Q4 2023 ARC Document Solutions Inc Earnings Call
Operator: Good afternoon, everyone. Welcome to the ARC Document Solutions to report 2023 fourth quarter and year end results conference call. At this time, I would like to hand things over to David Stickney, Vice President of Investor Relations. Please go ahead, sir.
Well good afternoon, everyone welcome to the a S. E document solutions to report 2023 fourth quarter and year end results conference call. At this time I would like to hand things over to David Stickney, Vice President of Investor Relations. Please go ahead Sir.
David Stickney: Thank you, Lisa, and welcome, everyone. On the call with me today are Suri Suriyakumar, our CEO and Chairman, our President and Chief Operating Officer, Dilo Wijesuriya, and Jorge Avalos, our Chief Financial Officer. Our fourth quarter and full year results for 2023 were publicized earlier today in a press release. Press release and other company materials are available from our investor relations pages on ARC Document Solutions website at ir.e-arc.com. Please note that today's call will contain forward-looking statements and are only predictions based on information as of today, February 28, 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filing. Any non-GAAP measures discussed today are reconciled in our press release and Form 8K file. I'll turn the call over to our Chairman and CEO, Suri Suriyakumar. Suri?
Thank you Lisa and welcome everyone on the call with me today are Suri Suryong Kumar, our CEO and chairman, our President and Chief operating officer dealer, which is serious and Georgia envelope <unk>, our chief Financial Officer.
Our fourth quarter and full year results for 2023 were publicized earlier today in a press release.
Press release and other company materials are available from our Investor Relations pages on arc document solutions website at IR Dot E Dash AARC Dot com.
Please note that today's call will contain forward looking statements and are only predictions based on information as of today February 28, 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual actually SEC filings.
Any non-GAAP measures discussed today are reconciled in our press release and form 8-K filings.
I'll turn the call over to our chairman and CEO Suri series Gomorrah, Sir thank.
Kumarakulasingam Suriyakumar: Thank you, David. If there was a year that validated our efforts to transform the company, 2023 might have been. The challenges were easy to see, but so were the opportunities that balanced them. Watching the progress we made in offsetting declines in our older business lines with our more contemporary services, namely color and document scanning, was extremely gratifying. I can see a time in the not-too-distant future when our strategic business lines will come to dominate our economy. Business conditions were fairly predictable for us after the first quarter of 2023. Capital spending was constrained due to interest rate hikes. Market activity was strong but focused on short term. Return to office initiatives lost much of their momentum.
Thank you David.
If there was a year that validated our efforts to transform the company 2023 might have been it.
The challenge is really easy to see but so what are the opportunities that I didn't step.
Watching the progress we made in offsetting declines in our all the business lines, we do have a more contemporary services, namely color and documents getting what's extremely gratifying.
I can see a time in the not too distant future when our strategic business lines will come to dominate our revenue mix.
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Business conditions will fairly predictable for us after the first quarter of 2023 cabinet.
Capital spending was constrained due to interest rate hikes market activity was strong but focused on short term.
They tend to all Skus initiative lost much of the momentum.
Kumarakulasingam Suriyakumar: And while the country and the general business environment seemed like it was improving, sentiment was muted. As much as we prefer bigger, long-term projects, Seasonal and event-driven marketing work helped us spur growth in our caller services throughout the year. The trend for converting paper documents to digital information that began with the pandemic continued to gain momentum throughout the year and dramatically increased demand for scanning historical documents, from the office and from warehouse storage. While the short-term growth of this service is gratifying, the volume of such information and the compelling need for it to be converted are both enormous and likely to last for decades. While we've seen declines in our on-site services as employees continue to work from home.
And while the country and agenda. This is environment seemed like it was improving sentiment was muted.
As much as we prefer bigger long term projects seasonal and event driven marketing work helped us both growth in our color services throughout the year.
The trend for converting paper documents digitally inflammation that began with the pandemic continued to gain momentum throughout the year.
And dramatically increased demand for scanning historical documents from.
From the office and from warehouse storage.
While the short term growth of the service is gratifying, the volume offset inflammation and the compelling need for it to be converted all bought both enormous.
And likely to last for decades.
While we have seen declines onsite services as employees continue to work from home.
Kumarakulasingam Suriyakumar: Sales in 2023 began to stabilize. And we had significant success in the fourth quarter. You will hear more about that from Dilo later on this call. In this economic environment. Construction projects were much more difficult to justify as for the purchases of large equipment.
