

a customers, keep and rates and healthy service on quality of have company fundamental remains our believe our steadfast to good political in strategies growth. interest share While companies new secure I some continue growing. customer to strategies the climate ARC will executing and pressured with relentless that market and uncertain focus and

digital in black printing trade easily our for decline new the Both printing. driver our the promotion, of customers color services and and new events. key leveraged offset services were launches, and improvement entertainment shows Our plan brand regular product and white sales

customer how companies we diversify to social vibrant to following with competitive print printing. life ideas verticals continue increasingly results transitioning market traditional digital many will media see for efforts graphics. custom Our bring color impressive becoming and on digital us The with to is to yield those

offerings stands team by management ARC can our characterized a with extensive However, a out do mindset. and footprint, comprehensive service seasoned

Our to to due higher delays new and construction construction plan interest the segment led rates, continues cancellations face which projects. challenges to printing in have

decline. to we the is improves on new projects prepare maintain economy customer as our rates interest and and strategy to base, current Our take

While The is by several important, evidenced are not successful results. proving reliant transformation ago recovery. are years this initiatives plan our as implemented printing we we on

have services boost scanning document revenue. Our in a notable provided

our building are with projects delivering We on time accuracy. by reputation high digital

low the enterprise targeting dual be continues effective. by customers Scan volume Our offering services Box to sales and approach,

us scanning ease online as positive supported reputation the helping to grow which organically best by country. our in our find with is reviews of strong and customers one the presence, the can Our providers

general ] Meanwhile, shows nominal the during the over Supply years. Equipment economy as further quarter, the of X While anticipate positive results MPS recovery. sales growth. and has segment [ it have past slighted the signs stabilized experienced We

strong the to strategies adopting similar also verticals Canada, U.S. expand India including by and the growth divisions have introduced customer we services international that Our U.K. implement delivered have and in

quarters. the strong coming We about results sales are optimistic delivering in continued

the gross first While with quarter, basis the experienced point in XX improvement margin reversed the in a we decline second quarter. we pressures

manage Our ability efficiently with subdued pressures gains. and operational the labor inflationary cost combined drove to

and providing remained stable, adequate to us with operational deliver sales to headcount capacity Our excellent customers. value our

leads. visitors ongoing, Our generation marketing capture by programs. effective efforts and Google use our and demand media, are to supported e-mail website attract to strategies warm social marketing We more

As always, our business strong fundamentals. on remains focus

and our and customers enjoyable that update to delivering give do winning an you our our direction. it prioritize seasoned team is Our we confident and Jorge making Jorge? with are for business now easy ask management our are financial in results. we in solutions unmatched, conditions, united economic us. I'll of of Regardless to value

Jorge Avalos

Dilo. you, Thank

came show, second increases our rose the our June to As proposal. Lower year-over-year quarter, primarily labor progress continuing pressures was color quarter, May of large costs on strategic revenue from margins. In $XXX,XXX to related we the of our but taking line and to projects pointed for better disclosed our results gross drive our out. with improve and to this number overhead and year. top costs business inflationary included and SG&A of the cash sales, it timing the financial points. by outlier as a to improved take-private continue our was sales basis to We collections. we in previously sales in also the investments of and won from leverage margins opportunities But advantage scanning late our with were completed and XX easing, able we due flows due the marketing and operations while

muted hence in this for July increase cash the While operating normally those sales, benefited extended and we collections quarter. the into in second projects see

the quarters, and it did half we are just flows flows the achieved last We anticipate confident operations XX% than cash of will third performance fourth and year. our from Of as cash of the year, in a in to second more similar improve we [ XXXX. that XXXX ] continue in note,

capital strong value. commitment our intact, does remains Our structure return to as shareholder

our we call can and pleased the that build unchanged. a plan we for our we first $X.XX back to a We financial turn in the Suri. the the quarter, the to results, summary remains of to dividend this issue continue success As of on year. With Suri? progress believe made balance quarterly I'll were build to on as such,

Kumarakulasingam Suriyakumar

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

Operator

the We begin now will of Greg Your from of first line question-and-answer Burns Sidoti. our comes question session. [Operator Instructions]

Gregory Burns

of that market. of for more we you year, growth still a relatively outlook When uncertain demand part we're willingness for about there, smaller you're any obviously seeing And balance given like you buying the demand, seen market that you're like have look the at seeing color you look of the in for changes overall macro is opportunity the to what spend, when the terms the printing, then, think decisions, environment in now?

