SAN RAMON, CA / ACCESSWIRE / August 3, 2021 / ARC Document Solutions, Inc. (NYSE:ARC), a leading document solutions provider to professionals in the design, marketing, commercial real estate, construction and related fields, today reported its financial results for the second quarter ended June 30, 2021.
Financial Highlights:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
(All dollar amounts in millions, except EPS) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net sales | $ | 68.8 | $ | 64.3 | $ | 130.5 | $ | 152.7 | ||||||||
Gross margin | 33.1 | % | 31.8 | % | 31.9 | % | 31.5 | % | ||||||||
Net income attributable to ARC | $ | 2.6 | $ | 1.5 | $ | 3.4 | $ | 2.1 | ||||||||
Adjusted net income attributable to ARC | $ | 2.6 | $ | 1.2 | $ | 3.6 | $ | 2.4 | ||||||||
Earnings per share - Diluted | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
Adjusted earnings per share - Diluted | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.06 | ||||||||
Cash provided by operating activities | $ | 11.5 | $ | 23.5 | $ | 16.9 | $ | 26.3 | ||||||||
EBITDA | $ | 10.7 | $ | 10.3 | $ | 19.1 | $ | 21.2 | ||||||||
Adjusted EBITDA | $ | 11.1 | $ | 10.7 | $ | 19.9 | $ | 22.1 | ||||||||
Capital Expenditures | $ | 1.0 | $ | 1.5 | $ | 1.6 | $ | 2.6 | ||||||||
Debt & finance leases (including current) | $ | 83.6 | $ | 122.8 | ||||||||||||
Management Commentary:
"We are pleased with our second quarter growth in sales and the improvements in gross margin, EPS and adjusted EBITDA that came with it," said Suri Suriyakumar, Chairman, President and CEO of ARC. "The diversity of our products and services continue to drive expansion into digital color production and the economic re-opening is bringing new vitality to our existing customers in the AEC market. Every major category of sales grew during the second quarter."
"Our sales teams capitalized on new opportunities often driven by targeted marketing campaigns. We are watching closely how various industry verticals are responding to changing business conditions, and we are adapting quickly to build momentum for the second half of the year," said Mr. Suriyakumar.
"We have established a sustainable and efficient cost structure that leverages every new dollar of sales," said Jorge Avalos, Chief Financial Officer of ARC. "This is best demonstrated by our strong performance in the absence of temporary measures we made last year due to the pandemic's uncertainties. In particular, we were gratified to eliminate the temporary wage reductions we put in place in 2020 for the majority of our staff. We also managed inventory closely to avoid potential supply chain disruptions, and dealing with inflation was essentially a non-issue for the company as cost increases in our materials are built into the pricing of our services."
"Cash flows from operations were healthy for the period, as they reflect the usual cyclical build we see in the first half of the year," said Mr. Avalos. "We are encouraged by the progress we made in the second quarter and look forward to continuing it in the last two quarters of the year."
2021 Second Quarter Supplemental Information:
Net sales were $68.8 million, a 7.0% increase compared to the second quarter of 2020.
Cash & cash equivalents on the consolidated balance sheet in the second quarter 2021 were $52.4 million.
Days sales outstanding were 50 in Q2 2021 as compared to 59 in Q2 2020.
Architectural, engineering, construction and building owner/operators (AEC/O) customers comprised approximately 67% of total net sales, while customers outside of construction made up approximately 33% of total net sales.
The number of managed print services (MPS) locations dropped by approximately 165 locations year over year to approximately 10,780 as of June 30, 2021.
Net Revenue
In millions | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
Total net revenue | $ | 68.8 | $ | 61.7 | $ | 289.5 | $ | 64.3 | $ | 72.4 | $ | 64.3 | ||||||||||||
For the second quarter 2021, net sales increased 7.0%, compared to the same period in 2020 primarily due to increasing year-over-year economic activity as the negative effects of the recent pandemic subsided. Sales in the second quarter also benefited from targeted marketing of services to address the changing graphic printing and scanning needs of customers.