Sales in 2023 began to stabilize and.
And we had significant success in the fourth quarter.
More about that from below later on this call.
In this economic environment construction projects were much more difficult to justify as further purchases of large equipment.
Kumarakulasingam Suriyakumar: So it wasn't much of a surprise when construction plan printing got off to a sluggish start and the equipment and supply sales followed suit. But our ability to adapt to changing market conditions, Drove an increase in fourth quarter revenue, limited declines in annual revenue to less than 2%. And I was skilled and experienced in managing cost, health, gross margin steady for the year. We had higher hopes, of course, but the continuing progress we made in identifying new markets, Launching new and exciting products, and finding new partners, and making the necessary investments to take promising services to the next level positioned us well, for 2024 and beyond. To help explain some of the details about our efforts throughout the last quarter and to help put the entire year in perspective, I'll turn the call over to Dilo and Jorge for their comments. Thank you, Suri.
So it wasn't much of a surprise when construction planned printing got off to a sluggish start and the coupon and supplies sales followed suit.
What are the ability to adapt to changing market conditions.
So an increase in the fourth quarter revenue limited declines in annual revenue to less than 2%.
And I was killed and experience in managing cost held gross margin steady for the year.
We had high hopes of course, but the continuing progress we made in identifying new markets.
Launching new and exciting products.
And finding new partners.
And making the necessary investments to date promising services to the next level positioned us well.
For 2024 and beyond.
To help explain some of the details about our efforts throughout the last quarter and we'll be tying it in perspective, I'll turn the call over to dealer and George for their committees.
Hello.
Thank you sorry in the fourth quarter, we achieved encouraging results, particularly in our strategic revenue lines as so we mentioned.
Dilantha Wijesuriya: In the fourth quarter, we achieved encouraging results, particularly in our strategic revenue lines, as Suri mentioned. Despite facing a decline in plant printing revenue, we successfully offset this loss by growing our document scanning and digital colour revenue stream. Notably, our sales in document scanning services were 34% higher than they were in 2022, and our digital color services saw a surge in demand driven by significant projects supporting year-end promotional activities across various business verticals. Beyond the holidays, our consistent focus on expanding retail, trade shows, and small and mall operations, coupled with increased tourism activity in the hotels vertical, contributed much of the business that led to our growth in digital color printing. Leveraging our premier digital print services brand, Riot, we continue to attract major brands across North America, positioning ourselves as a leading provider of on-demand, high-quality color printing solutions in all major markets in the U.S. In North America, few companies offer anything close.
Despite facing a decline in planned printing revenue is successfully offset this loss by growing our document scanning and digital color revenue streams.
Notably our sales and documents scanning services were 34% higher than they were in 2022 and number of digital color services saw a surge in demand driven by significant projects supporting year end promotional activities across various business verticals.
Beyond the holidays, our consistent focus on expanding retail trade show and small and mall operations, coupled with increased tourism activity in the hotel vertical contributed much of the business that led to our growth in digital color printing.
Leveraging our premier digital print. So he says brand right. We continue to attract major brands across North America positioning ourselves as a leading provider of on demand high quality color printing solutions in all major markets in the U S.
In North America few companies offer anything close.
Okay.
Dilantha Wijesuriya: Achieving this level of service demands meticulous planning and a cohesive, dedicated production team, qualities that define our operations. Over the past three decades, we honed these capabilities with plan printing, resulting in a dominant market presence in construction. Now, we are applying the same expertise and co-competencies to our digital wide format color services, ensuring consistent quality and efficiency to our clients. The demand for document scanning remains robust as businesses prioritize moving their critical content to digital platforms. Hybrid work models and the growing trend of office space reduction further propel the adoption of document digitization projects among our clientele. Our teams conduct thorough site audits and collaborate closely with clients to tailor solutions to their specific requirements. Our Scan by the Box program caters to smaller clients seeking efficient and cost-effective scanning solutions for a file cabinet or two, and our success in securing enterprise-level scanning contracts in the past few months with several contracts exceeding six figures has significantly improved our production backlog.
Achieving this level of service demands meticulous planning and a cohesive dedicated production team qualities that define our operations.
Over the past three decades, B horn these capabilities with planned printing, resulting in a dominant market presenting in construction.
Now we are applying the same expertise and core competency as do our digital wide format color services, ensuring consistent quality and efficiency to our clients.
The demand for document scanning remains robust as businesses prioritize more in their critical content to digital platforms hybrid work models and the growing trend of office space reduction further propel the adoption of document digitization projects among our clientele.
