SAN RAMON, CA / ACCESSWIRE / August 7, 2024 / ARC Document Solutions, Inc. (NYSE:ARC), a leading provider of digital printing and document-related services, today reported its financial results for the second quarter ended June 30, 2024.

Management Commentary:

"The execution of our strategic objectives were, once again, responsible for our success in the second quarter, despite uncertain business conditions caused by the high interest rates and the weakness in commercial construction due to excess supply," said Suri Suriyakumar, Chairman and CEO of ARC Document Solutions. "While we expect these conditions to continue in the second half of the year, we remain focused on our long-term objectives during these difficult market conditions."

"Our digital color print services have been the key drivers of our success in Q2, and we are optimistic about delivering continued strong sales results in the coming quarters," said Dilo Wijesuriya, President and COO. "The transformation initiatives we implemented several years ago are proving successful, as evidenced by our results."

"Sales were strong in the period, and we reversed the year-over-year decline in gross margin we experienced in the first quarter," said Jorge Avalos, Chief Financial Officer. "A number of large projects were completed in the last month of the second quarter, pushing collections into Q3, which temporarily muted our operating cash flow performance. We are confident that cash flows will improve in the third and fourth quarters, just as they did last year."

2024 Second Quarter Supplemental Information:

Net sales were $75.1 million, a 3.8% increase compared to the second quarter of 2023.

Cash & cash equivalents on the consolidated balance sheet in the second quarter 2024 were $49.9 million.

ARC's next quarterly cash dividend of $0.05 will be paid on August 30, 2024 with a record date of July 31, 2024.

Days sales outstanding were 50 in Q2 2024 and 48 in Q2 2023.

The number of MPS locations have declined slightly year over year to approximately 10,400 as of June 30, 2024, representing a net decrease of approximately 150 locations compared to June 30, 2023.

Net Revenue

In the second quarter 2024, net sales increased 3.8%, compared to the same period in 2023. The increase in net sales was primarily driven by the growth of sales in Digital Printing and Scanning and Digital Imaging sales. Growth for the period was partially offset by a small decline in MPS sales.

Revenue by Business Lines

1. Column does not foot due to rounding.

In the second quarter 2024, Digital Printing sales increased 5.8% compared to prior year. Year-over-year sales saw healthy increases in digital color graphic printing from new and existing customers. This growth was partially offset by a decrease in digital plan printing sales which we continue to attribute to less construction activity and subsequent lower spending due to high interest rates.

In the second quarter 2024, MPS sales decreased 1.2% year-over-year. MPS sales have remained in a narrow band between $18 million to $19 million per quarter for more than two years, strongly implying fewer employees in the workplace will continue to constrain onsite print volumes relative to historical averages.

In the second quarter 2024, Scanning and Digital Imaging sales increased 7.4% year-over-year. The increase in sales of our Scanning and Digital Imaging services continues to be driven by growing demand for paper-to-digital document conversions and digital archives to replace long-term warehoused paper document storage. We believe that demand for our Scanning and Digital Imaging services will continue to grow in the future.

In the second quarter 2024, Equipment and Supplies sales increased 1.4% year-over-year. Equipment and Supplies sales remained relatively flat year-over-year, as buying habits have stabilized as customers have adjusted to a high interest rate environment.

Gross Profit

In the second quarter 2024, gross profit and gross margin were $26.4 million, and 35.1%, respectively, a year-over-year margin increase of 30 basis points driven by the increase in sales, and our ability to leverage our work force and overhead costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $2.3 million or 12.2% year-over-year. The increase is primarily due to greater commissions based on a higher level of sales, as well as continuing investments in sales staff and marketing initiatives. Of note, selling, general and administrative expenses for the three months ended June 30, 2024 also include $0.9 million in costs related to the previously disclosed take-private proposal summarized below under "Non-Binding Proposal."

Net Income and Earnings Per Share

Year-over-year net income attributable to ARC and earnings per share decreased during the second quarter of 2024. The decrease was driven primarily by higher selling, general and administrative expenses, as described above.

Cash Provided by Operating Activities

The year-over-year decrease in cash flows from operations during the second quarter of 2024 was primarily due to timing of receivable collections resulting from of an increase in sales occurring later in the period.

EBITDA

Year-over-year EBITDA and Adjusted EBITDA decreased due to higher selling, general and administrative expenses, as described above.

Non-Binding Proposal

As previously disclosed, we received a non-binding proposal on April 8, 2024 from our Chairman and Chief Executive Officer, Kumarakulasingam Suriyakumar, outlining Mr. Suriyakumar's intent to explore and evaluate a potential acquisition of all of the outstanding shares of our common stock, $0.001 per share ("common stock"), not already owned by Mr. Suriyakumar in a going-private transaction at a purchase price of $3.25 per share in cash (the "Proposed Transaction"). On June 27, 2024, Mr. Suriyakumar, Dilantha Wijesuriya, our President and Chief Operating Officer, Jorge Avalos, our Chief Financial Officer, Rahul Roy, our Chief Technology Officer, Sujeewa Sean Pathiratne, a private investor, and certain entities affiliated with such persons (collectively, the "Acquisition Group") agreed in principle that they will work with each other to negotiate and consummate the Proposed Transaction. The Acquisition Group currently beneficially owns approximately 19.6% of our outstanding shares of common stock.

In response to the proposal, on April 8, 2024, a special committee of our board of directors consisting entirely of independent, disinterested directors (the "Special Committee") was formed to review and evaluate the Proposed Transaction. The Special Committee continues to carefully consider the Proposed Transaction with the assistance of its independent financial and legal advisors. No assurances can be given regarding the terms and details of any transaction, that any proposal made by the Acquisition Group regarding a transaction will be accepted by the Special Committee, that definitive documentation relating to any such transaction will be executed, or that a transaction will be consummated in accordance with that documentation, if at all.

Teleconference and Webcast

ARC Document Solutions will hold a conference call with investors and analysts on Wednesday, August 7, 2024, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results of the Company's second quarter of 2024. To access the live conference call outlining ARC's 2024 second quarter results, dial (800) 715-9871. International callers may join the conference by dialing +1 (646) 307-1963. The conference code is 1511143 and will be required to dial into the call. A live webcast will also be made available at: https://events.q4inc.com/attendee/383771751 or on the Company's investor relations website at http://ir.e-arc.com. A replay of the webcast will be available on the website following the call's conclusion.

About ARC Document Solutions (NYSE:ARC)

ARC partners with top brands around the world to tell their stories through visually compelling graphics. We use advanced digital printing technology, sustainable materials, and innovative techniques to bring their vision to life. ARC also provides other digital printing and scanning services to a wide variety of industries all over North America and in select markets around the world. Follow ARC at www.e-arc.com.

Forward-Looking Statements

This press release contains forward-looking statements that are based on current opinions, estimates and assumptions of management regarding future events and the future financial performance of the Company, and on the Company's operations. Words and phrases such as, "conditions to continue in the second half of the year," "focused on our long-term objectives" and "optimistic about delivering continued strong sales results in the coming quarters," and similar expressions identify forward-looking statements and all statements other than statements of historical fact, including, but not limited to, any projections regarding earnings, revenues and financial performance of the Company, could be deemed forward-looking statements. We caution you that such statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. In addition to matters affecting the construction, managed print services, digital printing industries, or the economy generally, factors that could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the section titled "Part I - Item 1A. Risk Factors " of ARC Document Solution's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Contact Information:
David Stickney
VP Corporate Communications & Investor Relations
925-949-5114