Revenue by Business Lines
In millions | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
CDIM | $ | 43.1 | $ | 37.4 | $ | 175.5 | $ | 38.2 | $ | 47.1 | $ | 41.1 | ||||||||||||
MPS | $ | 18.0 | $ | 17.3 | $ | 79.3 | $ | 18.1 | $ | 17.6 | $ | 16.2 | ||||||||||||
AIM | $ | 3.3 | $ | 3.0 | $ | 12.3 | $ | 3.1 | $ | 2.9 | $ | 2.7 | ||||||||||||
Equipment and supplies | $ | 4.4 | $ | 3.9 | $ | 22.3 | $ | 4.9 | $ | 4.7 | $ | 4.4 | ||||||||||||
For the second quarter 2021, construction document and information management (CDIM) sales increased 4.9% compared to prior year. As noted in previous quarters, the negative impact of the pandemic on CDIM has not been as pronounced as in other parts of our business due to the expansion of products and services beyond the construction vertical. During the second quarter, sales of these expanded services, primarily color graphics, have been driven by secular demands of businesses re-opening as opposed to sales of COVID-related products and services. Sales of construction and design-related services also grew during the period, coinciding with a resumption in building activity in most North American markets.
For the second quarter 2021, MPS sales increased 10.9% year-over-year. MPS sales increased as work from home directives ended for some of our customers, which in turn, lead to increased demand for our services performed on site.
For the second quarter 2021, archiving and information management (AIM) sales increased 23.9% year-over-year. Sales increases in AIM were driven by reasons similar to MPS, primarily attributable to the return of workers in offices and creating greater demand for scanning services.
For the second quarter 2021, equipment and supplies sales increased 1.3% year-over-year. The increase is a reflection of the more favorable economic conditions in 2021 when compared to the second quarter of 2020. Equipment and supply sales from our Chinese joint venture declined due to continued constraints on capital spending in that country, but were offset by improvements in U.S. sales as the economy began to recover.
Gross Profit
In millions unless otherwise indicated | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
Gross profit | $ | 22.8 | $ | 18.8 | $ | 92.9 | $ | 20.7 | $ | 24.2 | $ | 20.4 | ||||||||||||
Gross margin | 33.1% | 30.4% | 32.1% | 32.1% | 33.4% | 31.8% | ||||||||||||||||||
Gross profit increased 11.5% primarily due to the 7% growth in second quarter net sales coupled with the leverage gained from the permanent changes we made to our cost structure in 2020. Gross margin increased 130 basis points year-over-year.
Selling, General and Administrative Expenses
In millions | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
Selling,general and administrative expenses | $ | 18.5 | $ | 17.0 | $ | 79.0 | $ | 18.2 | $ | 19.2 | $ | 17.3 | ||||||||||||
Selling, general and administrative (SG&A) expenses in the second quarter 2021 increased by 7.3% year-over-year driven by increased commissions and bonus payments related to improved sales and profitability for the period. Also notable during the second quarter was the normalization of payrolls as the Company eliminated temporary wage reductions for most employees put in place at the beginning of the pandemic.
Net Income and Earnings Per Share
In millions unless otherwise indicated | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
Net income attributable to ARC - GAAP | $ | 2.6 | $ | 0.8 | $ | 6.2 | $ | 1.3 | $ | 2.8 | $ | 1.5 | ||||||||||||
Adjusted net income attributable to ARC | $ | 2.6 | $ | 0.9 | $ | 6.3 | $ | 1.0 | $ | 2.9 | $ | 1.2 | ||||||||||||
Earnings per share attributable to ARC | ||||||||||||||||||||||||
Diluted EPS - GAAP | $ | 0.06 | $ | 0.02 | $ | 0.14 | $ | 0.03 | $ | 0.07 | $ | 0.03 | ||||||||||||
Adjusted diluted EPS | $ | 0.06 | $ | 0.02 | $ | 0.15 | $ | 0.02 | $ | 0.07 | $ | 0.03 | ||||||||||||
The year-over-year increase in GAAP net income attributable to ARC for the second quarter of 2021 was driven by higher sales, improved gross profit, and significantly lower net interest expense as a result of debt pay downs and a decrease in LIBOR.
Cash Provided by Operating Activities
In millions | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
Cash provided by operating activities | $ | 11.5 | $ | 5.4 | $ | 54.5 | $ | 15.5 | $ | 12.8 | $ | 23.5 | ||||||||||||
The year-over-year decrease in cash flows from operations during the second quarter of 2021 reflect normalized levels of cash generation and collectibles for the period, compared to the same period in 2020 when aggressive measures were implemented to manage working capital and preserve cash in response to the COVID-19 pandemic.