Our teams conduct thorough site audits and collaborate closely with clients to tailor solutions to their specific requirements.
Our scan by the box program caters to smaller clients seeking efficient and cost effective scanning solution for a filing cabinet our tool and our success in securing enterprise level scanning contract in the past few months with several contracts exceeding six figures has significantly improved over.
Production backlog.
Dilantha Wijesuriya: Through targeted marketing campaigns, we are actively educating clients on the advantages of digitizing documents, and our performance is solidifying ARC's reputation as a trusted nationwide provider of document scanning services. Additionally, our continuous enhancement of technology tools enables us to streamline project management, elevate quality standards. Manage labor costs and provide improved accessibility via cloud-based solutions for valued customers. By contrast, we have yet to observe any significant improvements in plant printing from new construction projects.
Through targeted marketing campaigns, we actively educating clients on the advantages of digitizing documents and our performance is solid define odds reputation as a trusted nationwide provider of documents scanning services.
Additionally, our continuous enhancement of technology tools enables us to streamline project management elevate quality standard.
Manage labor costs and provide improved accessibility via cloud based solutions for our valued customers.
By contrast, we have yet to observe any significant improvement in plant printing from new construction projects. Our assessment indicates that positive momentum in this revenue stream hinges on a substantial decline in interest rates, which we have yet to witness.
Dilantha Wijesuriya: Our assessment indicates that positive momentum in this revenue stream hinges on a substantial decline in interest rates, which we have yet to witness. Nonetheless, we remain proactive in showcasing and promoting other services offered by ARC to diversify our revenue stream. Our long-standing relationship with construction clients serves as a valuable foundation for introducing and expanding our new services within their accounts. As office customer behaviors evolve, we've also noted a decline in on-site print services along with equipment sales.
Nonetheless, we remain proactive in showcasing and promoting other services offered by our to diversify our revenue streams.
The long lost long standing relationships with construction clients served as a valuable foundation for introducing and expanding our new services within their accounts.
As of his customer behaviors evolved. We've also noted a declining onsite print services along with equipment sales.
Dilantha Wijesuriya: However, over the past year, we have made a concentrated effort in renewing our on-site service contracts with key clients. I am pleased to report that we have achieved successful renewals for multiple years with several major MPS customers. Their continued satisfaction with our service and confidence in our comprehensive on-site service solution bode well for maintaining revenue in this service line. Moving forward, our revenue performance in the fourth quarter serves as a clear indication of the positive direction our company is headed. Our emphasis on scanning and digital color printing is driving overall company expansion and our management team is, Every market is 100% on board. Our strategic investments, ongoing staff training initiatives, and targeted marketing and selling strategies are all directed towards advancing this primary objective.
Over the past year, we have made a constant traded effort in renewing our onsite service contracts with our key clients I am pleased to report that we've achieved successful renewals for multiple years with several major MPS customers.
There are continued satisfaction with our service and confidence in our comprehensive onsite service solution bode well for maintaining revenue in this service line.
Moving forward our revenue performance in the fourth quarter serves as a clear indication of the positive direction. Our company is headed.
Our emphasis on scanning and digital color printing is driving overall company expansion and our management team is.
Every market is 100% on board.
Our strategic investments ongoing staff training initiatives and targeted marketing and selling strategies are all directed towards advancing this primary objective.
Dilantha Wijesuriya: Key areas of focus for our management teams include production management, customer service, margin optimization and planning capacity. We are also doubling down on our online and social media marketing efforts to generate new customer leads while maintaining a steady sales representative headcount. I encourage our investor community to follow us on LinkedIn and other social media platforms. Creating and sustaining a fun and secure workplace environment for employees remains a top priority for management.
Key areas of focus for our management teams include production management customer service margin optimization and planning capacity. We're also doubling down on our online and social media marketing efforts to generate new customer leads while maintaining a steady sales representative head count.
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I encourage our investor community to follow us on Linkedin, and other social media platforms.
Creating and sustaining a fun and secure workplace environment for our employees remains our top priority for management.
Jorge Avalos: We consistently implement initiatives to support our team members, including various employee assistance programs and a profit-sharing bonus plan. As we further establish ourselves as a prominent presence in digital color printing, document conversion and more, fostering a dedicated and inspired team is crucial to our success. I look forward to sharing our first quarter results soon. At this point, I'll hand over to Jorge for more on the financials. Jorge?