if market So do grow spend rates you you like overall can still even the decline? feel maybe

Kumarakulasingam Suriyakumar

take you like would Dilo, that? to

Dilantha "Dilo" Wijesuriya

Yes.

want is haven't very So we there print as from we No, smaller you so haven't you forth. much and were in any we to relatively this big and said, opportunities organization a are question slowdown of in a seen as customers organization spending point. seen Because know market. any -- this digital first whether growing

types different So canvassing actually we are customers. of therefore, to

of the to more canvassing and customers management forth. to projects services in and our do project our regional footprint so ability are types because with medium We of U.S. capabilities anywhere

market Again, but to of seen the spending has millions those So do certainly we that alluding the are X our massive news haven't or we and that customers, weeks hear color locations growth. or not thousands mentioned, the drop what, haven't macro in seen any but obviously, last, of I of significant prints. companies we X, that, some are maybe big been we opportunities, slowdown of to have we by positive X that growth who these one that. With many in X regard about marketing as

that. are not We

run, service. We provide that all high-quality we company that a where footprint are high-touch on-demand, across that short sizable has print

there So focus, out from continuing for the -- there, we significant companies where our is to demand is reps are on continuing competencies core know like are significant focus there a our out we customers mark-to-market us. there sales a to

So we growth. feel still future strong about our

Gregory Burns

currently did terms out, that is traditional all? printing, just plan of there is at? can that business What And but Okay. I then little where and And obviously, market maybe trajectory insight at you -- rates us help in slow more what it's on? the more at will a is decline give it bit interest the into where guess, your

Dilantha "Dilo" Wijesuriya

Yes.

delayed. to currently attribute there interest rates higher that we're or is a quite with change to So the quarters. been I there. in right? X, a plan haven't the same has trends last the same, But X continuing the that still regard plan mean, couple And bit to the lull market. is a I in down the getting seen printing that projects be paper paper of seen slowing I much usage, We've a experiencing.

the will home they down couple of things in come some the that back. Someday the be see easement back going some continue workflows. some improvement come tenant printing, of But to come all in work, we see moving that going construction, down interest quarters when The line, is I some of secular it's don't to back, to to we rates, changes think paper the of line work plan that homebuilding, level. digital the some to Those will right?

So, somewhat while be getting think will now the business a same but while. stabilized, for there is I headwinds the

Gregory Burns

Is a driving against step nice Okay. progression some we quarter. continuing about And you the maybe going to that was should growth then in here? How -- this should quarters? the coming improvement a of model? just How very invest for in margin about from and maybe -- think operating back see margins, very maybe quarter to this think margins leverage strong balancing, in terms we relative it the forward we in obviously,

Jorge Avalos

it we're I then way in our I'll perspective, points. gross better to our increase pressures, up -- a of mean inflationary the with with coupled leverage able easing X From labor the and the break margin into overhead. revenue,

know, in not XX% we our So, have maybe in as we repeat move to seasonality as as year. gross -- in we able the feel you sales. regards good guys about I we be to prospects you pending margins, would later mean

in we from it at perspective, example, that lower. are For a range. have But year-over-year we feel fourth we being when we a -- have look of good quarters typically a chance

are as transaction. part those our use flow second question your that forward, you a your through regards is the on and sense? second transaction a levels related to investments in the see make gauge quarter absent fees SG&A. to $XXX,XXX in which sales And moving Does the investments the in that predictor good and proposed to impact in Now, the go-private of margins, marketing, the coming the

Gregory Burns

pass I'll right. All helpful. along. that's it no, No, Yes.

Jorge Avalos

Yes, no problem.

Operator

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

David Marsh

looks ticked it yes, it the So, a if could count I share -- bit. up actually like start, doesn't

kind a the repurchasing your market had supersedes Wondering -- this I there. ability if repurchase opportunity priority been know was shares? Just any shares wondered of transaction go-private if to

Jorge Avalos

answer does. quick it yes, The is,

David Marsh

Okay.

like and cash that it transaction? so right? maybe of going would of you of some be down evaluate you quarter. paid priority in the And a debt this bit I as looks the what took reading kind And forward cash uses then little Am

Jorge Avalos

In -- the regards business as as go-forward to at looking running a just we're business as basis usual.

