Q2 2024 ARC Document Solutions Inc Earnings Call

John: Thank you for standing by. My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to ARC Document Solutions' second quarter 2024 earnings report.

Operator: Thank you for standing by.

Thank you for standing by my name is John and I'll be your conference operator for today at this time I would like to welcome everyone to the arc document solutions second quarter 2024 earnings report.

John: Thank you for standing by. My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to ARC Document Solutions' second quarter 2024 earnings report.

John: My name is John, and I will be your conference operator for today.

John: At this time, I would like to welcome everyone to the ARC Document Solutions 2nd quarter of 2024 earnings report.

John: All lives of the place and needs to prevent any background advice. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star, followed by the number one on your telephone keypad. If you would like to withdraw a question, simply press star one again. Thank you.

John: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Thank you. I would now like to turn the call over to David Stickney, Vice President, Investor Relations. Please go ahead.

John: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Thank you. I would now like to turn the call over to David Stickney, Vice President, Investor Relations. Please go ahead.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time you can press star followed by the number one on your telephone keypad. If you would like to withdraw your question simply press Star. One again. Thank you I would now like the theoretical over to David Stickney Vice President.

John: I would now like to turn the call over.

David Stickney: Relations. Please go ahead.

Suriyakumar: Thank you, John, and welcome everyone. On the call with me today, are Suriyakumar, our CEO and chairman; our president and chief operating officer, Dilo Wajasuria; and George Avalos, our chief financial officer. Our 2nd quarter results for 2024 were publicized earlier today in a press release. The press release and other company materials are available from our Investor Relations pages.

David Stickney: Thank you, John, and welcome, everyone. On the call with me today are Suri Suriyakumar, our CEO and Chairman; our President and Chief Operating Officer, Dilantha Wijesuriya, and Jorge Avalos, our Chief Financial Officer. Our second quarter results for 2024 were publicized earlier today in a press release. The 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, August 7, 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings.

David Stickney: Thank you John and welcome everyone on the call with me today are Suri Surya Tomorrow, our CEO and chairman, our President and Chief operating officer of dealer would you, Syria, and Georgia envelope start Chief Financial Officer.

David Stickney: Thank you, John, and welcome, everyone. On the call with me today are Suri Suriyakumar, our CEO and Chairman; our President and Chief Operating Officer, Dilantha Wijesuriya, and Jorge Avalos, our Chief Financial Officer. Our second quarter results for 2024 were publicized earlier today in a press release. The 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, August 7, 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. Any non-GAAP measures discussed today are reconciled in our press release and in our Form 8K file.

David Stickney: Any non-GAAP measures discussed today are reconciled in our press release and in our Form 8K file. Before reviewing our second quarter results, we should note that the company has disclosed its receipt of a non-binding proposal outlining a going private transaction at a purchase price of $3.25 per share in cash. The proposal was submitted by an acquisition group consisting of ARC's C-Suite and a private investor. In response to the proposal, a special committee of our Board of Directors, consisting entirely of independent, disinterested directors, was formed to review and evaluate the proposed transaction and continues to carefully consider it with the assistance of its independent financial and legal advisors.

David Stickney: The execution of our strategic objectives was once again responsible for our success. Sales fell slightly, but we continue to believe they will provide a steady base of sales with upside potential in the future. With an increase in sales and our ability to leverage our workforce, while interest rates and an uncertain political climate have pressured some of our customers, I believe that companies with good strategies and a relentless focus on quality and customer service will continue to secure new market share and growth.

David Stickney: No assurances can be given regarding the terms and details of any transaction, or that any proposal made by the acquisition group regarding a transaction will be accepted by the special committee, or that definitive documentation relating to any such transaction will be executed, or that a transaction will be consummated in accordance with that documentation, if at all. For further information, we direct you to the 8K Form 13-D and the press release available on ARC's Investor Relations website at ir.e-arc.com. No additional information has been released, nor will it be on this call. We will now continue with our customary remarks, and at this point, I'll turn the call over to our Chairman and CEO, Suri Suriyakumar. Suri?

Suri Suriyakumar: Thank you, David, and good afternoon, everyone. Net sales continued to grow in the second quarter, as did our gross margin and adjusted earnings per share. The execution of our strategic objectives was once again responsible for our success, despite uncertain business conditions caused by high interest rates and the weakness in commercial construction due to excess supply. Our strategic sales focus drove top-line growth, with Digital Color Printing making an outsized contribution to our overall success, despite the decrease in digital plant costs. Scanning and archiving continue to grow at a healthy pace, as expected. On take two.

Speaker Change: Our second quarter results for 2024 were publicized earlier today in our press release, the press release and other company materials are available from our Investor Relations pages on arc document solutions website at IR Dot E <unk> Dot com.

Suriyakumar: Please note that today's call will contain forward-looking statements, and our only predictions based on information as of today, August 7, 2024, and actual results may differ materially, as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. Any non-GAAP measures discussed today are reconciled in our press release.

Suri Suriyakumar: Sales fell slightly, but we continue to believe it will provide a steady base of sales with upside potential in the future. While we saw an incremental uptick in equipment and supplies, we believe that buying habits have stabilized as customers have adjusted to a new high interest rate environment. With an increase in sales and our ability to leverage our workforce and our overhead costs, we exceeded our own expectations in gross margins, growing it by 30 basis points year over year.

Speaker Change: Please note that today's call will contain forward looking statements and are only predictions based on information as of today August seven 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings.

The non-GAAP measures discussed today are reconciled in our press release and in our form 8-K filings.

Suriyakumar: Before reviewing our 2nd quarter results, we should note that the company has disclosed its receipt of a non-binding proposal outlining a going-private transaction at a purchase price of $3.25 per share in cash. The proposal was submitted by an acquisition group consisting of RxC Suite and a private investor. In response to the proposal, a special committee of our Board of Directors consisting entirely of independent, disinterested directors was formed to review and evaluate the proposed transaction and continues to carefully consider it with the assistance of its independent financial and legal advisers. No assurances can be given regarding the terms and details of any transaction, that any proposal made by the acquisition group regarding a transaction will be accepted by the special committee, that definitive documentation relating to any such transaction will be executed, or that a transaction will be consummated in accordance with that documentation, if at all.

Suri Suriyakumar: Throughout the past several quarters, we also made several investments in our sales force and in new marketing programs. While these quarterly SG&A costs were not inconsequential, putting new initiatives on trial to boost sales must be part of our growth efforts, and we were generally pleased with the results. Our performance in the first half of the year has been gratifying, and it is a testament to our strategic decisions and the company's execution.

Speaker Change: Before reviewing our second quarter results, we should note that the company has disclosed its receipt of a non binding proposal outlining a going private transaction at a purchase price of $3 25 per share in cash.

Speaker Change: The proposal was submitted by an acquisition group consisting of <unk> C suite and a private investor.

Speaker Change: In response to the proposal a special committee of our board of directors, consisting entirely of independent Disinterested Directors was formed to review and evaluate the proposed transaction and continues to carefully consider it with the assistance of its independent and independent financial and legal advisors.

Speaker Change: No assurances can be given regarding the terms and details of any transaction that any proposal made by the acquisition group regarding a transaction will be accepted by the special committee that definitive documentation relating to any such transaction will be executed or that a transaction will be consummated in accordance.

Speaker Change: With that documentation if at all.

Suriyakumar: For further information, we direct you to the 8-K Form 13D and a press release available on RxInvestor Relations website at ir.edasharc.com. No additional information has been released, nor will be on this call.

Speaker Change: For further information, we direct you to the 8-K form 13D, and the press release available on <unk> Investor Relations website at IR Dot E Dash eight <unk> dot com.

Speaker Change: No additional information has been released nor will be on this call.

Suriyakumar: We will now continue with our customary remarks, and at this point, I'll turn the call over to our Chairman and CEO, Suri Suri Alkomar.

Suri Suriyakumar: While we expect difficult market conditions to continue in the second half of the year, we remained focused on our long-term objectives. For more details about our activities in the second quarter, I'll now ask Dilo and George for their comments. Dilo. Thank you, Suri.

Speaker Change: We will now continue with our customary remarks and at this point I'll turn the call over to our chairman and CEO Suri, sorry, I'm sorry.

Dilantha Wijesuriya: Thank you, Suri. The momentum we built in the first quarter has continued. demonstrating solid sales growth in the second quarter. Achieving nearly 4% growth under the current volatile economic conditions is commendable. I want to extend my appreciation to our staff who remain committed to our company's transformation and the execution of our business plan for the year. While interest rates and an uncertain political climate have pressured some of our customers, I believe that companies with good strategies and a relentless focus on quality and customer service will continue to secure new market share and growth.

Dilantha Wijesuriya: ARC remains steadfast in executing our fundamental strategies to keep the company healthy and growing. Our color digital printing services were the key driver of our sales improvement and easily offset the decline in black and white plan printing. Both regular and new customers leveraged our services for brand promotion, new product launches, trade shows, and entertainment events. Our efforts to diversify customer verticals continue to yield impressive results, and those following us on social media will see how we bring custom ideas to life with vibrant graphics.

Suriyakumar: Thank you, David, and good afternoon, everyone. Next sales continue to grow in the second quarter, as did our growth margin and adjust to earnings per share. The execution of our strategic objectives was once again responsible for our success.

Suri: Thank you David and good afternoon, everyone net sales continued to grow in the second quarter.

Speaker Change: As did our gross margin and adjusted earnings per share.

Speaker Change: The execution of our strategic objectives will once again responsible for our success.

Speaker Change: Uncertain business conditions caused by the higher interest rates and the weakness in commercial construction due to excess supply.

