ARC Reports Fifth Consecutive Quarter of Growth in Sales and EPS

SAN RAMON, CA / ACCESSWIRE / August 3, 2022 / 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, 2022.

Management Commentary:

"The second quarter was our fifth consecutive quarter of year-over-year growth in both revenue and earnings," said Suri Suriyakumar, Chairman and CEO of ARC. "We are also on track to deliver EPS of more than 25 cents in 2022. This is the best earnings performance we will have produced since 2016 when our revenues were well over $400 million dollars."

"Our ability to leverage strong sales not only helped produce the impressive gross margins, operating income, and EPS we reported today, but it also helped minimize the worst effects of inflation," said Jorge Avalos, Chief Financial Officer. "Going forward, we think quarterly sales of $70 million dollars or more are within our reach for the balance of the year, which should produce continuing strength in margins, earnings and EBITDA."

Management also reiterated their commitment to continue returning shareholder value via the company's five-cent quarterly cash dividend, as well as opportunistic purchasing of ARC stock in the open market.

2022 Second Quarter Supplemental Information:

Net sales were $74.6 million, a 8.4% increase compared to the second quarter of 2021.

Cash & cash equivalents on the consolidated balance sheet in the second quarter 2022 were $44.6 million.

ARC's next quarterly cash dividend of $0.05 will be paid on August 31, 2022 with a record date of July 29, 2022.

Days sales outstanding were 54 in Q2 2022 and 50 in Q2 2021.

The number of MPS locations remained relatively flat year-over-year at approximately 10,800.

Net Revenue

For the second quarter 2022, net sales increased 8.4%, compared to the same period in 2021, primarily due to the expansion of industries we serve and selling more of our services to existing customers. The increase in economic activity in 2022 as compared to 2021 has also contributed to the sales growth.

Revenue by Business Lines

For the second quarter 2022, Digital Printing sales increased 7.1% compared to prior year. The increase is due to an increase in digital color graphic printing from new and existing customers, as well as an increase in sales in digital plan printing from our construction-oriented customers.

For the second quarter 2022, MPS sales increased 6.9% year-over-year. The increase in MPS sales reflect an increase of on-site printing volume as moderation of work-from-home directives encouraged more employees to return to offices during the period, as well as continuing activity on construction job sites where our equipment is often placed in job trailers for the duration of building projects.

For the second quarter 2022, Scanning and Digital Imaging sales increased 31.5% year-over-year. The increase in sales of our Scanning and Digital Imaging services was due to increased demand for paper-to-digital document conversions in re-opened offices and in response to increased marketing activity.

For the second quarter 2022, Equipment and Supplies sales grew 9.3% year-over-year. The increase was driven by demand from offices and job sites as they re-opened to employees, especially in the U.S.

Gross Profit

Second quarter 2022 gross profit improved by $2.7 million over the same period in 2021 driven by higher sales in the period. Gross margin improvement was largely driven by the new cost structure we put in place in 2020, which we were able to leverage with the increase in sales.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses in the second quarter 2022 increased in absolute dollars, but as a percentage of sales decreased by 30 basis points.

Net Income and Earnings Per Share

Year-over-year, net income attributable to ARC and earnings per share increased in the second quarter of 2022. Earnings growth was driven by the increase in net sales and the decrease in depreciation expense of $1.2 million, partially offset by the increase in selling, general and administrative expenses described above. As hybrid work schedules reduced office printing volumes, our need for printing equipment has significantly decreased and reduced our depreciation expense.

Cash Provided by Operating Activities

The year-over-year decrease in cash flows from operations during the second quarter of 2022, compared to the same period in 2021, was primarily due to the timing of accounts receivable collections and timing of payroll.

EBITDA

EBITDA and adjusted EBITDA grew in the second quarter of 2022 due to increased sales, offset by the increase in selling, general and administrative expenses described above.

Teleconference and Webcast

ARC Document Solutions will hold a conference call with investors and analysts on August 3, 2022, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the Company's second quarter of 2022. To access the live conference call, dial (888) 330-2446. International callers may join the conference by dialing (240) 789-2732. The conference code is 4600919 and will be required to dial into the call. A live webcast will also be made available from the "Overview" and "Events & Presentation" pages of ARC Document Solution'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 provides a wide variety of document distribution and graphic production services to facilitate communication for professionals in the design, marketing, commercial real estate, construction and related fields. 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, including forward-looking statements related to the impact of the COVID-19 pandemic on the Company's operations. Words and phrases such as "should," "we are on track" "we are confident," "we think," "are within our reach," "we will have produced," 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, 2021, 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

ARC Document Solutions, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)

ARC Document Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

ARC Document Solutions, Inc.
Consolidated Statements of Cash Flows
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ARC Document Solutions, Inc.
Net Sales by Product Line
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ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)

See Non-GAAP Financial Measures discussion below.

ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net income attributable to ARC Document Solutions, Inc. to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)

See Non-GAAP Financial Measures discussion below.

ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net income attributable to ARC Document Solutions, Inc. to unaudited adjusted net income attributable to ARC Document Solutions, Inc.
(In thousands, except per share data)
(Unaudited)

See Non-GAAP Financial Measures discussion below.

Non-GAAP Financial Measures

EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, net income margin or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating, investing or financing activities as a measure of our liquidity.

EBITDA represents net income before interest, taxes, depreciation and amortization.

We have presented EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.

We use EBITDA to measure and compare the performance of our operating divisions. Our operating divisions' financial performance includes all of the operating activities except debt and taxation which are managed at the corporate level for U.S. operating divisions. We use EBITDA to compare the performance of our operating divisions and to measure performance for determining consolidated-level compensation. In addition, we use EBITDA to evaluate potential acquisitions and potential capital expenditures.

EBITDA and related ratios have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

• They do not reflect our cash expenditures, or future requirements for capital expenditures and contractual commitments;
• They do not reflect changes in, or cash requirements for, our working capital needs;
• They do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debt;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
• Other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and related ratios should not be considered as measures of discretionary cash available to us to invest in business growth or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and related ratios only as supplements.

Our presentation of adjusted net income and adjusted EBITDA is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail in the reconciliation tables above.

Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and six months ended June 30, 2022 and 2021 to reflect the exclusion of changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the three and six months ended June 30, 2022 and 2021. We believe these changes were the result of items which are not indicative of our actual operating performance.

We have presented adjusted EBITDA for the three and six months ended June 30, 2022 and 2021 to exclude stock-based compensation expense. The adjustment to exclude stock-based compensation expense to EBITDA is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.

SOURCE: ARC Document Solutions