purchase we last same equipment more So, of to thing versus used leases. using did We capital our year. cash

moving and in interest can we did XXXX. see were to from you As to continued equipment, because into we've rates don't that financials, XXXX acquire and interest high, here X% our pay strategy in I that want

we've years. last had the strategies So, over that no in of change couple our

David Marsh

Okay.

obviously, an get again, looking or involved the as not proposal. as already overall involved disruption some new proposal, party business company, at in opportunities public here a seeing management of operation as that portion are the that to a you team is comment, might business you're into back an to kind financial new you for a So that But Suri, of some markets? see or continuing in line this in geography be a would more the kind the in party management your acquisitions of going either any just we're starting compelling

Kumarakulasingam Suriyakumar

one. I'll So take that

be always opportunistic it. not terms in in we'll about said We've had So that we've acquisitions, anything pipeline. of

any -- anything. directors. it up, -- legal whatever anything do as but table, come the by thoughts, up, the our comes. independent and special the we neither here. from had consideration do never a And we perspective. to pops usual that to if now go-private assigned merits have committee business then They'll transaction, to so. will did Board. in no completely pipeline or Something do to other just They a pops were usual appointed nothing regard we We -- or in we just they business With And run do are SEC as acquisitions it if across the review, the it's

David Marsh

pretty Okay. helpful. That's

I'm quarter. in right apologize line? go-private Are probably you sorry, I'm expense previous -- I I that the to do. right? of the Just transaction I repeating think in evaluation question. if $XXX,XXX said in Jorge, the Is related SG&A caller's they the the

Jorge Avalos

That points. on is both correct

David Marsh

Okay.

be as lower demonstrably Is assessment? go presumably. we a So that fair essentially that forward,

Jorge Avalos

We comment we just don't know, and it's something can't on.

Kumarakulasingam Suriyakumar

powers to They'll That's completely do up do to the special to do committee. full They directors. have are whatever the proposal. committee, an independent independent do they of have to to as evaluate white whatever they supposed

no We have over that. control

Operator

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

Glenn Primack

you're touch there? specific on the the programs deeper -- that little a specific program, after Or really is going like scanning? towards increased extra expense, a you marketing that can just Digging dollars is the like going with what on

Kumarakulasingam Suriyakumar

Yes.

the there's a very component sales it of can color, attribute So are a count. consultants, seen a we've format in experienced quarter, specific added there's consultants into who We've extra that good the to year-over-year program, that head goes couple -- for -- sales second new I spend specially printing. no color digital white for Glenn. It's

So we've specific in markets, ]. strategic them locations [ very added geographical front

E-mail as little months new But hope I rest using of well, [ so no are to is new heap lot, driving been color A we website on -- spending forth. count. And we a the well. programs, of focused not driven Google into website -- focusing ARC that. a just are year. programs but amount ] couple compared And just in we see launched on of red the you've some website. SEO a organic So last a ago. on programs. chance and as on big some going a of strong launched it bit to website, keywords traffic a head investments is advertising really very we've is got new marketing The marketing

the primarily obviously, headcount. the is spend grown, sales have And So color especially our the side. on

of on increased is marketing But is commissions. there programs. So the rest payment the it of an

Glenn Primack

All right. Great.

So locations sales newbie. experienced putting Is versus in if probably some on side, of you're the a safe that payback off you people different assume? that to it's got that, these

Kumarakulasingam Suriyakumar

Yes.

take it'll for get a even soliciting. months company people couple get the comfortable of and usually, used systems to to So and start experienced with the

So, yes, definitely, stages they delivering. are of at their early

Some takes extra more a little bit time.

So very successful they make are while stages, to all at the them goal is different quickly.

Glenn Primack

will doubt anyways. and it's you measure that Jorge everything no And Yes.

Jorge Avalos

time, And every new I love red Every Glenn, relatively [ website. the go time. to out check wait website that. That's ] can't new me. for in the I it

Operator

session. And Stickney the that floor over I for to closing question-and-answer does back turn to the David Mr. would like conclude remarks.

David Stickney

in our appreciate and continuing your questions we with reach we usual, As about encourage to any out progress. ARC, interest you

Investor You can ir.e-arc.com. website always our at Relations check

talking information, Bye-bye. care. more to For we with Take look forward you soon.

Operator

you gentlemen, call. and concludes your participation. Ladies this conference today's for Thank

You now disconnect. may

Arc Document Solutions (ARC) 7 Aug 242024 Q2 Earnings call transcript