Suriyakumar: In certain business conditions caused by the high interest rates and the weakness in commercial construction due to excess supply. Our strategic self-focus drove top-line growth with digital color printing, making an outsized contribution to our overall success despite the decrease in digital plant printing. Scanning and archiving continue to grow at a healthy pace, as expected. On-site services sales fell slightly, but we continue to believe it will provide a steady base of sales with upside potential in the future. While we saw an incremental uptick in equipment and supplies, we believe that buying habits have stabilized as customers have adjusted to a new high-interest rate environment.

Speaker Change: Our strategic sales focus drove top line growth.

Speaker Change: Could you give color printing, making an outsized contribution to our overall success. Despite the decrease in digital printing.

Speaker Change: Scanning and archiving continue to grow at a healthy pace as expected.

Speaker Change: <unk> services.

Speaker Change: Sales fell slightly but we continue to believe it will provide a steady base of sales with upside potential in the future.

Speaker Change: Why does the signing agreement to uptick in equipment and supplies, we believe that buying habits have stabilized as customers have adjusted to a new high interest rate environment.

Suriyakumar: With an increase in sales and our ability to leverage our workforce and our overhead cost, we exceeded our own expectations in growth margins, growing it by 30 basis points year-to-year. Throughout the past several quarters, we also made several investments in our sales force and in new marketing programs. While these quarterly SGA costs were not inconsequential, putting new initiatives on trial to boost sales must be part of our growth efforts, and we were generally pleased with ourselves.

Speaker Change: With an increase in sales and our ability to leverage our workforce.

Speaker Change: And I'll always cost, we exceeded our own expectations in gross margins growing by 30 basis points year over year.

Speaker Change: Throughout the past several quarters. We also made several investments in our sales force and the new marketing programs. While these quarterly SG&A costs were not inconsequential, putting new initiatives on trial to boost sales must.

Speaker Change: Be part of our growth efforts and we were generally pleased with the results.

Suriyakumar: Our performance in the first half of the year has been gratifying, and it is a testament to our strategic decisions and the company's execution. While we expect difficult market conditions to continue in the second half of the year, we remained focused on our long-term objectives.

Speaker Change: Our performance in the first half of the has been gratifying.

Speaker Change: <unk> is a testament to our strategic decisions and the company's execution.

Speaker Change: While we expect difficult market conditions to continue in the second half of the year, we remain focused on our long term objectives.

Suriyakumar: For more details about our activities in the second quarter, I will now ask Dilo and George for their comments.

Speaker Change: For more details about our activities in the second quarter, I know as Dino and George for their commence data. Thank.

Dilo Wajasuria: Dilo, thank you, Surrey. The moment that we build in the first quarter has continued demonstrating solid sales growth in the second quarter, achieving nearly four percent growth under the current volatile economic condition is commendable.

Speaker Change: Thank you sorry, the momentum we built in the first quarter has continued demonstrating solid sales growth in the second quarter.

Speaker Change: Achieving nearly 4% growth under the current volatile economic conditions is commendable.

Dilo Wajasuria: I want to extend my appreciation to our staff who remain committed to our company's transformation and the execution of our business plan for the year. While interest rates and uncertain political climate have pressured some of our customers, I believe that companies with good strategies and a relentless focus on quality and customer service will continue to secure new market share and grow. Our remains set fast in executing our fundamental strategies to keep the company healthy and growing. Our color digital printing services were the key driver for sales improvement and easily offset the decline in black and white plant printing.

Speaker Change: I want to extend my appreciation to our staff, who remain committed to our company's transformation and the execution of our business plan for the year.

Speaker Change: While interest rates and <unk>.

Speaker Change: Uncertain political climate that pressured some of our customers I believe that companies with good strategies and a relentless focus on quality and customer service will continue to secure new market share and grow.

Speaker Change: <unk> remains steadfast in executing our fundamental strategies to keep the company healthy and growing.

Speaker Change: Our colored digital printing services were the key driver for sales improvement and easily offset the decline in black and white planned printing.

Dilo Wajasuria: Both regular and new customers leveraged services for brand promotion, new product launches, trade shows, and entertainment events. Our efforts to diversify customer verticals continue to yield impressive results, and those following us on social media will see how we bring custom ideas to life with vibrant graphics. The market for digital color is becoming increasingly competitive, with many traditional print companies transitioning to digital printing. However, ARC stands out with our extensive footprint, comprehensive service offerings, and a seasoned management team characterized by a can-do mindset.

David Stickney: Both regular and new customers leverage our services for brand promotion, new product launches, trade shows, and entertainment events. However, ARC stands out with our extensive footprint, comprehensive service offerings, and a seasoned management team characterized by a can-do mindset. The transformation initiatives we implemented several years ago are proving successful, as evidenced by our results. Our strong online presence, supported by positive reviews and the ease with which our customers can find us, is helping to organically grow our reputation as one of the best scanning providers in the country. Meanwhile, the Equipment and Supply Segment experienced nominal growth. We anticipate further positive results as the general economy shows signs of recovery. Our seasoned management team is unmatched, and we are united in our direction.

Speaker Change: Both regular and new customers leverage does success for brand promotion and new product launches trade shows and entertainment events.

Speaker Change: I'll bet, you folks to diversify customer vertical continued to yield impressive results and those following us on social media, we will see how we bring customer ideas to life with library and graphics.

Dilantha Wijesuriya: The market for digital color is becoming increasingly competitive, with many traditional print companies transitioning to digital printing. However, ARC stands out with its extensive footprint, comprehensive service offerings, and a seasoned management team characterized by a can-do mindset. Our construction plan printing segment continues to face challenges due to higher interest rates, which have led to cancellations and delays in new construction projects. Our strategy is to maintain our current customer base and be prepared to take on new projects as the economy improves and interest rates decline. While plant printing is important, we are not reliant on this recovery.

Speaker Change: The market for digital color is becoming increasingly competitive with many traditional companies transitioning to digital printing.

Speaker Change: Hollywood Ox stands out with our extensive footprint comprehensive service offerings and a seasoned management team characterized by a can do mindset.

Dilo Wajasuria: Our construction plan printing segment continues to face challenges due to the higher interest rates, which have led to cancellations and delays in new construction projects. Our strategy is to maintain our current customer base and be prepared to take on new projects as the economy improves and interest rates decline. While plan printing is important, we are not reliant on this recovery.

Speaker Change: Well the construction plan printing segment continues to face challenges due to the higher interest rates, which have led to cancellations and delays in new construction projects.

Speaker Change: Our strategy is to maintain our current customer base and we are prepared to take on new projects as the economy improves and interest rates decline.

Speaker Change: While plant printing is important we are not reliant on this recovery.

Dilo Wajasuria: The transformation initiatives we implemented several years ago are proving successful, as evidenced by our results. Our document scanning services have provided a notable boost in revenue. We are building our reputation by delivering projects on time with high digital accuracy. Our dual sales approach targeting enterprise customers and offering low volume scan-by-the-box services continues to be effective. Our strong online presence, supported by positive reviews and the ease with which our customers can find us, is helping to organically grow our reputation as one of the best scanning providers in the country. While NPS sales fell slightly during the quarter, it has stabilized over the past two years.

Dilantha Wijesuriya: The transformation initiatives we implemented several years ago are proving successful, as evidenced by our results. For example, our document scanning services have provided a notable boost in revenue. We are building our reputation by delivering projects on time with high digital accuracy. Our dual-sales approach, targeting enterprise customers and offering low-volume, scan-by-the-box services, continues to be effective. Our strong online presence, supported by positive reviews and the ease with which our customers can find us, is helping to organically grow our reputation as one of the best scanning providers in the country. While MPS sales fell slightly during the quarter, it has stabilized over the past two years. Meanwhile, the equipment and supply segment experienced nominal growth.

Speaker Change: The transformation initiatives, we implemented several years ago are proving successful as evidenced by our results.

Speaker Change: Our document scanning services have provided a notable boost in revenue we.

Speaker Change: We are building our reputation by delivering projects on time with high digit digital accuracy.

Speaker Change: Our dual sales approach targeting enterprise customers and offering low volume scanned by the box services continues to be effective.

Speaker Change: Our strong online presence supported by positive reviews, and the ease with which our customers can find us is helping to organically grow our reputation as one of the best scanning providers in the country.

Speaker Change: While M. P. S sales fell slightly during the quarter. It has stabilized over the past two years.

Dilo Wajasuria: Meanwhile, the equipment has supplied segment experience nominal growth.

Speaker Change: Meanwhile, the equipment supply segment experienced domino's growth.

Dilo Wajasuria: We anticipate further positive results as the general economy shows signs of recovery. Our international divisions, including Canada, the UK, and India, have also delivered strong growth by adopting similar strategies to expand customer verticals and implement services that we have introduced in the US. We are optimistic about delivering continued strong sales results in the coming quarter. While we experienced gross margin pressures in the first quarter, we reversed the decline with a 30 basis point improvement in the second quarter. Our ability to manage labour and operational costs efficiently, combined with subdued inflationary pressures, drove the gains. Our operational and sales headcount remained stable, providing us with adequate capacity to deliver excellent value to our customers.

Dilantha Wijesuriya: We anticipate further positive results as the general economy shows signs of recovery. Our international divisions, including Canada, the UK, and India, have also delivered strong growth by adopting similar strategies to expand customer verticals and implement services that we have introduced in the US. We are optimistic about delivering continued strong sales results in the coming quarters. While we experienced gross margin pressures in the first quarter, we reversed the decline with a 30 basis point improvement in the second quarter.

Speaker Change: We anticipate further positive results as the general economy shows signs of recovery.

Speaker Change: Our international divisions, including Canada, the UK and India have also delivered strong growth by adopting similar strategies to expand customer verticals and implement services that we have introduced in the U S.

Speaker Change: We are optimistic about delivering continued strong sales results in the coming quarters.

Speaker Change: While we experienced gross margin pressure in the first quarter, we reversed the decline with a 30 basis point improvement in the second quarter of.

