EX-99.1 2 exhibit991-q22023earningsr.htm EX-99.1 Document


ARC Reports Increase in EPS and Cash Flow from Operations on Q2 Sales of $72.4 Million

SAN RAMON, CA – (August 2, 2023) – 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, 2023.
Financial Highlights:
Three Months EndedSix Months Ended
June 30,June 30,
(All dollar amounts in millions, except EPS)2023202220232022
Net sales$72.4 $74.6 $141.3 $144.1 
Gross margin34.8 %34.2 %34.0 %33.3 %
Net income attributable to ARC$4.0 $3.3 $6.0 $5.2 
Adjusted net income attributable to ARC$4.1 $3.7 $6.2 $5.7 
Earnings per share - Diluted$0.09 $0.08 $0.14 $0.12 
Adjusted earnings per share - Diluted$0.09 $0.08 $0.14 $0.13 
Cash provided by operating activities$10.3 $8.6 $14.2 $11.5 
EBITDA$10.6 $10.9 $18.8 $19.5 
Adjusted EBITDA$11.1 $11.3 $19.8 $20.4 
Capital expenditures$2.2 $1.4 $4.5 $2.7 
Debt & finance leases (including current)$62.8 $72.1 

Management Commentary:
“Today, I am happy to report a strong quarter in terms of net earnings despite the softening of overall sales due to market conditions,” said Suri Suriyakumar, Chairman and CEO of ARC. “Our business model continues to prove its effectiveness in leveraging sales, generating cash, and creating opportunities for future growth.”
“We continued to experience strong demand for digital color printing and were extremely happy to see scanning sales increase by double digits in the past two quarters,” said Dilo Wijesuriya, President and COO. “Construction plan printing remained soft, as did sales of new equipment, due to slowness in the building sector. Our operations team delivered solid growth in gross margins, and with our efficient and flexible cost structure, we are confident we will maintain strong profitability and cash flows throughout 2023.”

“Continuing strength in our bottom-line performance was the highlight of the period,” said Jorge Avalos, Chief Financial Officer. “Despite the overall sales drop of $2.2 million, gross profit was down just $360 thousand and net income was up by more than $300 thousand. On the cash side of the business, quarterly results were even more impressive with cash flows increasing by $1.7 million, and we returned $3.8 million in dividends and share repurchases to our shareholders during the second quarter.”

2023 Second Quarter Supplemental Information:
Net sales were $72.4 million, a 3.0% decrease compared to the second quarter of 2022.
Cash & cash equivalents on the consolidated balance sheet in the second quarter 2023 were $51.1 million.
ARC’s next quarterly cash dividend of $0.05 will be paid on August 31, 2023, with a record date of July 31, 2023.
Days sales outstanding were 48 in Q2 2023 and 54 in Q2 2022.
The number of MPS locations have declined slightly year over year to approximately 10,550 as of June 30, 2023 representing a net decrease of approximately 250 locations compared to June 30, 2022.





