ARC Document Solutions Reports Results for Third Quarter 2016

 

Management Commentary

"This has been a tough quarter for us," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC Document Solutions. "However, given our revised guidance earlier in the year, and the transformation we are going through, it was not unexpected. From the beginning of the year we have consistently maintained that we will need 24 to 36 months to implement the changes required to put the company back on a growth track. Making these changes and driving this transformation has had a disruptive effect on sales and operations, but they are necessary to build value in the future.

"The good news is that despite the challenges and weaker year-over-year sales and profit comparisons, our financial performance was healthy," continued Mr. Suriyakumar. "We delivered solid cash generation and EBITDA, and our capital structure remains a source of strength."

"During the third quarter we maintained solid control of our costs and minimized the effect of lower sales on our profitability," said Jorge Avalos, Chief Financial Officer. "Cash flow from operations for the year remained healthy despite quarterly timing differences in working capital. We chose to use $7 million during the period to reduce our senior debt and future interest costs, knowing that we will have additional opportunities to return value to our shareholders in the future."

2016 Third Quarter Supplemental Information:

Net sales were $100.4 million, a 5.6% decrease compared to the third quarter of 2015.

Days sales outstanding in Q3 2016 were 55, consistent with same period in 2015.

Architectural, engineering, construction and building owner/operators (AEC/O) customers comprised approximately 77% of our total net sales, while customers outside of construction made up approximately 23% of our total net sales.

Total number of MPS locations at the end of the third quarter has grown to approximately 9,370, a gain of 630 locations over Q3 2015. This information reflects the reduction of approximately 200 locations associated with a large client that did not renew their MPS engagement with us at the end of 2015.

Adjusted EBITDA excludes loss on extinguishment of debt, goodwill impairment, the impact of trade secret litigation costs, stock-based compensation expense, and restructuring expense.

 

Sales from Services and Product Lines as a Percentage of Net Sales

       
 

Three Months Ended

Nine Months Ended

 

September 30,

September 30,

Services and Product Line

2016

2015

2016

2015

CDIM

53.0

%

51.4

%

52.6

%

51.9

%

MPS

32.7

%

33.8

%

32.5

%

33.6

%

AIM

3.1

%

3.5

%

3.4

%

3.1

%

Equipment and supplies sales

11.2

%

11.3

%

11.5

%

11.4

%

 

Outlook

ARC Document Solutions is maintaining its 2016 annual forecast and anticipates annual adjusted earnings per share to be in the range of $0.24 to $0.28 on a fully diluted basis. Annual cash flow from operations is projected to be in the range of $48 million to $52 million. The Company's outlook for annual adjusted EBITDA is expected to be in the range of $59 million to $63 million.

Teleconference and Webcast

A conference call with investors and analysts will occur today, Wednesday, November 2, 2016, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the company's 2016 third quarter. To access the live audio call, dial 800-946-0744. International callers may join the conference by dialing 719-457-2731. The conference ID number is 1916977. A live webcast will also be made available on the investor relations page of ARC Document Solution's website at ir.e-arc.com.

The webcast of the call will be available at www.e-arc.com for approximately 90 days following the call's conclusion. A telephone replay of the call also will be available for five days after the call's conclusion. To access the replay, dial 888-203-1112. The conference ID number is 1916977.

About ARC Document Solutions (NYSE: ARC)

ARC Document Solutions distributes Documents and Information to facilitate communication for design, engineering and construction professionals, real estate managers and developers, facilities owners, and a variety of similar disciplines. The Company provides cloud and mobile solutions, professional services, and hardware to help its customers around the world reduce costs and increase efficiency, improve information access and control, and communicate faster, easier, and better. Follow ARC at www.e-arc.com

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