Dilantha Wijesuriya: Our ability to manage labor and operational costs efficiently, combined with subdued inflationary pressures, drove the gains. Our operational and sales headcount remained stable, providing us with adequate capacity to deliver excellent value to our customers. Our marketing efforts are ongoing, supported by effective demand generation programs. We use social media, Google, and email marketing strategies to attract more visitors to our website and capture warm leads. As always, our focus remains on strong business fundamentals.

Speaker Change: Our ability to manage labor and operational cost efficiently combined with subdued.

Speaker Change: Inflationary pressures drove the gains.

Speaker Change: Our operational and sales headcount remained stable, providing us with adequate capacity to deliver excellent value to our customers.

Dilo Wajasuria: Our marketing efforts are ongoing, supported by effective demand generation programs. We use social media, Google, and email marketing strategies to attract more visitors to our website and capture warm leads.

Speaker Change: Our marketing efforts are ongoing supported by effective demand generation programs, we use social media, Google and the email marketing strategies to attract more visitors to our website and capture of warm leads.

Dilo Wajasuria: As always, our focus remains on strong business fundamentals. Our season management team is unmatched, and we are united in our direction. Regardless of economic conditions, we are confident in our winning solutions that prioritize delivering value and making it easy and enjoyable for our customers to do business with us.

Speaker Change: As always our focus remains on strong business fundamentals, our seasoned management team is unmatched and we are United in our direction.

Dilantha Wijesuriya: Our seasoned management team is unmatched, and we are united in our direction. Regardless of economic conditions, we are confident in our winning solutions that prioritize delivering value and making it easy and enjoyable for our customers to do business with us. I'll now ask George to give you an update on our financial results. George, thank you.

Speaker Change: <unk> economy conditions, we are confident in our winning solutions that prioritize delivering value and making it easy and enjoyable for our customers to do business with us.

George Avalos: I now want George to give you an update of our financial results.

Jorge Avalos: As our financial results show, we continue to drive progress on the top line with strategic business sales while taking advantage of opportunities to improve our margins. In the second quarter, our revenue increases came primarily from color and scanning, as we've pointed out. But with inflationary pressures easing, we were better able to leverage our labor and our overhead costs, and our gross margins improved by 30 basis points. SG&A costs rose due to our continuing investments in sales and marketing and also included $900,000 related to the previously disclosed Take Private proposal.

Speaker Change: Now I'll ask George to give you an update of our financial results George.

George Avalos: George, thank you, Dilom. As our financial results show, we continue to drive progress on the top line with strategic business sales while taking advantage of opportunities to improve our margins. In the second quarter, our revenue increases came primarily from colour and scanning, as we pointed out. But with inflationary pressures easy, we were better able to leverage our labour and our overhead costs, and our gross margins improved by 30 basis. As G&A costs rose due to our continuing investments in sales and marketing, and also included $900,000 related to the previously disclosed take-private proposal. Lower cash flows from operations year over year was the outlier for the quarter, but it was due to the timing of sales collections.

George: Thank you Darren.

David Stickney: As our financial results show, we continue to drive progress on the top line with strategic business sales while taking advantage of opportunities to improve our margins. In the second quarter, our revenue increases came primarily from color and scanning, as we've pointed out. But with inflationary pressures easing, we were better able to leverage our labor and our overhead costs, and our gross margins improved by 30 basis points. Lower cash flows from operations year over year was the outlier for the quarter, but it was due to the timing of sales collection.

George: As our financial results show, we continue to drive progress on the top line with strategic business sales, while taking advantage of opportunities improve our margins in the second quarter. Our revenue increases came primarily from color and scanning as we pointed out but with inflationary pressures easing.

Speaker Change: We were better able to leverage our labor and our overhead costs and our gross margins improved by 30 basis points.

Speaker Change: G&A costs rose due to our continuing investments in sales and marketing and also included $900000 related to the previously disclosed take private proposal.

Jorge Avalos: Lower cash flows from operations year-over-year was the outlier for the quarter, but it was due to the timing of sales collection. We won and completed a number of large projects in late May and June of this year. While this benefited sales, collections for those projects extended into July and hence muted the increase in operating cash we normally see in the second quarter. However, we are confident that cash flows from operations will continue to improve in the third and fourth quarters, just as they did last year.

Speaker Change: Lower cash flows from operations year over year was the outlier for the quarter, but it was due to the timing of sales collections. We won and completed a number of large projects in late May and June of this year, well theres benefited sales collections for those projects.

George Avalos: We won and completed a number of large projects in late May and June of this year. While this benefited sales, collections for those projects extended into July and hence muted the increase in operating cash we normally see in the second quarter. We are confident that cash flows from operations will continue to improve in the third and fourth quarters, just as it did last year. Of no, we achieved more than 60% of our 2023 cash flows in the second half of the year, and we anticipate a similar performance in 2024. Our strong capital structure remains intact, as does our commitment to return shareholder value.

Kumarakulasingam Suriyakumar: We won and completed a number of large projects in late May and June of this year. We are confident that cash flows from operations will continue to improve in the third and fourth quarters, just as they did last year. Of note, we achieved more than 60% of our 2023 cash flows in the second half of the year, and we anticipate a similar performance in 2024. With that as a summary of our financial results, I'll turn the call back to Suri. Suri?

Speaker Change: <unk> extended into July and has muted the increase in operating cash we normally see in the second quarter.

Speaker Change: We are confident that cash flows from operations will continue to improve in the third and fourth quarters, just as it did last year.

Jorge Avalos: Of note, we achieved more than 60% of our 2023 cash flows in the second half of the year, and we anticipate a similar performance in 2024. Our strong capital structure remains intact, as does our commitment to return shareholder value. As such, our plan to issue a 5 cent quarterly dividend remains unchanged. We were pleased to build on the progress we made in the first quarter, and we believe we can continue to build on this success for the balance of the year. With that as a summary of our financial results, I'll turn the call back to Suri. Okay?

Speaker Change: No we achieved more than 60% of our 2023 cash flows in the second half of the year and we anticipate a similar performance in 2024.

Speaker Change: Our strong capital structure remains intact as does our commitment to return shareholder value as such our plan to issue a <unk> <unk> quarterly dividend remains unchanged.

George Avalos: As such, our plan to issue a five-sec quarterly dividend remains unchanged. We were pleased to build on the progress we made in the first quarter, and we believe we could continue to build on this success for the balance of the year.

Speaker Change: We were pleased to build on the progress we made in the first quarter and we believe we can continue to build on this success for the balance of the year.

Suriyakumar: With that as a summary of our financial result, I'll turn the call back to Surrey.

Speaker Change: With that as a summary of our financial result, I will turn the call back to Suri Suri.

Suriyakumar: Surrey, thank you, George.

Suri Suriyakumar: Thank you, George. Operator, we are now ready to take questions from our listeners.

Suri: Thank you George operator, we are now ready to.

John: Operator, we are now ready to take questions from all listeners. Thank you. We will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star, followed by the number one on your touchstone phone. If you would like to withdraw a question, send to press star one again.

Suri Suri: I'll take questions from our listeners.

Kumarakulasingam Suriyakumar: Thank you. We will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number 1 on your touchtone phone. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Greg Burns from Sidoti.

Operator: Thank you. We will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your touchstone phone. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Greg Burns from Sidoti. Please go ahead.

Speaker Change: Thank you we will now begin our question and answer session. If you have dialed in and would like to ask a question. Please press star followed by the number one on your Touchtone phone.

Speaker Change: You would like to withdraw your question simply press Star. One again, if you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from the line of Greg Burns from Sidoti. Please go ahead.

John: If you are called to ask your question and are listening to the allowed speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you.

Greg Burns: Your first question comes from the line of Greg Burns from Sedolite. Please go ahead.

Greg Burns: Good afternoon. When you look at the man that the man you are seeing in color printing, have you seen any changes in terms of buying decisions, willingness to spend?

Gregory Burns: Good afternoon. Have you seen any changes in terms of buying decisions, willingness to spend, like what is the outlook for? opportunity for you there? Obviously, you're still a relatively smaller part of the overall market, so do you still feel like you can grow even if maybe the overall market spend rates decline?

Greg Burns: Good afternoon.

Greg Burns: Good afternoon. When you look at the man, the man you're seeing is in color printing.

Greg Burns: When you look at demand the demand youre seeing in color printing.

Greg Burns: Have you seen any changes in terms of buying decisions, or willingness to spend, like what is the outlook for? What does that market look like for the balance of the year, given a more uncertain macro environment that we're seeing now? And then, you know, when we think about the growth and opportunity for you there. Obviously, you're still a relatively smaller part of the overall market, so do you still feel like you can grow even if maybe the overall market spend rates decline?

Greg Burns: Have you seen any changes in terms of.

Greg Burns: Buying decisions willingness to spend like what what is the outlook for.

Greg Burns: What does the outlook for that market look like for the balance of the year, given a more uncertain macro environment that we are seeing now?

Greg Burns: Thank you.

Greg Burns: So that market look like for the balance of the year, given a more uncertain macro environment that we're seeing now.

Greg Burns: And then when we think about the growth opportunity for you there, obviously you are still a relatively smaller part of the overall market. So do you still feel like you can grow even if maybe the overall market spend rates decline?

Speaker Change: And then when we think about.

Speaker Change: The growth opportunity.

Speaker Change: Opportunity for you there obviously still you are still a relatively smaller part.

Speaker Change: The overall market. So do you still feel like you can grow even if maybe the overall market spend spend rates.

Speaker Change: The decline thank you.

Suriyakumar: Thank you.