Net Revenue
In millions2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Total net revenue$72.4 $68.9 $286.0 $68.8 $73.1 $74.6 
In the second quarter 2023, net sales decreased 3.0%, compared to the same period in 2022. The decrease in net sales in 2023 is primarily driven by the decrease in our lower margin Equipment & Supplies sales, and a decrease in our Digital Printing services, partially offset by the year-over-year increase in sales from Scanning and Digital Imaging services.
Revenue by Business Lines
In millions2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Digital Printing$44.2 $41.4 $174.8 $42.0 $44.7 $46.2 
MPS$19.0 $19.0 $75.8 $18.5 $19.4 $19.2 
Scanning and Digital Imaging$5.3 $4.6 $17.4 $4.1 $4.8 $4.3 
Equipment and supplies$3.9 $3.9 $18.1 $4.3 $4.3 $4.8 
In the second quarter 2023, Digital Printing sales decreased 4.2% compared to prior year. Year-over-year sales increased in digital color graphic printing from new and existing customers and we experienced continuing demand for digital color graphic printing across most of our customer base. This growth was offset by the decrease in digital plan printing sales which we attribute to less activity and lower spending on new construction projects due to increased costs of capital.
In the second quarter 2023, MPS sales decreased 1.5% year-over-year. Fewer employees returning to the workplace after the pandemic has muted print volumes in offices. We expect MPS sales to remain challenged for the balance of the year.
In the second quarter 2023, Scanning and Digital Imaging sales increased 21.8% year-over-year. The increase in sales was primarily attributable to growing demand for paper-to-digital document conversions used in day-to-day business operations, and the creation of digital archives to replace long-term warehoused paper document storage.
In the second quarter 2023, Equipment and Supplies sales decreased 19.0% year-over-year. Equipment and Supplies sales continue to decline in the U.S. as well as in our China operations. We attribute the decrease in sales to the high cost of capital which reduced our customers' willingness to invest in equipment expenditures.
Gross Profit
In millions unless otherwise indicated2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Gross profit$25.2 $22.9 $96.0 $23.2 $24.8 $25.5 
   Gross margin34.8 %33.3 %33.6 %33.6 %33.9 %34.2 %
Despite a $2.2 million decrease in sales in the second quarter of 2023 compared to the same period in 2022 gross profit only declined by $0.4 million. Second quarter 2023 gross margin increased by 60 basis points over the same period in 2022 driven by the efficiency in our cost structure and the reduction in depreciation expense.
Selling, General and Administrative Expenses
In millions 2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Selling, general and administrative expenses
$19.0 $19.5 $77.5 $19.2 $19.1 $19.9 
Selling, general and administrative (SG&A) expenses in the second quarter 2023 decreased in absolute dollars year-over-year by $0.9 million or 4.6%. The decrease in selling, general and administrative expenses was primarily driven by lower variable costs resulting from the decline in net sales.



Net Income and Earnings Per Share
In millions unless otherwise indicated2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Net income attributable to ARC – GAAP$4.0 $1.9 $11.1 $2.1 $3.7 $3.3 
Adjusted net income attributable to ARC $4.1 $2.2 $12.0 $2.6 $3.7 $3.7 
Earnings per share attributable to ARC
   Diluted EPS – GAAP$0.09 $0.04 $0.26 $0.05 $0.09 $0.08 
   Adjusted diluted EPS$0.09 $0.05 $0.28 $0.06 $0.09 $0.08 
Year-over-year, net income attributable to ARC and earnings per share increased during the second quarter of 2023, despite lower sales, as we benefited from the reduction in depreciation expense and efficiencies in our overall cost structure.
Cash Provided by Operating Activities
In millions 2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
Cash provided by operating activities$10.3 $3.8 $37.2 $10.8 $14.9 $8.6 
The year-over-year increase in cash flows from operations during the second quarter of 2023, compared to the same period in 2022, was primarily due to an improvement in accounts receivable collections and continued inventory management.
EBITDA
In millions 2Q 20231Q 2023FYE 20224Q 20223Q 20222Q 2022
EBITDA$10.6 $8.2 $39.1 $8.9 $10.8 $10.9 
Adjusted EBITDA $11.1 $8.7 $40.9 $9.3 $11.2 $11.3 
EBITDA and adjusted EBITDA decreased in the second quarter of 2023 due to lower sales during the second quarter of 2023, compared to the same period in 2022.

Three Months EndedSix Months Ended
June 30,June 30,
Sales from Services and Product Lines as a Percentage of Net Sales2023202220232022
Digital Printing61.1 %61.9 %60.5 %61.2 %
MPS26.2 %25.8 %26.9 %26.3 %
Scanning and Digital Imaging7.3 %5.8 %7.0 %5.9 %
Equipment and supplies sales5.4 %6.5 %5.6 %6.6 %