Consistent really implement initiatives to support our team members, including various employee assistance programs and a profit sharing bonus plan.
As we further establish ourselves as a prominent presence in digital color printing document conversion and more fostering a dedicated and inspired team is crucial to our success I look forward to sharing our first quarter results. So at this point I'll hand over to George for more and more on the financials George Thank you.
Jorge Avalos: Thank you, Dilo. While sales of equipment and supplies, on-site services, and construction clamp printing were soft during the first three quarters, we saw signs of stabilization in the fourth quarter. Combined with strong sales in color and scanning, it led to incremental sales during the period. As Suriyan Dhillon noted, our work in 2023 has created a favorable environment for new sales opportunities. With rates forecasted to come down, a limited chance of recession, and confidence building in the resilience of the economy, we're in a good position to capitalize on them in 2024. Gross Margin, Help Study for the Year, but found the fourth quarter as a result of our fourth quarter mix of business. High-margin plant printing decreased as it normally does during the fourth quarter, but unlike last year, we did not have a drop in the low-margin equipment sales. Throughout the year, we kept a tight leash on costs in light of softer sales.
Hello, while sales of equipment and supplies on site services and construction plan currencies were soft during the first three quarters, we saw signs of stabilization in the fourth quarter.
Combined with strong sales in color and scanning the led to incremental sales during the period.
As <unk> noted our work in 2023 has created a favorable environment for new sales opportunities.
With rates forecast has it come down a limited chance of recession.
Confidence building and the resilience of the economy, we're in a good position to capitalize on them in 2024.
Gross margin held steady for the year.
<unk> fell in the fourth quarter as a result of our fourth quarter mix of business high margin plant printing decrease as it normally does during the fourth quarter, but unlike last year, we did not have a drop in the low margin equipment sales.
Throughout the year, we kept a tight leash on cost in light of softer sales.
Jorge Avalos: Reap the benefits of lower depreciation costs that reduce our equipment purchases on on-site services, and even higher labor costs associated with increase in scanning and revenue and inflationary pressures were not enough to put a debt on our gross margin. SNA for the year without, benefiting from a lower level of sales commissions and bonuses, which left us with net income and earnings per share relatively stable year over year. The decrease in adjusted EBITDA for the year was attributed to our lower sales and an increase in labor costs.
The benefits of lower depreciation cost.
That reduced our equipment purchases, our onsite services and even higher labor costs associated with increase in scanning and revenue and inflationary pressures were not enough to put a dent on our gross margin.
SG&A for the year was down.
Benefiting from a lower level of sales commissions and bonuses, which left us with net income and earnings per share relatively stable year over year.
The decrease in adjusted EBITDA for the year was attributed to our lower sales and an increase in labor costs.
Jorge Avalos: Well, cash flow from operations was affected by the same thing. The decrease was mitigated by strong cash collection efforts in the second half of the year. Our DSO dropped a full four days, which helped keep 2023 cash flow from operations in line with prior year, and drove the $2.9 million increase in the fourth quarter. We are happy to report that for the full year we returned $12 million to shareholders in the form of dividends and share buybacks. This was the most we have ever done in the history of the company, and we plan to do it again in 2024. Our liquidity and capital structure continues to improve, even after the $12 million spent on shareholder returns. Our cash balance increased by $3.5 million. Our net debt was only $6.0 million, representing a $7.7 million decrease.
Well cash flow from offer operations was affected by the same things.
The decrease was mitigated by strong cash collection efforts in the second half of the year.
Our DSO dropped a full four days, which helped Q2 thousand 23 cash flow from operations in line with prior year.
And drove the $2 $9 million increase in the fourth quarter.
We are happy to report that for the full year, we returned $12 million to shareholders in the form of dividends and share buyback.
This was the most we have ever done in the history of the company and we plan to do it again in 2024.
Our liquidity and capital structure continues to improve even after the $12 million spent on shareholder returns.
Our cash balance decreased by $3 5 million.
Our net debt was only 6 million.
Million.
Representing a $7 7 million decrease.
Jorge Avalos: Our leverage ratio stands at only 0.3 times adjusted EBITDA. Finally, before we end our remarks, we need to address the obvious outlier on our P&L for the year, the site remediation expense. The expense stems from an acquisition we made in California during the 1990's that included property that had been used for a gas station before we purchased it. The gas station had long been demolished and its storage tanks removed well before our involvement.
Our leverage ratio stands at only three times.
<unk> EBITDA.