Suri Suriyakumar: Yes, so you know we haven't seen any first question is you know you want to know whether there were any slowdown in your spending opportunities from customers and so forth no we haven't seen very much as of this point because as you said we are a relatively a smaller organization and a growing organization in this big digital print market so therefore you know we are we are actually canvassing to different types of customers as you know we are canvassing to you know medium regional types of customers because of the footprint capabilities and our ability to do projects anyway in the US with you know more project management services and so forth so we haven't seen any significant you know slowdown or drop in spending by many of the marketing customers but obviously some of these big macro market news that we hear in the last what three four weeks have been have been you know maybe eluding to that but we haven't seen that. With regard to the growth opportunities we are certainly positive about our color growth again as I mentioned that you know we are not one you know one of those companies we are who has one or two massive locations that do you know thousands and you know millions of prints we are not that we are that on-demand short-run high-quality print company you know that has a you know sizable footprint all across where we provide that high-touch service so we are continuing to focus our sales reps are continue to focus on the our core competencies where we know there is a significant market market out there there is a significant demand from customers out there for companies like us so we feel still strong about our future growth.

Dilantha Wijesuriya: Yeah, so, you know, we haven't seen any. The first question is, you know, you want to know whether there was any slowdown in spending, opportunities from customers, and so forth. No, we haven't seen very much as of this point, because, as you said, we are a relatively smaller organization and a growing organization in this big digital print market. So therefore, you know, we are actually canvassing for different types of customers, as you know; we are canvassing for, you know, medium, regional types of customers because of their footprint capabilities and their ability to do projects anywhere in the US with, you know, more project management services and so forth.

Speaker Change: Yes.

Suriyakumar: We haven't seen any first question. You want to know whether there are any slowdowns in your spending opportunities from customers and so forth. No, we haven't seen very much as of this point because, as you said, we are relatively a smaller organization and a growing organization in this big digital print market. So therefore we are actually canvassing to different types of customers. We are canvassing to medium regional types of customers because of footprint capabilities and availability to do projects anyway in the US with more project management services and so forth. So we haven't seen any significant slowdown or drop in spending by many of the marketing customers.

Speaker Change: We haven't seen any first question is you know you want to know whether there are any slowdown in spending opportunities from customers and so forth <unk> seen very much as of this point.

Speaker Change: Because as you said, we had a relatively a smaller organization and a growing organization in this big digital print market.

Speaker Change: So therefore, we are.

Ken: Actually Ken listening to different types of customers as you know we are canvassing to medium.

Speaker Change: Regional types of customers because of both footprint capabilities of average new projects anywhere in the U S with more project management.

Speaker Change: Services and so forth so we haven't seen.

Dilantha Wijesuriya: So we haven't seen any significant slowdown or drop in spending by many of the marketing customers. But obviously, some of these big macro market news that we've heard in the last three, four weeks have been, have been, you know, maybe alluding to that, but we haven't seen that.

Ken: Any significant.

Speaker Change: Slow down or drop in spending by many of the marketing customers, but obviously some of these big macro market means that we here in the last three or four weeks have been have been.

Suriyakumar: But obviously, some of this big macro market news that we hear in the last three, four weeks have been maybe a little due to that, but we haven't seen that. With regard to the growth opportunities, we are certainly positive about our color growth. Again, as I mentioned, that we are not one of those companies who has one or two massive locations that do thousands and millions of prints. We are not that. We are that on demand, short run, high quality print company that has a sizable footprint all across where we provide that high touch service.

Speaker Change: Maybe lee alluded to that but we haven't seen that with regard to the growth opportunities.

Dilantha Wijesuriya: With regard to growth opportunities, we are certainly positive about our color growth. Again, as I mentioned, we are not one of those companies that has one or two massive locations that do, you know, thousands and millions of prints. We are not that. We are that on demand, short run, high quality print company, you know, that has a, you know, sizable footprint all across where we provide that high-touch service.

Speaker Change: <unk>.

Speaker Change: Certainly.

Speaker Change: Plus Steve about our color growth again, as I mentioned that.

Speaker Change: We are not one one.

Steve: One of those companies we have.

Speaker Change: As one or two massive locations that do.

Speaker Change: Thousands and millions of trains we announced that we have that on demand short term high quality print company.

Speaker Change: That is a sizable footprint dollar cost, where we provide that high touch service. So we are continuing to focus our sales reps are continue to focus on our core competencies, where we know there is a significant mark to market out there. There is a significant demand from customers out there for companies like us So we see it.

Dilantha Wijesuriya: So we are continuing to focus, our sales reps are continuing to focus on, our core competencies where we know there is a significant market out there, there is a significant demand from customers out there for companies like us. So we feel still strong about our future growth.

Suriyakumar: So we are continuing to focus on our sales reps, who are continuing to focus on the other co-competencies, where we know there is a significant market out there. There is a significant demand from customers out there for companies like us. So we feel still strong about our future growth.

Speaker Change: Still strong about our future growth.

Greg Burns: Okay, and then in terms of your more traditional plan printing, did the client slow there at all? Where is that market at?

Greg Burns: Okay, and then in terms of your more traditional plan printing, did the decline slow there at all? What is the... Where is that market? And, you know, I guess, obviously, interest rates will help it out. But can you just maybe give us a little bit more insight into where that business currently is and which directory it's on?

Gregory Burns: Okay, and then in terms of your more traditional plan printing, did the decline slow there at all? What is it?

Speaker Change: Okay, and then in terms of your more traditional planned printing.

Speaker Change: Did the decline slow there at all what what is the.

Gregory Burns: Where is that market at? And, you know, I guess, obviously, interest rates will help it out. But can you just maybe give us a little bit more insight into where that business is currently at and which directory it's on?

Speaker Change: Where is that market out and I guess, obviously interest rates will help it out but can you just maybe give us a little bit more insight into that.

Suriyakumar: And, you know, I guess obviously interest rates will help it out, but can you just maybe give us a little bit more insight into where that business currently is at and what your director is on? Yeah, so the plan paper printing is continuing to be the same. I haven't seen a much change in the last three, four quarters; I mean the same trends have been there. We've seen a couple of projects slowing down or getting delayed, but with regard to the plain paper usage, there is still a lull in that market, and I attribute that quite a bit to the higher interest rates that we are currently experiencing.

Speaker Change: Where that that business currently is at and what trajectory it's on.

Dilantha Wijesuriya: Yeah, so plain paper printing is continuing to be the same, right? I haven't seen much change in the last three, four quarters. I mean, the same trends have been there.

Suri Suriyakumar: Yeah, so the plain paper printing is continuing to be the same, right? I haven't seen much of a change in the last three, four quarters. I mean, the same trends have been there. We've seen a couple of projects slowing down or getting delayed. But with regard to plain paper usage, there is still a lull in that market, and I attribute that quite a bit to the higher interest rates that we're currently experiencing.

Speaker Change: Yes, so the plain paper printing is continuing to be the same right.

Speaker Change: <unk> seen a much change in the last three four quarters I mean, the same trends trends that have been there.

Speaker Change: We've seen a couple of projects slowing down of getting delayed but with regard to the Pip plain paper usage there is still a.

Dilantha Wijesuriya: We've seen a couple of projects slowing down or getting delayed. But with regard to plain paper usage, there is still a lull in that market. And I attribute that quite a bit to the higher interest rates that we are currently experiencing. Someday down the line, a couple of quarters down the line, when we see some easement in interest rates, some of that work is going to come back, right? The home building, home construction, some of the tenant improvement work, they'll all come back to some level.

Speaker Change: Lull in that market.

Speaker Change: I attribute that quite a bit to the higher interest rates that we're currently experiencing.

Suri Suriyakumar: Someday down the line, a couple of quarters down the line, when we see some easement in interest rates, some of that work is going to come back, right? The home building, home construction, some of the tenant improvement work, they'll all come back to some level. But some of the secular changes that we see in plain paper printing, I don't think they're going to come back. Those things will continue to be moving to digital workflows. So while the business is somewhat now getting stabilized, I think the same headwinds will be there for a while.

Suriyakumar: You know, somebody down the line, a couple of quarters down the line that when we see some easement in interest rates, you know, some of that work is going to come back, right?

Speaker Change: Someday down the line couple of quarters down the line that when we see some easement in.

Speaker Change: Interest rates.

Speaker Change: Some of that work is going to come back the whole bill.

Suriyakumar: The home building, home construction, some of the tenant improvement work, they all come back to some level, but you know, some of the secular changes that we see in the plan paper printing, I don't think it's going to come back. You know, those things will continue to be moving to digital workflows. So while the business is somewhat now getting stabilized, but I think the same events will be there for a while.

Speaker Change: Homebuilding of construction some of the tenant improvement work.

Speaker Change: They'll all come back to some level, but in some others.

Speaker Change: Secular changes that we've seen the player printing I don't think its going to come back and all those things will continue to be negative.

Dilantha Wijesuriya: But some of the secular changes that we've seen in plain paper printing, I don't think they're going to come back. Those things will continue to be moving to digital workflows. So while the business is somewhat now getting stabilized, but I think the same headwinds will be there for a while.

Speaker Change: B.

Speaker Change: Moving to digital workflows.

Speaker Change: While the business is somewhat now getting stabilized, but I think the same headwinds will be there for a while.

Gregory Burns: Okay, in terms of margins, obviously, very, very nice improvement in the margins this quarter. How should we think about that going forward relative to you balancing, continuing to invest for growth, against maybe driving some operating leverage in the model, you know, is this maybe... You know, it's just a strong quarter and maybe we see a step back in the coming quarters. How should we think about margin progression from here?

Greg Burns: Okay, in terms of margins, obviously, very, very nice improvement in the margins this quarter. How should we think about that going forward relative to you balancing, continuing to invest for growth, against maybe driving some operating leverage in the model, you know, is this maybe? You know, it's just a strong quarter, and maybe we see a step back in the coming quarters. How should we think about margin progression from here?

Greg Burns: Okay, and in terms of margins, obviously very, very nice improvement in the margins this quarter. How should we think about that going forward relative to you balancing continuing to invest for growth? Again, maybe driving some operating leverage in the model, you know, just maybe, you know, it's just a strong quarter and maybe we see a step back in the coming quarters.

