ARC Reports Quarterly and Annual Results Above Expectations - 2018 Sales Grow Despite Headwinds, EPS and Cash Provided by Operating Activities Above Forecast, Meets Adjusted EBITDA Forecast

WALNUT CREEK, CA / ACCESSWIRE / February 26, 2019 / ARC Document Solutions, Inc. (NYSE: ARC), a leading document solutions provider to design, engineering, construction, and facilities management professionals, today reported its financial results for the fourth quarter and full year ended December 31, 2018.

Management Commentary

"ARC delivered overall revenue growth of 1.6% for 2018, driven by more than a 3% increase in sales from CDIM," said K. "Suri" Suriyakumar CEO of ARC Document Solutions. "Considering that our primary strategic objective has been to protect print revenue in the face of declining volume, driving company-wide sales growth from print with the help of our technology initiatives is a remarkable achievement. We also capitalized on our growth by posting significant year-over-year improvements in gross margin, beating our own estimates for cash flow from operations and exceeding our earnings per share expectations."

"Our performance also contributed to ARC achieving its target of annual adjusted EBITDA of $53.4 million despite our higher-than-usual medical costs," Mr. Suriyakumar continued. "Absent those expenses for the year, annual adjusted EBITDA would have been nearly $3 million higher than our 2017 results. I'm very proud of our team."

"Essentially, we did exactly what we planned to do, and ARC's annual and quarterly performance demonstrated our success," said Jorge Avalos, Chief Financial Officer for ARC Document Solutions. "We've delivered our third consecutive quarter of revenue growth, and our second consecutive quarter of adjusted EBITDA growth. Cash flow from operations for the quarter grew by $9.3 million, and EPS of four cents for the quarter contributed to our strong annual performance. With the additional debt reduction of $5 million during the quarter, we also continued to improve our capital structure."

2018 Fourth Quarter Supplemental Information:

Net sales were $98.4 million, a 1.3% increase compared to the fourth quarter of 2017.

Architectural, engineering, construction and building owner/operators (AEC/O) customers comprised approximately 79% of our total net sales, while customers outside of construction made up approximately 21% of our total net sales.

Total number of MPS locations at the end of the fourth quarter has grown to approximately 10,500, a net gain of approximately 400 locations over Q4 2017.

Adjusted EBITDA excludes loss on extinguishment and modification of debt, goodwill impairment, and stock-based compensation expense.

Outlook

Management introduced its annual outlook for 2019, anticipating fully-diluted annual adjusted earnings per share to be in the range of $0.17 to $0.22; annual cash provided by operating activities is projected to be in the range of $47 million to $52 million; and annual adjusted EBITDA is forecast to be in the range of $52 million to $57 million.

Teleconference and Webcast

ARC Document Solutions will hold a conference call with investors and analysts on Tuesday, February 26, 2019, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the Company's 2018 fourth quarter and fiscal year. To access the live audio call, dial (877) 823-7014. The conference code is 7591655. A live webcast will also be made available on the investor relations page of ARC Document Solution's 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 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.

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. Words and phrases such as "forecast," "outlook," "anticipate," "projected," 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, document management or reprographics 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 caption entitled "Risk Factors" in Item 1A in ARC Document Solution's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, 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
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

ARC Document Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)

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 (loss) attributable to ARC Document Solutions, Inc. shareholders to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)

ARC Document Solutions, Inc.
Non-GAAP Measures Reconciliation of net income (loss) attributable to ARC to unaudited adjusted net income attributable to ARC
(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, 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. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.

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 segments. Our operating segments' financial performance includes all of the operating activities except debt and taxation which are managed at the corporate level for U.S. operating segments. We use EBITDA to compare the performance of our operating segments 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 twelve months ended December 31, 2018 and 2017 to reflect the exclusion of loss on extinguishment and modification of debt, goodwill impairment, and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items, including the impact of new tax laws enacted in 2017. This presentation facilitates a meaningful comparison of our operating results for the three and twelve months ended December 31, 2018 and 2017.

We have presented adjusted EBITDA for the three and twelve months ended December 31, 2018 and 2017 to exclude loss on extinguishment and modification of debt, goodwill impairment, and stock-based compensation expense. The adjustment of EBITDA for these items 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, Inc.