Finally, before we end our remarks, we need to address the obvious outlier on our P&L for the year the site remediation expense.
<unk> expense stems from an acquisition, we made in California. During the 19 nineties that include a property that had been used for a gas station before we purchased the.
The gas station had long been demolished and its storage tags removed well before our involvement several years ago ground monitoring detected petroleum on the property and we were asked to create a remediation plan for this site. We did so and the plan was approved.
Jorge Avalos: Several years ago, ground monitoring detected petroleum on the property and we were asked to create a remediation plan for the site. We did so and the plan was approved. But further monitoring in the fourth quarter of 2023 turned up additional risk and now requires a much more extensive plan. Three points are worth emphasizing about this expense. First, None of this has to do with our operations. Second, this is the only service center property we own.
But further monitoring in the fourth quarter of 2023 churned up additional risk and now requires a much more extensive plan.
Three points are worth emphasizing about this expense first.
None of this has to do with our operations second this is the only service center property, we own and third and most importantly, this expense will extend over a long period of time time, but accounting rules require us to establish a liability now.
Jorge Avalos: And third, and most importantly, this expense will extend over a long period of time, but accounting rules require us to establish a liability now. We don't expect it to hamper our operations or our cash flows in a meaningful way in any given year of the project. Turning our attention to 2024. We are seeing encouraging growth in our strategic services and our pipeline of opportunities and backlog is robust. The economy is benefiting from anticipated declines in interest rates and the variety of industries and customers we serve continues to grow. We've also made prudent investments in people.
We don't expect that to hamper our operations or our cash flows in a meaningful way in any given year of the project.
Turning our attention to 2024, we are seeing encouraging growth in our strategic services and our pipeline of opportunities and backlog is robust.
The economy is benefiting from anticipated declines in interest rates and a variety of industries and customers. We serve continues to grow.
We've also made prudent investments in people.
Jorge Avalos: Marketing and Equipment to Drive Future Growth. With that in mind, we look forward to what lies ahead in 2024 and sharing our progress with you in the coming quarter. At this point, I'll turn the call back to Suri. Suri?
Marketing and equipment to drive future growth.
With that in mind, we look forward to what lies ahead in 2024 and sharing our progress with you in the coming quarters.
At this point I'll turn the call back to serve sorry.
Kumarakulasingam Suriyakumar: Thank you, George. Operator, we are now ready for questions from our listeners. Thank you. And everyone just a reminder that it is star one if you would like to ask a question today. Once again, that is star one for questions. We'll go to Greg Burns, Sidoti, and come. Good afternoon.
Thank you George.
Operator, we are now ready for questions from our listeners.
Thank you and everyone. Just a reminder that is star one if you would like to ask a question today. Once again that is star one for questions. We'll go to Greg Burns Sidoti <unk> company.
Good afternoon.
Gregory John Burns: In the construction plan printing market, I guess you noted you saw some signs of stabilization in the fourth quarter. As you look into 24, I know interest rates going down would be a potential catalyst to get that part of the business higher. But do you, barring interest rates going down, do you feel like that business has stabilized at a lower level? Or, you know, how should we think about the...
And the construction plan printing market I guess, you noted you saw some signs of stabilization in the fourth quarter.
As you look into 'twenty four.
Interest rates going down would be a potential catalyst to get that.
Part of the business higher but.
Barring interest rates going down do you feel like that business has stabilized at a lower level, how should we think about the.
Kumarakulasingam Suriyakumar: Potential for further declines in that side of the business. Yeah, like you said, Greg, if actually the interest rates go down, it's definitely going to kickstart some of the construction business, and it'll be helpful for the plant running segment of our revenues. However, if the interest rates don't move, which I think is unlikely, you know, probably, it's going to be stable. And, you know, it's going to just be muted. I don't think it's going to do any any different deal. Would you agree? No, I agree.
The potential for further declines in that side of the business.
Yes, like you said, Greg if actually the interest rates go down is definitely be going to kick start.
Some of the construction business and it'll be helpful. For the planned drilling segment of our revenues. However, if interest rates don't move, which I think is unlikely.
Probably it's going to be stable and it's going to just be muted I don't think its going to do anything any different <unk> aggressively and uptake and the other thing to do is even if the interest rates go down in the second quarter is going to there is always a six to nine months lagged to see new designs new construction footings.