Speaker Change: Okay.

Speaker Change: In terms of margins, obviously very very nice.

Speaker Change: Improvement in the margins this quarter, how should we think about that going forward.

Speaker Change: Two you balancing continuing to invest for growth.

Speaker Change: Against maybe driving some operating leverage in the model.

Speaker Change: Is this maybe.

Speaker Change: It was just a strong quarter and maybe we see a step back in the coming quarters, how should we think about margin progression from here.

Greg Burns: How should we think about margin progression from here?

Jorge Avalos: I mean, I'll break it up into two points. From a gross margin perspective, you know, with the easing of inflationary pressures coupled with the increase in revenue, we're better able to leverage our labor and our overhead. So we feel good about our prospects as we move later in the year. I mean, would we be able to repeat 35 percent gross margins? Probably not in regards to pending; as you know, we have seasonality in sales.

Suriyakumar: I mean, do I? I'll break it up into two points. From a gross margin perspective, you know, with the easing of inflationary pressures coupled with the increase in revenue, then we're better able to leverage our labor. And our overhead, so we feel good about our prospect as we move later in the year.

Speaker Change: I mean, the way I'll break it up into two points from a gross margin perspective.

Speaker Change: With the easing of inflationary pressures coupled with the increase in revenue then we're better able to leverage our labor and our overhead. So we feel good about our R. R.

Speaker Change: Our prospects as we move.

Speaker Change: Later in the year, I mean would we be able to repeat 35% gross margins, maybe not if with regards to pending as you guys. As you know we have seasonality in sales for example, fourth quarters are typically lower but when we look at it from a year over year perspective, we have we feel we have a good chance of being in that range.

Suriyakumar: I mean, would we be able to repeat 35% gross margins? Maybe not if in regards to pending, as you guys, as you know, we have seasonality in sales. For example, fourth quarter, they're typically lower, but when we look at it from a year-over-year perspective, we have a, we thought we have a good chance of being in that range.

Operator: Thank you for standing by.

John: My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to the ARC Document Solutions, 2nd quarter, 2020, 24, Irina's report. All lives of the place and needs to prevent any background bias. After the speaker's remarks, there will be a question in answer session. If you would like to ask a question during this time, the press start, followed by the number one on your telephone keypad. If you would like to withdraw a question, simply press start one again. Thank you.

George Avalos: Now, the second part of your question in regards to the investments and the impact on our margins: those investments are coming in sales and marketing, which flow through your SGNA. And the levels that you see in the, in the second quarter is a good gauge to use as a predictor movie forward, absent the 900,000 in transaction fees related to the proposed go-private transaction. Does that make sense?

Speaker Change: Now the second part of your question in regards to investments and the impact on their margins those investments are coming in sales and marketing which flow through your SG&A and the levels that you see in the.

Jorge Avalos: For example, fourth quarters are typically lower. But when we look at it from a year-over-year perspective, we feel we have a good chance of being in that range. Now the second part of your question, in regards to the investments and the impact on our margins, those investments are coming in sales and marketing, which flow through your SG&A. And the levels that you see in the second quarter are a good gauge to use as a predictor moving forward, absent the $900,000 in transaction fees related to the proposed go-private transaction. Transaction. Does that make sense?

David Stickney: I would now like to turn the call over to David Stickney. Vice-president, investor relations, please go ahead. Thank you, John, and welcome everyone.

Speaker Change: In the second quarter is a good gauge to use as a predictor moving forward apps at 900000 transaction fees related to the proposed go private.

David Stickney: On the call with me today, our Suriyakumar, our CEO and Chairman, our President and Chief Operating Officer, Dilo, which is Suriyak, and George Avalos, our Chief Financial Officer. Our 2nd quarter results for 2024 were publicized earlier today in a press release. The press release and other company materials are available from our investor relations pages on ARC Document Solutions website at IR.e-airc.com.

Speaker Change: Transaction does that makes sense.

Greg Burns: Yep, no, that's helpful. All right, I'll pass it along. Thank you.

Greg Burns: Yeah, that's helpful.

Speaker Change: Yes, no not such.

Speaker Change: That's helpful All right I'll.

Greg Burns: All right, I'll pass it along. Thank you.

Speaker Change: I'll pass it along thank you.

Greg Burns: Yeah, no problem.

Speaker Change: No problem.

David Marsh: Your next question comes from the line of David Marsh from Singular Research.

Operator: Your next question comes from the line of David Marsh from Singular Research. Please go ahead.

Speaker Change: Your next question comes from the line of David Marsh from singular research. Please go ahead.

David Marsh: Please go ahead. Hey guys, thank you very much for taking the questions. Sure.

David Marsh: Hey, guys. Thank you very much for taking the questions. Sure. So, yeah, if I could start,

David Marsh: Hey, guys. Thank you very much for taking the questions.

Speaker Change: Sure.

David Stickney: Please note that today's call will contain forward-looking statements and are only predictions based on information as of today August 7th, 2024, and actual results made different materialy as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. Any non-gap measures discussed today are reconciled in our press release and in our form 8K filing.

David Marsh: It doesn't, you know, it looks like the share count actually ticked up a bit. Just... Wondered, you know, I know, Repurchasing shares had been a priority if, you know, the market opportunity was there. I'm wondering if this GoPrivate transaction kind of supersedes our ability to repurchase any shares. Thank you.

David Marsh: So, yeah, if I could start, doesn't it look like the share count actually ticked up a bit? Just wondered, you know, I know, you know, repurchasing shares had been a priority if, you know, if the market opportunity was there. Wondering if this go private transaction kind of supersedes her ability to repurchase any shares. The quick answer is yes, it does.

Speaker Change: So yes, if I can start it doesn't.

Speaker Change: It looks like the share count actually ticked up a bit.

Speaker Change: Wonder I know.

Speaker Change: Repurchasing shares had been our priority.

Speaker Change: You know for market opportunity was there I'm wondering if this go private transaction kind of supersedes your ability to repurchase any shares.

David Stickney: Before reviewing our second quarter results, we should note that the company has disclosed its receipt of a non-binding proposal outlining a going private transaction at a purchase price of $3.25 per share in cash. The proposal was submitted by an acquisition group consisting of ARC's suite and a private investor. In response to the proposal, a special committee of our board of directors consisting entirely of independent, disinterested directors was formed to review and evaluate the proposed transaction and continues to carefully consider it with the assistance of its independent financial and legal advisors.

Suri Suriyakumar: The quick answer is yes, it does.

Speaker Change: The quick answer is yes. It does.

David Marsh: Okay. And so, you know, it looks like it took some cash and, you know, maybe pay down a little bit of debt in the quarter. Am I reading that right?

Speaker Change: Okay.

David Marsh: And so, you know, it looks like you took some cash and, you know, maybe paid down a little bit of debt in a quarter. Am I reading that right? And then, you know, what would be the kind of priority uses of cash going forward as you evaluate this transaction? Of M. M. M. M. M. M.

Gregory Burns: And so, you know, it looks like you took some cash and, you know, maybe paid down a little bit of debt in a quarter. Am I reading that right? And then, you know, what would be the kind of priority uses of cash going forward as you evaluate this transaction?

Speaker Change: And so it looks like you took some cash and maybe pay down a little bit of debt in the quarter or am I am I reading that right and then what would be the kind of.

George Avalos: And then, you know, what would be that kind of priority use as a cash going forward as you evaluate this transaction? In regards to, we're looking at the business just as a go forward basis as running business as usual. So same thing we did last year. We used more of our cash to purchase equipment versus using capital leases. As you can see from our financials, we did that in 2023 because interest rates were high, and I don't want to pay 9% interest to acquire equipment. And we've continued that strategy moving in here in 2024. So no change in our strategies that we've had over the last couple of years.

Speaker Change: Priority uses of cash going forward as you evaluate this transaction.

Jorge Avalos: In regards to, we're looking at the business just as a go-forward basis, as running business as usual. So, the same thing we did last year, we used more of our cash to purchase equipment versus using capital leases. As you can see from our financials, we did that in 2023 because interest rates were high, and I didn't want to pay 9% interest to acquire equipment, and we've continued that strategy moving into 2024. So there is no change in our strategies that we have had over the last couple of years.

Speaker Change: In regards to we're looking at the business just as a go forward basis as running business as usual. So same thing we did last year, we used more of our cash to purchase equipment versus using capital leases.

Speaker Change: You could see from our financials, we did that in 2023, because interest rates were high and I don't want to pay 9% interest to acquire equipment and we've continued that strategy moving in here into 2024, So no change in our strategies that we've had over the last couple of years.

David Stickney: No assurances can be given regarding the terms and details of any transaction that any proposal made by the acquisition group regarding a transaction will be accepted by the special committee. That definitive documentation relating to any such transaction will be executed or that a transaction will be consummated in accordance with that documentation if at all.

Suriyakumar: Okay. So, you know, this proposal obviously management is an involved party, or some portion of the management teams are involved party in the proposal. But, you know, going back to your comment, looking at the business more as a, you know, just kind of a continuing operation as a public company. You know, are you seeing any opportunities for acquisitions that would, you know, either get you into a new business line or new geography that you're not already in that might be compelling here. You know, as we're starting to see some kind of disruption in the overall financial markets.

Speaker Change: Okay.

David Marsh: Okay. So, you know, this is what it is. This proposal, obviously, management is an involved party, or some portion of the management team is an involved party in the proposal, but going back to your comment, looking at the business more as just kind of a continuing operation as a public company, are you seeing any opportunities for acquisitions that would either get you into a new business line or new geography that you're not already in that might be compelling here as we're starting to see some kind of disruption in the overall

Speaker Change: Right.

David Stickney: For further information, we direct you to the 8K form 13D and the press release available on ARC's investor relations website at IR.edasherc.com. No additional information has been released nor will be on this call.