Teleconference and Webcast
ARC Document Solutions will hold a conference call with investors and analysts on Wednesday, August 2, 2023, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results of the Company’s second quarter of 2023. To access the live conference call, dial (888) 330-2354. International callers may join the conference by dialing (240) 789-2706. The conference code is 68720 and will be required to register or 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 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, “opportunities for future growth,” “we are confident we will maintain strong profitability and cash flows throughout 2023” 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, 2022, 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)
June 30,December 31,
Current assets:20232022
Cash and cash equivalents$51,066 $52,561 
Accounts receivable, net of allowances for accounts receivable of $2,012 and $1,947
38,451 38,748 
Inventory8,876 8,610 
Prepaid expenses4,154 4,018 
Other current assets3,817 3,540 
Total current assets106,364 107,477 
Property and equipment, net of accumulated depreciation of $232,051 and $231,913
37,941 40,214 
Right-of-use assets from operating leases27,691 28,163 
Goodwill121,051 121,051 
Other intangible assets, net178 208 
Deferred income taxes5,430 7,993 
Other assets2,138 2,209 
Total assets$300,793 $307,315 
Current liabilities:
Accounts payable$23,526 $22,972 
Accrued payroll and payroll-related expenses8,451 11,235 
Accrued expenses15,524 16,882 
Current operating lease liabilities9,534 9,924 
Current portion of finance leases9,792 11,558 
Total current liabilities66,827 72,571 
Long-term operating lease liabilities22,949 23,339 
Long-term debt and finance leases52,984 54,916 
Other long-term liabilities132 199 
Total liabilities142,892 151,025 
Commitments and contingencies    
Stockholders’ equity:
ARC Document Solutions, Inc. stockholders’ equity:
Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding
— — 
Common stock, $0.001 par value, 150,000 shares authorized; 52,436 and 51,400 shares issued and 43,229 and 43,101 shares outstanding
52 51 
Additional paid-in capital135,115 132,952 
Retained earnings46,087 44,416 
Accumulated other comprehensive loss(4,284)(4,187)
176,970 173,232 
Less cost of common stock in treasury, 9,207 and 8,299 shares
20,685 18,877 
Total ARC Document Solutions, Inc. stockholders’ equity156,285 154,355 
Noncontrolling interest1,616 1,935 
Total equity157,901 156,290 
Total liabilities and equity$300,793 $307,315 



ARC Document Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Net sales$72,350 $74,564 $141,268 $144,052 
Cost of sales47,174 49,026 93,167 96,065 
Gross profit25,176 25,538 48,101 47,987 
Selling, general and administrative expenses19,013 19,939 38,495 39,294 
Amortization of intangible assets10 35 21 70 
Income from operations6,153 5,564 9,585 8,623 
Other income, net(15)(9)(26)(34)
Interest expense, net447 446 903 876 
Income before income tax provision5,721 5,127 8,708 7,781 
Income tax provision1,734 2,001 2,894 2,799 
Net income3,987 3,126 5,814 4,982 
Loss attributable to the noncontrolling interest31 136 144 252 
Net income attributable to ARC Document Solutions, Inc. stockholders$4,018 $3,262 $5,958 $5,234 
Earnings per share attributable to ARC Document Solutions, Inc. stockholders
Basic $0.09 $0.08 $0.14 $0.12 
Diluted $0.09 $0.08 $0.14 $0.12 
Weighted average common shares outstanding:
Basic 42,801 42,250 42,673 42,172 
Diluted 43,614 43,490 43,679 43,630 




















ARC Document Solutions, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Cash flows from operating activities
Net income$3,987 $3,126 $5,814 $4,982 
Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for credit losses131 129 229 201 
Depreciation4,363 5,153 9,015 10,547 
Amortization of intangible assets10 35 21 70 
Amortization of deferred financing costs16 15 32 30 
Stock-based compensation529 439 1,023 890 
Deferred income taxes1,583 1,843 2,545 2,578 
Deferred tax valuation allowance6 8 49 16 
Other non-cash items, net(82)(56)(157)(106)
Changes in operating assets and liabilities:
Accounts receivable920 (4,217)222 (5,607)
Inventory260 (289)(323)(1,156)
Prepaid expenses and other assets1,284 1,984 4,542 5,197 
Accounts payable and accrued expenses(2,678)428 (8,859)(6,113)
Net cash provided by operating activities10,329 8,598 14,153 11,529 
Cash flows from investing activities
Capital expenditures(2,241)(1,424)(4,496)(2,666)
Other99 54 191 142 
Net cash used in investing activities(2,142)(1,370)(4,305)(2,524)
Cash flows from financing activities
Proceeds from stock option exercises 45 23 1,081 311 
Proceeds from issuance of common stock under Employee Stock Purchase Plan31 18 60 38 
Share repurchases(1,691)(1,049)(1,808)(1,330)
Distribution to noncontrolling interest— (3,908)— (3,908)
Payments on finance leases(3,011)(3,794)(6,194)(7,827)
Borrowings under revolving credit facilities40,000 38,000 82,000 76,000 
Payments under revolving credit facilities(40,000)(39,250)(82,000)(78,500)
Payment of deferred financing costs(23)— (23)— 
Dividends paid(2,145)(2,110)(4,267)(4,218)
Net cash used in financing activities(6,794)(12,070)(11,151)(19,434)
Effect of foreign currency translation on cash balances (130)(937)(192)(905)
Net change in cash and cash equivalents1,263 (5,779)(1,495)(11,334)
Cash and cash equivalents at beginning of period49,803 50,374 52,561 55,929 
Cash and cash equivalents at end of period$51,066 $44,595 $51,066 $44,595 
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Finance lease obligations incurred$997 $2,674 $2,482 $4,363 
Operating lease obligations incurred$1,010 $3,652 $4,375 $4,799 