Dilantha Wijesuriya: So I think the other thing to do is even if the interest rates go down in the second quarter, it's going to there's always a six to nine month lag to see new designs, new constructions put in place. So, you know, just want to, you know, keep keep that timing in mind as well. And we'll go to our next question. Hang on, Greg, did you have another question?
Play so just wanted to keep that timing in mind as well.
And our next question from Yangon, Greg did you have another question.
Gregory John Burns: Oh, yeah, sure. Just one more around your capital allocation priorities, you know, I guess. If the cash flow remains strong this year, you're probably be in a net cash position. You know, what are your thoughts on, May be increasing the dividend or accelerating buybacks, you know, how do you think about the capitalization? share return for the, Yeah, both of those are opportunities, Greg.
Yes sure.
Just one more around your capital allocation priorities I guess.
If the cash flow remains strong this year, you'll probably be in a net.
Cash position what are your thoughts on.
Maybe increasing the dividend or accelerating buybacks, how do you think about the capitalization and share return.
For the business.
Yes, both of those opportunities Greg I mean, obviously based on everything what we did last year, which was an amazing year from a shareholder returns point of view I mean, I was talking to George 33% of our cash flow from operations went back to the shareholders I would is that so.
Kumarakulasingam Suriyakumar: I mean, obviously, based on everything what we did last year, which was an amazing year from a shareholder returns point of view. I mean, you know, I was talking to George, 33% of our, you know, cash flow from operations went back to the shareholders. How good is that?
Kumarakulasingam Suriyakumar: So, you know, so that it's already pretty good. And if it continues to improve, then, of course, depending on the market conditions, you know, we will decide what to do as to whether we should buy more, buy back more shares, or how we deploy that cash. Cost of operating the business is also going up. So it's something that we want to bear in mind. We might choose to make some investments in the business. George, would you like to add to that?
It's already pretty good and if it continues to improve.
<unk>, depending on the market conditions.
We'll decide what to do as to whether we should buy more buyback more shares.
We deploy that cash cost of operating the business is also going up so it's something that we want to bear in mind, we might choose to make some investments in the business George do you like to yes, I mean, we don't see us reducing the level. We did in 'twenty three I mean, we think the cash flows we generate obviously stay pretty stable and will allow us.
Jorge Avalos: Yeah, but I mean, we don't see us reducing the level we did at 23. I mean, we think the cash flows we generate obviously stay pretty stable and will allow us to do that. And more, like I mentioned on my script, I mean, even with everything we did and returning the shareholder value, we still grew cash by almost $4 million after all that. So the future is bright for us. We have options, which is a good thing. Thank you. And we'll go to our next question, which comes from David Marsh, Singular Research. Hey guys, thanks for taking the questions and congrats on the, So it looks like you used a little over 600K to reproduce.
To do that and more like I mentioned on my script, I mean, even with everything we did and returning to shareholder value. We still we still grew cash by almost $4 million after all of that so.
Future's bright for US we have options, which is a good thing.
Okay. Thank you.
And we'll go to our next question, which comes from David Maher singular research.
Hey, guys. Thanks for taking the question.
Joe Congrats on the year.
So it looks like you used a little risky.
The repurchase.
David Marsh: Equity in the fourth quarter. Could you just give us an update on where that puts you with regard to your share of the purchase program? And can you give us a sense of kind of what the average, Sorry, could you repeat that question? It is not very clear.
In the fourth quarter could you just.
Give us an update on where that puts you with regard to your share repurchase program.
Most of the firm kind of what the average.
Sorry could you repeat that question is really not very I think was about share repurchase and if I don't answer the question right.
Jorge Avalos: I think it's about share repurchase, and if I don't answer the question right, just clarify, but I think you were saying the repurchases we did. We did $3.5 million worth of share repurchases. We still have another $9 million-ish available under the board approved plan. You know, every quarter is a little different. Sometimes there's more opportunity to buy more in a certain quarter versus another one. Think about the first quarter.
Clarify what I think you were saying the repurchases, we did with a $3 $5 million.
Work the share repurchases, we still have another 9 million ish available under the board approved plan.
Every quarter is a little different sometimes theres more opportunity to buy more in a certain quarter versus another one think about the first quarter. The open window doesn't open until March. So we have two to three weeks to buy shares very truncated period of time, but overall for the year, we expect to be in that $3 5 million.
Jorge Avalos: The open window doesn't open until March, so we have two, three weeks to buy shares. Very truncated period of time, but overall for the year, we expect to be in that $3.5 million range for 2024, borrowing other opportunities that Suri mentioned earlier. Did that answer your question? Yeah, yeah, I just was asking the other part of it was, you just give a sense of what the average price per share was that it reported. It was under $3 and it was in that $2.80, $2.90 range, don't quote me exactly, but it's pretty close to that.
