Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the 2020 Q1 earnings report conference call. At this time, all participants I know a female email.

The speakers presentation there'd be a question and answer session.

ASCII question. During this session you need to press Star one are you telling me.

If you require any further assistance please that starts email.

I'd now like to hand, the conference over to your Speaker today Mr. David C. B.

Vice President Investor Relations. Thank you. Please go ahead Sir.

Thank you, it's easy and welcome everyone on the call with me today, our Suri Suriyakumar, Chairman, President and Chief Operating Officer Pardon Me Chief executed Chief Executive Officer deal, We're just Syria, our Chief operating officer, and Georgopoulos, our Chief Financial Officer.

Our first quarter results for 2020 were publicized earlier today in a press release the press release. Another company materials are available from our Investor Relations pages on arc document solutions web site at IR Dot E. Dash HRC Dot com.

In today's earnings announcement arc offered expanded supplemental disclosures to provide shareholders and analysts with additional information in advance of our quarterly conference call. The disclosures are largely historical and will not be read on today's call.

Please note that today's call will contain forward looking statements that fall within the safe Harbor provisions of the private Securities Litigation Reform Act as 1995.

Such statements are only predictions based on information as of today makes F 2020, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual FCC filings.

This call will also contain references to certain non-GAAP measures, which are reconciled in today's press release ended our form 8-K filing I'll now turn the call over to our chairman President and CEO Suri Suriyakumar sorry.

Thank you David and welcome everyone. We appreciate your interest in the company doing this extraordinary time I Hope you and your families are healthy and staying safe as depend demi continues.

As he stated you know last call 2019, Charlie does to reconfigure our product and so these portfolios.

Adapt to we're transforming market and focused on returning shareholder value.

Well the actions in the second half of 2019 was talking to deliver to the south this year.

The core we'd 19 was declared a pandemic by the World Health organization.

Instantly changed everything.

Many of you may not realize that arc, you've considered and if they chose Sylvia.

He said the critical industries, such as construction utilities, Nokia and mall.

All but fiber fall and still be sent does have remained open grew older pandemic ducs, while supporting our they essentially businesses across the country.

In addition, our work on critical construction and infrastructure projects.

Uh huh.

Oh that'd be month, such as a UTI was a need for health and see if decide age in locations, we our customers I feel like we're performing essential services.

Moreover, we are also producing operating manuals and the other documentation for companies, who manufacture a much needed medical devices.

And wireless testing equipment.

Contrary to what many may have thought we not only have been keeping up with the demand up all the services, but also supporting the communities around us doing these critical times.

Like other businesses that have deep roots in the our local communities, we booked axes resources to good use and manufactured fish shields of all designed to help and support thousands of frontline workers in the fight to gain school, we'd 90.

We also have applied personal protective equipment photo employees and their families.

The Cobiz 19 crises is like no other.

Something none of us have expediency no lifetime.

However, the management team at OCC has deep experience in managing the company through crisis situations and our response was quick and decisive.

We identified critical actions required to predict the financial well being up the company.

And they executed them immediately.

The key wants to preserve cash and focus on business continues to be.

The I need to fight the largest expense items in the company and took action to mitigate the negative impact caused by the economic shutdowns.

[laughter].

We communicated with more than hundred 60, landlords, our leasing companies and only coupon manufacturers and negotiated be funds.

Second we took actions to mitigate our labor cost through a combination of photos temporary layoffs scheduled reductions and wage reductions.

Good.

Focused on connections.

As they see cash is king.

Especially in times like this.

Oh I see it for job loss Mobileye stole financial teams and books and only libbeys efforts, providing us with the means to operate in an otherwise uncertain environment.

Finally, although operations team led by our COO deal over just Suria daily calls with more than three younger members how far leadership teams do identify opportunities do all said they got any disruption in the relocation and I need to fight needs you never communities that deal.

Fulfill.

These calls were very powerful and effective not only to be so business continued de but also to boost stuff morale and create a sense of real teamwork across the country.

The results thus far has been very satisfying.

The last few weeks of March drove a 9% decline year over year sales in the first quarter.

But our gross margin was essentially flat.

And I just had EBITDA operating cash and earnings Bush share all posted gains year over year.

Our performance illustrates how will be managed costs as they fix up the pandemic group and how quickly we optimized our labor force and why we are confident that need to overcome the challenge challenges in front of us.

This has been a humbling experience, but also in empowering one.

Not afford it completed shipments came easily and all of them are the result of direct and decisive action on our part.

I'm very proud off our team and their performance during this time of crisis.

I'm going to call I'll turn the call over to deal.

And George to outline some of the pertinent details of the quarter and further explain our response to the pandemic.

All of the actions we have taken I think our IND filing under the circumstances and demonstrate the resorts wellness and grid I'll, probably exhibitors and our employees.

Do you know.

Thank you sorry.

The different states cities, Todd shutting down in March we went into immediate action to accomplish two things.