Speaker Change: Sure.

Speaker Change: This proposal obviously management.

Speaker Change: <unk> is an involved party or or some portion of our management teams are involved party in the proposal.

Speaker Change: But you know.

Speaker Change: Again going back to your comment looking at the business more.

Speaker Change: Just kind of a continuing.

Suriyakumar: We will now continue with our customary remarks and at this point I'll turn the call over to our chairman and CEO Surrey Surrey. Thank you David and good afternoon everyone. Net sales continued to grow in the second quarter as did our gross margin and adjusted earnings per share. The execution of our strategic objectives will once again responsible for our success. Despite uncertain business conditions caused by the high interest rates and the weakness in commercial construction due to excess supply.

Speaker Change: Continuing operation as a public company.

Speaker Change: Are you seeing any opportunities for acquisitions.

Speaker Change: That would either get you into a new business line or geography that you're not already in that.

Speaker Change: Might be compelling here.

Speaker Change: As you know as we're starting to see some kind of disruption in the overall financial markets.

Suri Suriyakumar: So... Thank you. Thank you.

Dilantha Wijesuriya: So, I'll take that one. In terms of acquisitions, we've not had anything in the pipeline. We've always said that we will be opportunistic about it, something pops up, it pops up, but we never had anything in the pipeline, or neither were we in consideration to do anything. With regard to the GoPrivate transaction, you know, it's now completely assigned to the special committee appointed by the board. They are independent directors. They'll do whatever they have to do from a legal and SEC perspective. We just run the business as usual, business as usual here, and then nothing, no acquisitions or any other thoughts. We just come across our table if that comes, and if it merits a review.

Suri Suriyakumar: So I'll take that one. In terms of acquisitions, we've not had anything in the pipeline. We've always said that we will be opportunistic about it, something pops up, it pops up, but we never had anything in the pipeline, or neither were we in consideration to do anything. With regard to the GoPoint private transaction, you know, it's now completely assigned to the special committee appointed by the board. They are independent directors.

Suriyakumar: So I'll take that one. So, in terms of acquisitions, we've not had anything in pipeline. We've always said that we'll be opportunistic about it. Something pops up. It pops up.

Speaker Change: So I'll take that one so in terms of acquisitions, we've not had anything.

Operator: Okay, that's pretty helpful. I'm sorry, I'm probably repeating the previous caller's question, and I apologize if I do.

Speaker Change: Pipeline, we've always said that we are.

Speaker Change: We'll be opportunistic about it something pops up it pops up but we never had anything in the pipeline are neither will we.

Suriyakumar: But we never had anything in the pipeline, nor did we go in consideration to do anything with regard to the go point private transaction. You know, it's now completely assigned to the Special Committee appointed by the Board. They have independent directors. They'll do whatever they have to do from a legal and a CC perspective. We just run the business as usual. Business as usual here. And then nothing, no acquisitions or any other thoughts. We just come across our table if that comes. And if it merits review, we will do so.

Suriyakumar: Our strategic self-focus drove top-line growth with digital color printing, making an outsized contribution to our overall success despite the decrease in digital plant printing. Scanning and archiving continue to grow at a healthy pace, as expected, on-site services sales fell slightly, but we continue to believe it will provide a steady base of sales with upside potential in the future. While we saw an incremental uptick in equipment and supplies, we believe that buying habits have stabilized as customers have adjusted to a new high-interest rate environment.

Speaker Change: Concentration to do anything with regard to the go private transaction.

Speaker Change: Now completely assigned to the special Committee.

Speaker Change: Appointed by the board.

Speaker Change: Independent directors they'll do whatever they have to do from a legal and a.

Suri Suriyakumar: They'll do whatever they have to do from a legal and SEC perspective. We just run the business as usual, business as usual here, and then nothing, no acquisitions or any other thoughts. We just come across our table if that comes, and if it merits a review, we will do so.

Speaker Change: ACC perspective.

Speaker Change: Just run the business as usual business as usual here and then nothing no acquisitions or any other thoughts we just come across our table if that comes in.

Speaker Change: If it merits.

Speaker Change: Our review, we will do so.

David Marsh: Okay, that's pretty helpful. I'm sorry, I'm probably repeating the previous caller's question, and I apologize if I do.

Speaker Change: Okay.

David Marsh: Okay, that's pretty helpful. Just, I'm sorry; I'm probably repeating the previous caller's question. I had full apologize if I do. George, I think you said $900,000 in expense related to the evaluation of the go-private transaction in the quarter. Is that right to the year? Right. And is that his GNA line? That is correct on both points.

Speaker Change: That's pretty helpful. Just I'm, sorry, yeah, probably repeating.

Suriyakumar: With an increase in sales and our ability to leverage our workforce and our overhead cost, we exceeded our own expectations in growth margins growing it by 30 basis points year-to-year. Throughout the past several quarters, we also made several investments in our sales force and in new marketing programs. While these quarterly SGA costs were not in consequential, putting new initiatives on trial to boost sales must be part of our growth efforts and we were generally pleased with ourselves. Our performance in the first half of the year has been gratifying and it is a testament to our strategic decisions and the company's execution.

Speaker Change: The previous caller's question I had for apologize if they do.

Gregory Burns: Jorge, I think you said $900,000 in expenses related to the evaluation of the GoPrivate transaction in the quarter. Is that right? Did I hear you right? And did that hit the SG&A line? Yes, on both points. Okay, so as we go forward, that extent should be demonstrably lower, presumably. Is that a fair assessment?

David Marsh: Jorge, I think you said $900,000 in expenses related to the evaluation of the GoPrivate transaction in the quarter. Is that right? Did I hear you right? And did that hit the SG&A line? That is correct on both points. Okay, so as we go forward, that extent should be demonstrably lower, presumably, as a

Speaker Change: George I think you said $900000 in expense related to the evaluation of the go private transaction in the quarter is that right or you're right.

Speaker Change: Does that is that SG&A line.

George: That is correct on both points.

George Avalos: So, as we go forward, that that accent should be demonstrable or presently as a fair assessment. We just don't know, and it's something we can't comment on. That's completely up to the Special Committee. They have white powers to do whatever they have to do to evaluate the proposal. They'll do whatever they are supposed to do as an independent committee, full of independent directors. We have no control over that. Roger that.

Speaker Change: Okay.

Speaker Change: As we go forward that that sense should we.

Speaker Change: Sure.

Speaker Change: Presumably is that a fair assessment.

Jorge Avalos: We just don't know, and it's something we can't comment on.

Jorge Avalos: We just don't know, and it's something we can't comment on. That's completely up to the special committee. They have the right powers to do whatever they have to do to evaluate the proposal. They'll do whatever they are supposed to do as an independent committee full of independent directors. We have no control over that.

Speaker Change: We just don't know and that's something we can't comment on.

Speaker Change: That's completely up to the special committee they have white polo is to do what it would have to do to evaluate the proposal.

Speaker Change: They'll do whatever they are supposed to do as an independent Committee Fuller.

Speaker Change: Full of independent directors.

Speaker Change: We have no control over that.

David Marsh: Roger that. Okay, guys. Thanks very much for taking the questions. I'll pass them along.

Speaker Change: Roger.

Suriyakumar: While we expect difficult market conditions to continue in the second half of the year, we remained focused on our long-term objectives.

David Marsh: Okay, guys. Thanks very much for taking questions on the past forum. You're welcome.

Speaker Change: Hey, guys. Thanks, very much for taking the question about platform.

Speaker Change: You're welcome.

Glenn Primack: Your next question comes from the line of Glenn Primack from the same investment group. Please go ahead.

Operator: Your next question comes from the line of Glenn Primack from Luce Investment Group. Please go ahead.

Speaker Change: Your next question comes from the line of Glenn Primack from Lasalle Investment Group. Please go ahead.

Dilantha Wijesuriya: For more details about our activities in the second quarter, I will now ask Dilo and George for their comments. Dilo, thank you, Surrey. The moment that we build in the first quarter has continued demonstrating solid sales growth in the second quarter, achieving nearly four percent growth under the current volatile economic condition is commendable. I want to extend my appreciation to our staff who remain committed to our company's transformation and the execution of our business plan for the year.

Glenn Primack: Good afternoon. Digging a little deeper on the increased marketing expense, is that going towards a specific program like the scanning? Or is that, can you just... Tachana, like what?

Glenn Primack: Like that. No. Definitely.

Glenn Primack: Hi, good afternoon.

Glenn Primack: Good afternoon.

Glenn Primack: Taking a little deeper on the increased marketing expense. Is that going towards a specific program like the scanning, or is that you can you just touch on like what's specific programs you're really going after with the extra dollars there? Yeah, so there's no I can attribute it to a very specific program. Glenn, you know, it's the extra spend that we've seen year over here for the second quarter. There's a component for that goes into head count. We've added a couple of sales new sales consultants, especially experienced consultants who are good in digital color. The white form at color printing.

Operator: Digging a little deeper on the increased marketing expense, is that going towards a specific program like the scanning? Or is that, can you just...

Speaker Change: Digging a little deeper on the.

Glenn Primack: Increased marketing expense is that going towards a specific program like.

Glenn Primack: The scanning or is that.

Speaker Change: Can you just.

Speaker Change: Touch on like what.

Glenn Primack: Specific programs you're really going after with the extra dollars there.

Speaker Change: Specific programs you are really going after with the extra dollars there.

Dilantha Wijesuriya: Yeah, so there's no, I can attribute it to a very specific program Glen, you know, it's the extra spend that we've seen year over year for the second quarter. There's a component that goes into headcount. We've added a couple of new sales consultants, especially experienced consultants who are good at digital color, light format color printing, so we've added them to specific geographical markers, very strategic locations for us, so some amount is in headcount and the rest of it is, you know, we just launched a new website. I hope you got a chance to see that the new ARC website is on.