Rates for 2020 for borrowing other.
Other opportunities as Suri mentioned earlier did that answer your question.
Yeah, Yeah, I'll just ask you the other part of it was.
Can you just give a sense of what the average.
Price per share was <unk>.
Purchase.
The repurchase it was under $3 and it was in that $2 80 to 90 range don't quote me exactly but it's pretty close to that.
Got it.
Yes, that's helpful.
Jorge Avalos: Yep, that's helpful. And then just turning to more kind of the business fundamental side, are there particular industry verticals that have started to, you know, started to show incremental strength here in the back half of 23, early 24, that maybe you didn't have as strong of a performance from during the earlier part of 23? And are there any other particular verticals that, you know, away from the construction side, which obviously we know is, hinges a little bit on interest rate movements, but are there any other verticals that you could talk about that you've, yeah, you have kind of particularly strong expectations for in the coming year? Yeah, so I mean, obviously, based on the market sentiments right now, it sure looks like we're going to have a positive, you know, impact on the market going forward, that nothing shows that the market is going to deteriorate, it's going to, it sure seems like it's stabilizing. And if that is the case, obviously, the other segments of the business is going to be much more active. And we are we are thinking that that will be a positive deal. What's your perspective on that?
And then just.
Turning to more kind of the.
Business fundamentals side.
Are there particular industry verticals that have started to.
It started to show incremental strength here in the back half of 'twenty three early 'twenty for that maybe you didn't have.
As strong of a performance from during the earlier part of 'twenty three and are there any other particular verticals that.
Away from the construction side, which obviously would know us.
Changes a little bit on interest rate movements that are there any other verticals that you could talk about that.
Yes.
Particularly strong.
<unk> for the coming year.
Yes, so I mean, obviously based on the market sentiment right now it sure looks like we are going to have a positive.
<unk> impact on the market going forward nothing shows that the market is going to deteriorate, it's going to it sure seems like it's stabilizing and if that is the case obviously the other segments of the business is going to be much more active than we were thinking that there will be a positive deal. What's your perspective on that yet I think.
Dilantha Wijesuriya: Yeah, I think if you're looking at the business segments of the company, you know, there wasn't one or two specific business segment that, that really helped us in Q4, because different seasons, different, you know, customer types get get busy, you know, obviously, you know, towards the holiday season, retail, retail, mall, mall operations, those type of customers were very, very strong in the fourth quarter. But overall, when we track all our verticals, as you know, we track about 53 verticals in the organization, we see, we see a bump in almost all categories, because one of the things that that we see is that every company is marketing, they are marketing, they're trying to grab extra market share, a lot of trade show work is continuing to bump up. So I think that's the positive sign that we see pretty much in all all all business verticals, because everybody is looking for that new business. So that's where our digital marketing and digital color graphics services bode well with those customer verticals. That's very helpful.
Looking at the business.
Segments.
No there wasn't one or two specific business segment that that really helped us in Q4 because different seasons different.
Customer types get.
Busy obviously towards the holiday season retail retail mall mall operations.
Those are our customers were very very strong in the fourth quarter, but overall when we track all of our verticals as you know we track about 53 verticals in the organization, we see we see a bump in almost all categories because one of the things that that we see is that every company is marketing.
Our marketing they are trying to grab back extra market share lot of Tradeshow work is continuing to.
Bump up.
So I think that's a positive sign that we see pretty much in all business verticals because everybody is looking for that new business. So that's.
We have a digital marketing and digital color graphics services bode well with those customer verticals.
That's very helpful.
David Marsh: And then last one for me, just another kind of housekeeping type item, Jorge, just looking at the liability side here, balance sheet, it looks like, It kind of looks like the operating leases bumped up a bit and, The debt and finance leases kind of upped up a little bit long term. Can you just talk about, you know, what's going on there and, you know, what your expectation is for the next 12 months? Yeah, I'll start off with the easy one.
And then last one for me just another kind of housekeeping item George.
Just looking at the.
Liability side here the balance sheet it looks like.
And Ken it looks like the operating leases bumped up a bit.
The debt.
Finance leases kind of popped up a little bit.
Long term.
Can you talk about whats going on there and what your expectation is for the next 12 months.
Yes, I'll start with the easy one in regards to the finance leases that actually went down.