EBITDA
In millions | 2Q 2021 | 1Q 2021 | FYE 2020 | 4Q 2020 | 3Q 2020 | 2Q 2020 | ||||||||||||||||||
EBITDA | $ | 10.7 | $ | 8.4 | $ | 43.2 | $ | 9.9 | $ | 12.1 | $ | 10.3 | ||||||||||||
Adjusted EBITDA | $ | 11.1 | $ | 8.8 | $ | 44.8 | $ | 10.2 | $ | 12.5 | $ | 10.7 | ||||||||||||
Increases in EBITDA and adjusted EBITDA in the second quarter of 2021 were driven primarily by the increase in sales.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
Sales from Services and Product Lines as a Percentage of Net Sales | 2021 | 2020 | 2021 | 2020 | ||||||||||||
CDIM | 62.6 | % | 63.9 | % | 61.7 | % | 59.1 | % | ||||||||
MPS | 26.2 | % | 25.2 | % | 27.1 | % | 28.5 | % | ||||||||
AIM | 4.8 | % | 4.1 | % | 4.8 | % | 4.1 | % | ||||||||
Equipment and supplies sales | 6.4 | % | 6.8 | % | 6.4 | % | 8.3 | % | ||||||||
Outlook
Due to the economic uncertainty driven by the COVID-19 pandemic, ARC has not issued a full forecast for 2021, but has stated its confidence in generating at least $10 million in adjusted EBITDA per quarter for the balance of the year. Management will consider issuing a more complete forecast in the future if more reliable indicators become available.
Teleconference and Webcast
ARC Document Solutions will hold a conference call with investors and analysts on Tuesday, August 3, 2021, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the Company's 2021 second quarter. To access the live audio call, dial (833) 968-2212. International callers may join the conference by dialing (778) 560-2897. The conference code is 1237156 and will be required to dial in to the call. 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 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 "continue to drive expansion", "we are adapting quickly to build momentum for the second half of the year", "encouraged by the progress we made in the second quarter and look forward to continuing it in the last two quarters of the year", 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 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, 2020, 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: | 2021 | 2020 | ||||||
Cash and cash equivalents | $ | 52,372 | $ | 54,950 | ||||
Accounts receivable, net of allowances for accounts receivable of $2,246 and $2,357 | 38,222 | 36,279 | ||||||
Inventory | 9,287 | 9,474 | ||||||
Prepaid expenses | 4,669 | 4,065 | ||||||
Other current assets | 3,287 | 3,979 | ||||||
Total current assets | 107,837 | 108,747 | ||||||
Property and equipment, net of accumulated depreciation of $226,453 and $219,834 | 48,961 | 57,830 | ||||||
Right-of-use assets from operating leases | 33,993 | 37,859 | ||||||
Goodwill | 121,051 | 121,051 | ||||||
Other intangible assets, net | 392 | 515 | ||||||
Deferred income taxes | 15,749 | 17,261 | ||||||
Other assets | 2,267 | 2,175 | ||||||
Total assets | $ | 330,250 | $ | 345,438 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 20,057 | $ | 18,661 | ||||
Accrued payroll and payroll-related expenses | 12,160 | 10,088 | ||||||
Accrued expenses | 16,288 | 17,783 | ||||||
Current operating lease liabilities | 11,039 | 12,158 | ||||||
Current portion of finance leases | 15,514 | 17,557 | ||||||
Total current liabilities | 75,058 | 76,247 | ||||||
Long-term operating lease liabilities | 29,694 | 33,561 | ||||||
Long-term debt and finance leases | 68,132 | 79,679 | ||||||
Other long-term liabilities | 1,571 | 1,615 | ||||||
Total liabilities | 174,455 | 191,102 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
ARC Document Solutions, Inc. shareholders' 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;50,403 and 49,422 shares issued and 43,298 and 42,792 shares outstanding | 50 | 49 | ||||||
Additional paid-in capital | 128,524 | 127,755 | ||||||
Retained earnings | 38,982 | 37,308 | ||||||
Accumulated other comprehensive loss | (2,535 | ) | (2,787 | ) | ||||
| 165,021 | 162,325 | |||||||
Less cost of common stock in treasury, 7,105 and 6,630 shares | 15,682 | 14,657 | ||||||