Speaker Change: Yes.

Glenn Primack: There's nos again attributed to a very specific program Glenn.

Dilantha Wijesuriya: While interest rates and uncertain political climate have pressured some of our customers, I believe that companies with good strategies and a relentless focus on quality and customer service will continue to secure new market share and grow. Our remains set fast in executing our fundamental strategies to keep the company healthy and growing. Our color digital printing services were the key driver for sales improvement and easily offset the decline in black and white plant printing.

Speaker Change: The extra spend that we've seen year over year for the second quarter.

Speaker Change: As a component that goes into head count.

Speaker Change: We have a debt.

Speaker Change: I'd add a couple of.

Speaker Change: Sales new sales consultant sufficiently experienced consultants, who are good in digital color bite format color printing so.

Dilo Wajasuria: So we've added them in specific geographical market, very strategic locations for some amount is in head count. And the rest of it is, you know, we just launched a new website. You know, I hope you got a chance to see that the new website is on. We launched a new Riot Color website. A couple of months ago, and we're just focusing on some really strong SEO programs driving traffic into the website using keywords and so forth. You know, a little bit of spending on Google advertising as well, but not a heck of a lot. No big, big investments compared to last year, but we've been very focused on organic driven, driven marketing programs. Email marketing programs are going as well.

Speaker Change: Added them in specific geographies market very strategic location swaps. So some amount is in head count and the rest of it is we just launched a new website I.

Dilantha Wijesuriya: Both regular and new customers leveraged services for brand promotion, new product launches, trade shows and entertainment events. Our efforts to diversify customer verticals continue to yield impressive results and those following us on social media will see how we bring custom ideas to life with vibrant graphics. The market for digital color is becoming increasingly competitive with many traditional print companies transitioning to digital printing. However, ARC stands out with our extensive footprint, comprehensive service offerings and a seasoned management team characterized by a can-do mindset of a construction plant printing segment continues to face challenges due to the higher interest rates which have led to cancellations and delays in new construction projects.

Speaker Change: I Hope you got a chance to see that the new website is on we launched a new riot color website, a couple of months ago, and we are just focusing on some really strong.

Dilantha Wijesuriya: We launched a new Riot Color website a couple of months ago and we are just focusing on really strong SEO programs, driving traffic into the website using keywords and so forth, you know, a little bit of spending on Google advertising as well, but not a heck of a lot, no big investments compared to last year, but we've been very focused on organic driven marketing programs, email marketing programs are going as well, so the spend is primarily the headcount and obviously our sales have grown, especially on the color side, so there is an increased payment of commissions, but the rest of it is on the marketing programs.

Speaker Change: Youll programs driving traffic into the web site.

Speaker Change: <unk> key words and so forth.

Speaker Change: A little bit of spending on Google advertising as well, but not a heck of a lot norm.

Speaker Change: Investments compared to last year, but we've been very focused on organic driven driven marketing programs email marketing programs are growing as well. So the spend is primarily the head count and obviously, our sales have grown especially on the color side. So.

Dilo Wajasuria: So the spend is primarily the head count, and obviously our sales have grown, especially on the color side.

Dilo Wajasuria: So there is an increased payment of commissions, but the rest of it is on the marketing programs. All right, great. So, on the sale side, there's probably got some payback off of that. If it's experienced people that you're putting in these different locations versus a newbie. Is that safe to assume? Yes, so usually it takes a couple of months for even for experienced people to get comfortable with the company and get used to the systems and start soliciting. So, yeah, definitely, they are, they are, they are early stages of delivering some takes a little bit more extra time.

Speaker Change: There is an increase payment of commissions, but the rest of it is on the marketing programs.

Glenn Primack: All right, great. So, on the sales side... So you've probably got some payback on of that if it's experienced people that you're putting in these different locations versus a newbie. Is that safe to assume?

Speaker Change: Alright, great.

Dilantha Wijesuriya: Our strategy is to maintain our current customer and prepare to take on new projects as the economy improves and interest rates decline. While plant printing is important, we are not reliant on this recovery. The transformation initiatives we implemented several years ago are proving successful as evidenced by our results. Our document canning services have provided a notable boost in building our reputation by delivering projects on time with high digital accuracy. Our dual sales approach targeting enterprise customers and offering low volume scanned by the box services continues to be effective.

Speaker Change: Sales side.

Operator: So you've probably got some payback on that if it's experienced people that you're putting in these different locations versus a newbie, is that safe to assume?

Speaker Change: You've probably got some payback off of that if it's the experienced people that youre, putting in these different locations versus a newbie safety.

Speaker Change: Safe to assume.

Dilantha Wijesuriya: Yes, so usually it takes a couple of months or even for experienced people to get comfortable with the company and get used to the systems and start recruiting. So yes, definitely there are early stages of delivering, some take a little bit more extra time. So there are different stages; our goal is to make them all successful very quickly.

Dilantha Wijesuriya: Yes, so usually it takes a couple of months or even for experienced people to get comfortable with the company and get used to the systems and start recruiting. So yes, definitely there are early stages of delivering, some take a little bit more extra time. So there are different stages; our goal is to make them all successful very quickly.

Speaker Change: Yes, so usually it takes a couple of months or even fly experience be able to get comfortable with the company and get used to the systems.

Speaker Change: Solid sitting so yes definitely.

Speaker Change: They are.

Speaker Change: Early stages of delivering some some takes a little bit extra time.

Dilo Wajasuria: You know, so you know, they are different stages. Our goal is to make them all successful very quickly. Yeah, and it's no doubt that you and George will measure everything. Anyways. Every time, Glenn, every time. I don't love that.

Speaker Change: So there are different stages of our goal is to make them more successful very quickly.

Glenn Primack: Yeah, and there's no doubt that you and Jorge will measure everything anyway.

Operator: Yeah, and there's no doubt that you and Jorge will measure everything.

Speaker Change: Yes and no.

Speaker Change: No doubt that you and George will measure everything anyways.

Glenn Primack: Every time, Glenn, every time. I love that. That's it for me. I can't wait to go check out the new website and the relatively new RIOT website.

Glenn Primack: Every time, Glenn, every time. I love that. That's it for me. I can't wait to go check out the new website and the relatively new RIOT website.

Speaker Change: Every time, Glenn every time.

Dilantha Wijesuriya: Our strong online pressurne supported by positive reviews and the ease with which our customers can find us is helping to organically grow our reputation as one of the best scanning providers in the country. While MPS sales felt slightly during the quarter, it has stabilized over the past two years. Meanwhile, the equipment and supply segment experience nominal growth we anticipate further positive results as the general economy shows signs of recovery. Our international divisions including Canada, the UK and India have also delivered strong growth by adopting similar strategies to expand customer verticals and implement services that we have introduced in the U.S. We optimistic about delivering continued strong sales result in the coming quarters.

Speaker Change: Yeah.

Speaker Change: And I love that.

Glenn Primack: That's it for me. I can't wait to go check out the new website and the riot and the relatively new website. Thank you.

Speaker Change: That's it for me I can't wait to go check out the new website and Orion relatively new web site.

Speaker Change: Thank you.

Operator: And that does conclude the question and answer session. I would like to turn the floor back over to Mr. David Stickney for closing remarks.

David Stickney: And that, that's the clue to the question and answer session.

David Stickney: And that does conclude the question and answer session. I would like to turn the floor back over to Mr. David Stickney for closing remarks.

Speaker Change: And that does conclude the question and answer session I would like to turn the floor back over to Mr. David Stickney for closing remarks.

David Stickney: I would like to turn the floor back over to Mr. David Stickney for closing remarks.

David Stickney: As usual, we appreciate your continuing interest in ARC, and we encourage you to reach out.

David Stickney: As usual, we appreciate your continuing interest in ARC, and we encourage you to reach out with any questions about our progress. You can always check our investor relations website at ir.edasharc.com.

David Stickney: As usual we appreciate your continuing interest in arc and we encourage you to reach out with any questions about our progress you can always check our investor relations website at IR Dot <unk> dot com for more information, we look forward to talking with you soon take care Bye bye.

David Stickney: As usual, we appreciate your continuing interest in ARC, and we encourage you to reach out with any questions about our progress. You can always check our investor relations website at ir.e-arc.com. For more information, we look forward to talking with you soon. Take care. Bye-bye

David Stickney: For more information, we look forward to talking with you soon.

David Stickney: Take care. Bye-bye.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: You may now disconnect.

David Stickney: Yes.

David Stickney: [music].

Dilantha Wijesuriya: While we experienced gross margin pressures in the first quarter, we reverse the decline with 30 basis point improvement in the second quarter. Our ability to manage labor and operational cost efficiently combined with some inflationary pressures grow the gains. Our operational and sales hit count remain stable providing us with adequate capacity to deliver excellent value to our customers. Our marketing efforts are ongoing supported by effective demand generation programs. We use social media, Google and email marketing strategies to attract more visitors to website and capture wrong leads.

David Stickney: Yes.

Dilantha Wijesuriya: As always, our focus remains on strong business fundamentals. Our season management team is unmatched and we are united in our direction. Regardless of economic conditions, we are confident in our winning solutions that prioritise delivering value and making it easy and enjoyable for customers to do business Thank you, Dello. As our financial results show, we continue to drive progress on the top line with strategic business sales while taking advantage of opportunities to prove our margins.

David Stickney: Yes.

Dilantha Wijesuriya: In the second quarter, our revenue increases came primarily from color and scanning as we've pointed out. But with inflationary pressures easy, we were better able to leverage our labor and our overhead costs and our gross margins improve by 30 basis. Point. As she in a cause rose due to our continuing investments in sales and marketing, and also included $900,000 related to the previously disclosed take private proposal. Lower cash flows from operations year over year was the outlier for the quarter, but it was due to the timing of sales collections.