Jorge Avalos: In regards to the finance leases, that actually went down. 2022, end of the year, we were at $26 million. We ended the year at $22 million.
2022 ended the year, we were at $26 million, we ended the year at $22 million. So I foresee that kind of staying either in that range or potentially dropping a little bit more so not a big shift there.
Jorge Avalos: So I foresee that kind of staying either in that range or potentially dropping a little bit more. So not a big shift there. From a balance sheet perspective, in regards to the operating leases, this is just a product of facility renewals. Our annual rent expense is going to stay pretty stable. But the new accounting rules say, okay, if I'm in a building, say it's one of my bigger buildings, and I renew it in December, now I have a seven year lease for the next seven years, that all shows up as a liability on my books. But my annual rent stays the same.
From a balance sheet perspective in regards to the operating leases. This is just a product of facility renewals.
Our annual rent expense is going to stay pretty stable, but the new accounting rules say, okay fiber to build the say, it's one of my bigger buildings and I renew it in December and now have a seven year lease for the next seven years that all shows up as a liability on my books.
Burma annual rent stays the same so it kind of just like a balance sheet gross up on your financials there.
Jorge Avalos: So it's kind of just like a balance sheet grows up on your financials there. Nothing that I would be worried about from a, this is gonna have an impact on my P&L. Does that make sense?
Nothing that I would be worried about from a this is going to have an impact on my P&L does that make sense.
David Marsh: Yep, makes a lot of sense. Thanks very much. I appreciate the time. No problem. Just a reminder, everyone, that is star one if you have a question. And we'll go back to Greg Burns.
Yep makes lot of sense. Thanks, very much appreciate Paul <unk>.
No problem.
Just a reminder, everyone that is star one if you have a question.
And we will go back to Greg Becker.
Gregory John Burns: I just wanted to follow up with your outlook for 2024. If, you know, construction plan printing is, Stable. Do you foresee the strategic growth areas driving net growth next year for the business? Oh yeah, we definitely feel so, especially given the activity we have been having with the customers. I think it will be going in the, you know, it will definitely improve. Dilo, do you like to add to that? Yeah, I mean, if you take a look at Q4 as a proxy, you know, our strategic business line growth overtook the drop in plan printing. So if the plan printing stabilizes in 2024, definitely we'll see that, see that growth.
I just wanted to follow up with your outlook for.
For 2024.
Construction plan printing is.
Stable do you foresee the strategic growth areas driving net growth next year for the business.
Well, yes, we definitely feel so.
Especially given the activity we have been having with the customers.
It will be going into.
It will definitely improve dealer b like to add to that yes, I mean, if you'll take a look at.
Q4 as a proxy.
Our strategic business line growth overtook the drop in <unk> printing. So if the plant printing stabilizers in 'twenty to 'twenty four definitely we will see that the less growth, but we are.
Dilantha Wijesuriya: We are, you know, fully focused on building our strategy, building our push behind those, you know, specific growth initiatives. And that, as I said in our call, all our management teams are fully behind that. You know, over the last two years, we've been, you know, putting certain things in place and now we are enjoying the benefits of that.
Fully focused on building our strategy and building out.
Push behind those specifics.
Our growth initiatives and that as I said in our call all our management teams.
Fully behind that in over the last two years, we've been we've been putting certain things in place and now we are enjoying the benefits of that.
Gregory John Burns: Okay, great. Thank you. And at this time, there are no further questions. I'll hand things back to Mr. David Stickney for any additional or closing remarks. Thanks, Lisa, and thank you, everyone, for your attention tonight. We appreciate your continuing interest in ARC and encourage you to reach out to us with any questions about our progress. In the meantime, we look forward to talking with you soon on our first quarter call in early May. Thanks, and have a good day. And once again, that does conclude this conference. Thank you all for your participation. You may now disconnect. Amnesia, AMNHS, Immigration, Public Health Surgery and Mathematical Applied Services Helpful videos Get invested Amnesia, ARC, DonĂt Face It
Okay, great. Thank you.
And at this time there are no further questions I'll hand things back to Mr. David Stickney for any additional or closing remark.
Thanks, Lisa and thank everyone for your attention Tonight. We appreciate your continuing interest in arc and encourage you to reach out with us to us with any questions about our progress in the meantime, we look forward to talking with you soon on our first quarter call in early may Thanks, and have a good evening.
And once again that does conclude this conference. Thank you all for your participation you may now disconnect.
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