Total ARC Document Solutions, Inc. shareholders' equity | 149,339 | 147,668 | ||||||
Noncontrolling interest | 6,456 | 6,668 | ||||||
Total equity | 155,795 | 154,336 | ||||||
Total liabilities and equity | $ | 330,250 | $ | 345,438 | ||||
ARC Document Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Net sales | $ | 68,799 | $ | 64,319 | $ | 130,529 | $ | 152,744 | ||||||||
Cost of sales | 46,007 | 43,874 | 88,950 | 104,702 | ||||||||||||
Gross profit | 22,792 | 20,445 | 41,579 | 48,042 | ||||||||||||
Selling, general and administrative expenses | 18,549 | 17,292 | 35,544 | 41,630 | ||||||||||||
Amortization of intangible assets | 56 | 471 | 131 | 1,068 | ||||||||||||
Income from operations | 4,187 | 2,682 | 5,904 | 5,344 | ||||||||||||
Other income, net | (12 | ) | (17 | ) | (23 | ) | (33 | ) | ||||||||
Interest expense, net | 576 | 1,131 | 1,196 | 2,240 | ||||||||||||
Income before income tax provision | 3,623 | 1,568 | 4,731 | 3,137 | ||||||||||||
Income tax provision | 1,155 | 148 | 1,651 | 1,255 | ||||||||||||
Net income | 2,468 | 1,420 | 3,080 | 1,882 | ||||||||||||
Loss attributable to the noncontrolling interest | 106 | 41 | 283 | 262 | ||||||||||||
Net income attributable to ARC Document Solutions, Inc. shareholders | $ | 2,574 | $ | 1,461 | $ | 3,363 | $ | 2,144 | ||||||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||||||||||||
Basic | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
Diluted | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 42,304 | 42,672 | 42,284 | 43,154 | ||||||||||||
Diluted | 42,597 | 42,767 | 42,613 | 43,277 | ||||||||||||
ARC Document Solutions, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | $ | 2,468 | $ | 1,420 | $ | 3,080 | $ | 1,882 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Allowance for accounts receivable | 42 | 251 | 6 | 517 | ||||||||||||
Depreciation | 6,319 | 7,057 | 12,768 | 14,464 | ||||||||||||
Amortization of intangible assets | 56 | 471 | 131 | 1,068 | ||||||||||||
Amortization of deferred financing costs | 16 | 16 | 32 | 32 | ||||||||||||
Stock-based compensation | 404 | 416 | 743 | 920 | ||||||||||||
Deferred income taxes | 1,042 | 493 | 1,434 | 1,244 | ||||||||||||
Deferred tax valuation allowance | 43 | (318 | ) | 103 | (28 | ) | ||||||||||
Other non-cash items, net | (41 | ) | (14 | ) | (79 | ) | (32 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (1,355 | ) | 10,161 | (1,859 | ) | 8,166 | ||||||||||
Inventory | 504 | 915 | 214 | 1,942 | ||||||||||||
Prepaid expenses and other assets | 1,973 | 3,607 | 5,323 | 7,011 | ||||||||||||
Accounts payable and accrued expenses | 43 | (994 | ) | (5,007 | ) | (10,931 | ) | |||||||||
Net cash provided by operating activities | 11,514 | 23,481 | 16,889 | 26,255 | ||||||||||||
Cash flows from investing activities | ||||||||||||||||
Capital expenditures | (986 | ) | (1,460 | ) | (1,554 | ) | (2,581 | ) | ||||||||
Other | 89 | 7 | 220 | 80 | ||||||||||||
Net cash used in investing activities | (897 | ) | (1,453 | ) | (1,334 | ) | (2,501 | ) | ||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from issuance of common stock under Employee Stock Purchase Plan | 12 | 20 | 26 | 40 | ||||||||||||
Share repurchases | (869 | ) | - | (1,025 | ) | (2,432 | ) | |||||||||
Payments on finance leases | (4,748 | ) | (1,698 | ) | (9,565 | ) | (6,300 | ) | ||||||||
Borrowings under revolving credit facilities | 23,750 | - | 38,750 | 40,000 | ||||||||||||
Payments under revolving credit facilities | (25,000 | ) | - | (45,000 | ) | (25,000 | ) | |||||||||
Payment of deferred financing costs | (281 | ) | - | (281 | ) | - | ||||||||||
Dividends paid | (847 | ) | (427 | ) | (1,269 | ) | (870 | ) | ||||||||
Net cash (used in) provided by financing activities | (7,983 | ) | (2,105 | ) | (18,364 | ) | 5,438 | |||||||||
Effect of foreign currency translation on cash balances | 278 | 298 | 231 | (186 | ) | |||||||||||
Net change in cash and cash equivalents | 2,912 | 20,221 | (2,578 | ) | 29,006 | |||||||||||
Cash and cash equivalents at beginning of period | 49,460 | 38,210 | 54,950 | 29,425 | ||||||||||||
