Management Commentary
"ARC's transformation continues. Our 24-to-36-month plan is on track to both accelerate our technology services sales and protect our core print revenue," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC Document Solutions. "In spite of the disruptions we made while reconfiguring sales and operations in the second half of 2016, we met or exceeded our revised financial performance goals for the year."
Management issued its 2017 forecast for diluted annual adjusted earnings per share to be in the range of $0.24 to $0.29; annual adjusted cash provided by operating activities is projected to be in the range of $49 to $54 million; and annual adjusted EBITDA is forecast to be in the range of $58 million to $63 million.
"As reflected by our forecast for 2017, we expect the disruption from the changes we've made to soften sales in the first half of the year, and prudent investments in our overall sales and marketing structure will likely mute our full-year financial performance," Mr. Suriyakumar said. "I remain excited about our potential, and strongly believe the changes we are making will deliver results in the near future."
"Even during a year of transition we maintained a strong gross margin, and we were quick to exert control over costs to improve our performance on lower sales volume," said Jorge Avalos, Chief Financial Officer of ARC Document Solutions. "We generated more than $50 million in cash flows from operations in 2016, which allowed us to pay down $22 million of Term A debt, and repurchase more than five million dollars of stock in the open market. Even if we experience sales disruptions early this year, we still anticipate continuing strong cash flow for 2017."
2016 Fourth Quarter Supplemental Information:
Net sales were $98.6 million, a 5.7% decrease compared to the fourth quarter of 2015.
Days sales outstanding in Q4 2016 were 55, compared to 52 days in Q4 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 9,400, a net gain of approximately 400 locations over Q4 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 |
Twelve Months Ended |
||||||||
December 31, |
December 31, |
||||||||
Services and Product Line |
2016 |
2015 |
2016 |
2015 |
|||||
CDIM |
51.5 |
% |
50.7 |
% |
52.3 |
% |
51.6 |
% |
|
MPS |
32.2 |
% |
33.8 |
% |
32.4 |
% |
33.6 |
% |
|
AIM |
3.5 |
% |
3.2 |
% |
3.5 |
% |
3.1 |
% |
|
Equipment and supplies sales |
12.8 |
% |
12.3 |
% |
11.8 |
% |
11.7 |
% |
Outlook
ARC Document Solutions anticipates 2017 fully-diluted annual adjusted earnings per share to be in the range of $0.24 to $0.29; 2017 annual adjusted cash provided by operating activities is projected to be in the range of $49 to $54 million; and 2017 annual adjusted EBITDA is forecast to be in the range of $58 million to $63 million.
Teleconference and Webcast
ARC Document Solutions will hold a conference call with investors and analysts on Tuesday, February 21, 2017, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the company's 2016 fourth quarter and fiscal year. To access the live audio call, dial 888-539-3679. International callers may join the conference by dialing 719-325-2244. The conference ID number is 8445562. 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.