So keep all the employees on cost and let's see if and system to keep the business held.

On the 55 to be directed every employee who could work from home to to do so.

We applied social be something between employees and customers in every service center, including curbside pickup and contact us did anybody.

We should fifth shield fifth small and loves to protect our employees.

We ensure dollar people who work at our custom off refugees, but equally protected.

He created he loved and shutdown and look for you know people CBS in kids self shop closures.

And in civilians jumped to be Timberly goes shops to allow for deep cleaning and disinfecting at the highest.

The slight does concern around exposure.

On the business front, we reduced our workforce by approximately 30%, while furloughs or temporary levels.

I would use workable in that was shops.

But delivered use reagents for on exempt employees between 10, and 25 person based on their salaries.

And management said, David Souter deals insanity, Bicester person and the rest of the C suite executives reduced their salaries by 35%.

The need for health and safety signage has been in almost another color graphics capabilities have served us well in that the thing.

And we strengthened our online ordering systems and the E commerce platform to help increase our person in the market.

Although operation and sales managers, but didn't for the first few weeks off the shutdown and we still need twice a week online to explore new solution and refine existing plans for every market.

No. So you shouldn't ignore and contributions from the team have been significant.

Yeah, no designing printing and installing graphics to support our customers back to work initiatives.

I imagine it would be a critical components when employees we've done.

To the new norm.

In addition to managing labor cost Sunday luxury management, you have also negotiate that drives the flows for more than 60% of facilities that does today and we have hospital and received several months of financing relief from maybe coupon supplies.

I'm happy to share this news with you.

It's a person the combined there for the for people and the opportunities. They have identified to sub board business I know its communities in the months ahead.

But now I turn the call what we'll see a food George.

George.

Thank you did slow as we noted in February arc ended 2019 with lower levels of death, a better cost structure lower margins any resilient capital structure.

Well, we were certain such progress will provide for a good start to the year. We were fortunate that it also put us in a good position to manage to manage through the covert 19 pandemic.

In early March with growing evidence of an ongoing pandemic.

We made the decision to preemptively draw $15 million from our revolving credit line.

Hey, bolstered an already strong balance sheet and provides a comfort we need to operate as aggressively as we can despite the economic disruption that is correct occurring around us.

Thanks to solid cash management throughout the company I'm happy to report that we have not seen a drop in collections to date cash and operational savings have been impressive and we continue to explore alternatives in case the pressures from the pandemic delay the returned to a more normalized economy.

The results speak for themselves.

Cash flows from operation in the first quarter was higher than prior year.

EBITDA is higher than prior year, despite the drop in revenue.

We reduced cash.

Capital expenditures to $1 million versus $3 million in the prior year.

We took advantage of any and all tax deferment under the cares Act.

And we increased our use cash balance by more than $10 million from March 31st to the end of April.

Importantly, this performance was 100% due to the management of our operating cash not the result of borrowings are using draws from our credit line.

Given the uncertainty of the economic situation. We also remain unaware of opportunities for assistance should become necessary as such we are examining the possibility of the loan under the cares Akt program.

Although the rules are not final we're exploring the main street loan program applicable to companies in our category.

At this point, it's too early to say, whether we qualify for the loan or if we do whether it would be beneficial for the company to participate but we are closely watching developments in this area.

In the end there's no single client that has characterize our approach to the pandemic. In fact, it has been our willingness to look for and capitalize on opportunities wherever they may occur that has kept as healthy and strong today.

It is this approach and a strong focus on preserving our cash.

Help us effectively manage the company in the future.

At this point I'll turn the call back to Suri sorry.

Thank you George.

Given our strong position and our readiness to resume normalize worked levels.

We remain confident that weekend, whether these strong.

But there are too many variables to accurately forecast any detail.

As a result, we ever drawing over and your guidance and suspending dividend payments and share repurchases for the remainder of 2020.

Likewise, the shoe off how and when we will resume compliance with the New York stock exchange listing standards would be purely speculative.

As it stands the lifting threshold for the NYSE and that there have been suspended through June and as a solution in our kids isn't required until December.

No one really plans for a pandemic, but I'm grateful that veeva as well prepared as VEBA.

Yeah remains much to be done and barring any drastic changes in the character of the pandemic. We are optimistic that an economic recovery is on the horizon.

As a nation, we have proven to sealant and as a company we continue to demonstrate our ability to adapt and find opportunities under any circumstance.

I expect we will do so in the months ahead.

Operator at this time, we are available to take our listeners question.

Wanted to ask a question you want me to buy so I want to your children and again that's start wants to ask a question to withdraw your question. Please press the pound or county.

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And again, if he likes to ask a question. Please press star followed by the number one I guess healthy keep.

And again, that's star followed by the number one could ask your question.

T. I think we can wrap up the call. Thank you everyone for your attention. This afternoon. We appreciate your interest in the company and we look forward to talking with you again about our second quarter results later in the year. Thanks, everyone stay safe Bye bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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