Cash and cash equivalents at end of period | $ | 52,372 | $ | 58,431 | $ | 52,372 | $ | 58,431 | ||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Noncash investing and financing activities | ||||||||||||||||
Finance lease obligations incurred | $ | 1,220 | $ | 2,725 | $ | 2,094 | $ | 8,078 | ||||||||
Operating lease obligations incurred | $ | 780 | $ | 146 | $ | 1,198 | $ | 3,644 | ||||||||
ARC Document Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
CDIM | $ | 43,089 | $ | 41,070 | $ | 80,523 | $ | 90,230 | ||||||||
MPS | 18,005 | 16,233 | 35,340 | 43,541 | ||||||||||||
AIM | 3,286 | 2,653 | 6,310 | 6,253 | ||||||||||||
Equipment and supplies sales | 4,419 | 4,363 | 8,356 | 12,720 | ||||||||||||
Net sales | $ | 68,799 | $ | 64,319 | $ | 130,529 | $ | 152,744 | ||||||||
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 Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Cash flows provided by operating activities | $ | 11,514 | $ | 23,481 | $ | 16,889 | $ | 26,255 | ||||||||
Changes in operating assets and liabilities | (1,165 | ) | (13,689 | ) | 1,329 | (6,188 | ) | |||||||||
Non-cash expenses, including depreciation and amortization | (7,881 | ) | (8,372 | ) | (15,138 | ) | (18,185 | ) | ||||||||
Income tax provision | 1,155 | 148 | 1,651 | 1,255 | ||||||||||||
Interest expense, net | 576 | 1,131 | 1,196 | 2,240 | ||||||||||||
Loss attributable to the noncontrolling interest | 106 | 41 | 283 | 262 | ||||||||||||
Depreciation and amortization | 6,375 | 7,528 | 12,899 | 15,532 | ||||||||||||
EBITDA | 10,680 | 10,268 | 19,109 | 21,171 | ||||||||||||
Stock-based compensation | 404 | 416 | 743 | 920 | ||||||||||||
Adjusted EBITDA | $ | 11,084 | $ | 10,684 | $ | 19,852 | $ | 22,091 | ||||||||
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 Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income attributable to ARC Document Solutions, Inc. | $ | 2,574 | $ | 1,461 | $ | 3,363 | $ | 2,144 | ||||||||
Interest expense, net | 576 | 1,131 | 1,196 | 2,240 | ||||||||||||
Income tax provision | 1,155 | 148 | 1,651 | 1,255 | ||||||||||||
Depreciation and amortization | 6,375 | 7,528 | 12,899 | 15,532 | ||||||||||||
EBITDA | 10,680 | 10,268 | 19,109 | 21,171 | ||||||||||||
Stock-based compensation | 404 | 416 | 743 | 920 | ||||||||||||
Adjusted EBITDA | $ | 11,084 | $ | 10,684 | $ | 19,852 | $ | 22,091 | ||||||||
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 Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income attributable to ARC Document Solutions, Inc. | $ | 2,574 | $ | 1,461 | $ | 3,363 | $ | 2,144 | ||||||||
Deferred tax valuation allowance and other discrete tax items | 68 | (240 | ) | 199 | 259 | |||||||||||
Adjusted net income attributable to ARC Document Solutions, Inc. | $ | 2,642 | $ | 1,221 | $ | 3,562 | $ | 2,403 | ||||||||
Actual: | ||||||||||||||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||||||||||||
Basic | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
Diluted | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.05 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 42,304 | 42,672 | 42,284 | 43,154 | ||||||||||||
Diluted | 42,597 | 42,767 | 42,613 | 43,277 | ||||||||||||
Adjusted: | ||||||||||||||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||||||||||||
Basic | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.06 | ||||||||
Diluted | $ | 0.06 | $ | 0.03 | $ | 0.08 | $ | 0.06 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 42,304 | 42,672 | 42,284 | 43,154 | ||||||||||||
Diluted | 42,597 | 42,767 | 42,613 | 43,277 | ||||||||||||
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.
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 six months ended June 30, 2021 and 2020 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, 2021 and 2020.
We have presented adjusted EBITDA for the three and six months ended June 30, 2021 and 2020 to exclude stock-based compensation expense. The adjustment of 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