ARC Document Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)
 Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Service sales
Digital Printing$44,218 $46,165 $85,597 $88,112 
MPS18,958 19,248 37,974 37,902 
Scanning and Digital Imaging5,260 4,320 9,854 8,489 
Total service sales68,436 69,733 133,425 134,503 
Equipment and Supplies Sales3,914 4,831 7,843 9,549 
Total net sales$72,350 $74,564 $141,268 $144,052 

ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Cash flows provided by operating activities$10,329 $8,598 $14,153 $11,529 
Changes in operating assets and liabilities214 2,094 4,418 7,679 
Non-cash expenses, including depreciation and amortization(6,556)(7,566)(12,757)(14,226)
Income tax provision1,734 2,001 2,894 2,799 
Interest expense, net447 446 903 876 
Loss attributable to the noncontrolling interest31 136 144 252 
Depreciation and amortization4,373 5,188 9,036 10,617 
EBITDA10,572 10,897 18,791 19,526 
Stock-based compensation529 439 1,023 890 
Adjusted EBITDA$11,101 $11,336 $19,814 $20,416 
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)
 Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Net income attributable to ARC Document Solutions, Inc.$4,018 $3,262 $5,958 $5,234 
Interest expense, net447 446 903 876 
Income tax provision1,734 2,001 2,894 2,799 
Depreciation and amortization4,373 5,188 9,036 10,617 
EBITDA10,572 10,897 18,791 19,526 
Stock-based compensation529 439 1,023 890 
Adjusted EBITDA$11,101 $11,336 $19,814 $20,416 



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)
 Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Net income attributable to ARC Document Solutions, Inc.$4,018 $3,262 $5,958 $5,234 
Deferred tax valuation allowance and other discrete tax items33 432 267 438 
Adjusted net income attributable to ARC Document Solutions, Inc.$4,051 $3,694 $6,225 $5,672 
Actual:
Earnings per share attributable to ARC Document Solutions, Inc. stockholders:
Basic$0.09 $0.08 $0.14 $0.12 
Diluted$0.09 $0.08 $0.14 $0.12 
Weighted average common shares outstanding:
Basic42,801 42,250 42,673 42,172 
Diluted43,614 43,490 43,679 43,630 
Adjusted:
Earnings per share attributable to ARC Document Solutions, Inc. stockholders:
Basic$0.09 $0.09 $0.15 $0.13 
Diluted$0.09 $0.08 $0.14 $0.13 
Weighted average common shares outstanding:
Basic42,801 42,250 42,673 42,172 
Diluted43,614 43,490 43,679 43,630 
See Non-GAAP Financial Measures discussion below.


Non-GAAP Financial Measures
EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, adjusted net income and adjusted earnings per share 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, diluted earnings per share 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. We have presented these measures 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.
EBITDA represents net income before interest, taxes, depreciation and amortization. We calculate EBITDA margin by dividing EBITDA by net sales.
We use EBITDA and EBITDA margin 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 and EBITDA margin to compare the performance of our operating divisions and to measure performance for determining consolidated-level compensation. In addition, we use EBITDA and EBITDA margin to evaluate potential acquisitions and potential capital expenditures.
EBITDA and EBITDA margin 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 EBITDA margin 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 stockholders for the three and six months ended June 30, 2023 to reflect the exclusion of changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. We believe this presentation helps facilitate our investors understanding of our results of operations and allows them to make meaningful comparisons of our operating results for the three and six months ended June 30, 2023 against the corresponding periods in 2022. 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, 2023 to exclude stock-based compensation expense. We calculated Adjusted EBITDA margin by dividing Adjusted EBITDA by net sales. The adjustment to exclude stock-based compensation expense from 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 and ability to access our credit facility.