Dilantha Wijesuriya: We won and completed a number of large projects in late May and June of this year. While this benefited sales, collections for those projects extended into July and hence muted the increase in operating cash we normally see in the second quarter. We are confident that cash flows from operations will continue to improve in the third and fourth quarter, just as it did last year. Of no, we achieved more than 60% of our 2023 cash flows in the second half in the year, and we anticipate a similar performance in 2024.

Dilantha Wijesuriya: Our strong capital structure remains intact as does our commitment to return shareholder value. As such, our plan to issue a five-second quarterly dividend remained unchanged. We were pleased to build on the progress we made in the first quarter, and we believe it could continue to build on this success for the balance of the year.

Suriyakumar: With that of the summary of our financial result, I'll turn the call back to Suriy, Suriy. Thank you, George.

John: All right then, we are now ready to take questions from our listeners. Thank you. We will now begin our question and answer session. If you have doubt in and would like to ask a question, please press star, followed by the number one on your touchstone phone. If you would like to wish our question some to press star run again. If you are called upon to ask your question and are listening to the allowed speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you.

Gregory Burns: Your first question comes from the line of Greg Burns from CIDO. Please go ahead. Good afternoon. When you look at the man that the man you're seeing in color printing, have you seen any changes in terms of buying decisions, willingness to spend? What is the outlook for that market look like for the balance of the year given a more uncertain macro environment that we're seeing now? Then when we think about the growth opportunity for you there, obviously, you're still relatively smaller.

Gregory Burns: Part of the overall market, so do you still feel like you can grow even if maybe the overall market spend spend rates decline? Thank you. You know, we're elected. We haven't seen any first question. You want to know whether any slow down and spending opportunities from customers and so forth. No, we haven't seen very much as of this point. Because as you said, we are relatively a smaller organization and a growing organization in this big digital print market.

Gregory Burns: So therefore, we are actually witnessing to different types of customers. We are witnessing to medium regional types of customers because of footprint capabilities and our ability to do projects anywhere in the US with more project management services and so forth. So we haven't seen any significant, slow down or drop in spending by many of the marketing customers. But obviously, some of this big macro market news that we here in the last 3, 4 weeks have been, you know, maybe we'll do that.

Gregory Burns: But we haven't seen that with regard to the growth opportunities, we are certainly positive about our color growth. Again, as I mentioned that, you know, we are not, you know, one of those thousands and millions of prints. We are not that. We are that on demand, short run, high quality print company. You know, that has a sizable footprint all across where we provide that high touch service. So we are continuing to focus, sales reps are continuing to focus on the other compute competencies where we know there is a significant market out there. There is a significant demand from customers out there for companies like us.

Suriyakumar: So we feel strong about our future growth.

Gregory Burns: Okay, and then in terms of your more traditional plan printing, did the client slow there at all? Where is that market at?

Suriyakumar: And, you know, I guess obviously interest rates will help it out, but can you just maybe give us a little bit more insight into where that business currently is at and what your director is on? Yeah, so the plan paper printing is continuing to be the same. I haven't seen a much change in the last three, four quarters, I mean the same trends have been there. We've seen a couple of projects slowing down or getting delayed, but with regard to the plain paper usage, there is still a lull in that market, and I attribute that quite a bit to the higher interest rates that we currently experiencing. You know, somebody down the line, a couple of quarters down the line that when we see some easement in interest rates, you know, some of that work is going to come back, right?

Suriyakumar: The home building, home construction, some of the tenant improvement work, they are all come back to some level, but you know, some of the secular changes that we see in the plan paper printing, I don't think it's going to come back. You know, those things will continue to be moving to digital workflows. So while the business is somewhat now getting stabilized, but I think the same events will be there for a while.

Gregory Burns: Okay, and in terms of margins, obviously very, very nice improvement in the margins this quarter, how should we think about that going forward relative to you balancing continuing to invest for growth. Again, maybe driving some operating leverage in the model, you know, just maybe, you know, it's just a strong quarter and maybe we see a step back in the coming quarters.

George Avalos: How should we think about margin progression from here? I mean, do I, I'll break it up into two points. From a gross margin perspective, you know, with the easing of inflationary pressures coupled with the increase in revenue, then we're better able to leverage our labor. And our overhead, so we feel good about our prospect as we move later in the year. I mean, would we be able to repeat 35% gross margins, maybe not if in regards to pending as you guys, as you know, we have seasonality in sales.

George Avalos: For example, fourth quarter, they're typically lower, but when we look at it from a year over year perspective, we have a, we thought we have a good chance of being in that range. Now, the second part of your question in regards to the investments and the impact on our margins, those investments are coming in sales and marketing, which flow through your SGNA. And the levels that you see in the, in the second quarter is a good gauge to use as a predictor movie forward, absent the 900,000 in transaction fees related to the proposed go private transaction. Does that make sense? Yeah, that's helpful.

Gregory Burns: All right, I'll pass it along. Thank you. Yeah, no problem.

David Marsh: Your next question comes from the line of David Marsh from singular research. Please go ahead. Hey guys, thank you very much for taking the questions. Sure. So yeah, if I can start, it doesn't, you know, it looks like the share count actually ticked up a bit. Just wondered, you know, I know, you know, pretty refreshing shares had been a priority. If, you know, the market opportunity was there. Wondering if this go private transaction kind of supersedes their ability to reproduce any shares.

George Avalos: The quick answer is yes, it does. Okay. And so, you know, it looks like it took some cash and, you know, maybe pay down a little bit of debt in a quarter or am I reading that right? And then, you know, what would be the kind of priority uses of cash going forward as you evaluate this transaction? In regards to, we're looking at the business just as it go forward basis as running business as usual.

George Avalos: So, same thing we did last year, we used more of our cash to purchase equipment versus using capital leases as you could see from our financials. We did that in 2023 because interest rates were high and I don't want to pay 9% interest to acquire equipment. And we've continued that strategy moving in here into 2024.

Suriyakumar: So no change in our strategies that we've had over the last couple years. Okay. So, you know, this is, you know, this proposal obviously management is an involved party or some portion of the management team is involved party in the proposal. But, you know, instead of, you know, going back to your comment, looking at the business more as they have, you know, just kind of a continuing operation as a public company.

Suriyakumar: You know, are you seeing any opportunities for acquisitions that would, you know, either get you into a new business line or new geography that you're not already in that might be compelling here. You know, as we're starting to see some kind of disruption in the overall financial markets.

Suriyakumar: So, I, I'll take that one. So, in terms of acquisitions, we've not had anything in pipeline. We've always said that we've, we'll be opportunistic about it. Something pops up. It pops up.

David Marsh: But we never had anything in the pipeline or neither did work or we in consideration to do anything with regard to the go point private transaction. You know, it's now completely assigned to the special committee. A point and by the board, they have independent directors. They'll do whatever they have to do from a legal and. HCC perspective. We just run the business as usual business as usual here. And then nothing, you know, acquisitions or any other thoughts, which has come across our table, if that comes.

David Marsh: And if if it, if it merits review, we will do so. Okay, that's free helpful. Just I'm sorry, you know, I'm probably repeating. The previous college question. I had full apologies if I do. George, I think you said $900,000 in extension related to the evaluation of the go private transaction in the quarter. Is that right to the right? And did that? Yes, that is correct on both points. So, as we go forward, that that accent should be demonstrably or presumably as a fair assessment.

David Marsh: We just don't know and it's something we can't comment on. That's completely up to the special committee. They have white policy to do whatever they have to do to evaluate the proposal. They'll do whatever they are supposed to do as an independent committee full of independent directors. We have no control over that. Roger that. Okay, guys. Thanks very much for taking questions on past forms. You want to.

Glenn Primack: Your next question comes from the line of Glenn Primack from the same assessment group. Please go ahead. Thank you. Good afternoon. Definitely. Taking a little deeper on the increased marketing expense. Is that going towards a specific program like the scanning or is that you can you just touch on like what specific program you're really going after with the extra dollars there? Yeah, so there's no I can attribute it to a very specific program.

Glenn Primack: Glenn, you know, it's the extra spend that we've seen year over year for the second quarter. There's a component for that goes into head count. We've added a couple of sales news sales consultant, special experience consultants were good in digital color like white format color printing. So we've added them in specific geographical market, very strategic locations for. So some amount is in head count and rest of it is you know, we just launched a new website.

Glenn Primack: You know, I hope you got a chance to see that the new website is on me launched a new right color website a couple of months ago. And and we're just focusing on some really strong SEO programs driving traffic into the website using keywords and so forth. You know, a little bit of spending on Google advertising as well, but not a hikolart, no, no big big investments compared to last year, but we've been very focused on organic driven, driven marketing programs email marketing programs are going as well.

Glenn Primack: So the spend is primarily the head count and obviously our sales have grown especially on the color side, so there is an increased payment of commissions, but rest of it is on the marketing programs. All right, great. So the sales side. There's you probably got some payback off of that if it's experienced people that you're putting in these different locations versus a newbie. Yeah, so usually you don't take a couple of months or even for experienced people to get comfortable with the company and get used to the systems and start soliciting.

Glenn Primack: So yes, definitely they are they are they are early stages of delivering some some takes a little bit more extra time. You know, so, you know, they are different stages for our goal is to make them all successful very quickly. Yeah, and it's no doubt that you and George will measure everything in. Anyways. Every time, Glenn, every time. I don't love that.

Glenn Primack: That's it for me. I can't wait to go check out the new website and the riot and the relatively new website. Thank you.

David Stickney: And that that's the clue to the question and answer session.

David Stickney: I would like to turn the floor back over to Mr. David Stickney for closing remarks. As usual, we appreciate your continuing interest in ARC, and we encourage you to reach out with any questions about our progress. You can always check our investor relations website at ir.edasharc.com. For more information, we look forward to talking with you soon. Take care. Bye-bye.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.