180522 arc q1 ir presentation - lrs2.q4cdn.com/.../2018/06/180522-arc-q1-ir-presentation-lr.pdf ·...
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Information is current to March 31, 2018 unless otherwise indicated.
Investor Overview
Forward Looking Statements
This presentation contains forward-looking statements that are basedon current opinions as of the date it is presented, as well as estimatesand assumptions of management regarding future events and thefuture financial performance of the Company. Words such as“anticipates,” “projects,” “expect” and similar expressions identifyforward-looking statements and all statements other than statements ofhistorical fact could be deemed forward-looking statements. Forinformation on factors that may affect our future performance, pleasereview our periodic filings with the U.S. Securities and ExchangeCommission, and specifically the risk factors set forth in our mostrecent report on Form 10-K and current Forms 10-Q. The Companyundertakes no obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events, orotherwise, except as required by law.
NYSE:ARC
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3
Print Color Graphics
ProfessionalServices
Cloud Apps & Software
Scanning & Archiving
How We Serve Our Customers
construction plansoffice documentsprinting & display equipment
BIM & renderingdocument linking3D laser scanning
project managementfacilities managementprint management
digital document accessdocument scanning
information management
signage & displaysenvironmental graphicsnationwide distribution
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Where We Serve Our Customers
Construction Job Sites
170 ARC Service Centers
Customer Offices
print (onsite & offsite)color graphicsprofessional servicescloud apps & software
printcolor graphicsprofessional servicesscanning & archiving
print (onsite & offsite)cloud apps & softwareprofessional servicesscanning & archiving
Everywherecloud apps & softwareprofessional services
And thousands more…
As an industry leader in data and document management for the construction industry, ARC connects more than 90,000 customers from all over the world to their people and projects.
ARC has exclusive agreements with 27 of the top 100 AEC firms in the industry.5
Who Our Customers Are
ARC’s Strategic Objectives
6
1. Protect Print Revenue
2. Grow Tech Services
3. Preserve Cash Flows
4. Resume Organic Sales & EBITDA Growth
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CDIMconstruction document & information management
REVENUE CATEGORYAddressable market includes the $1 trillion construction industry, including :• Owners/Developers• Architects• Engineers• General Contractors• Sub Contractors
A secondary market for color graphics exists based on similarities to large-format b&w printing, and includes:• Retail• Hospitality• Signage• Environmental
graphics
52%
Percent of Revenue:Gross Margin: 37% - 40%
Historical Revenue
Value Add:• Simplify a complicated workflow• Provide documents in print, digital, or cloud-based app• Support with professional services• Service center network for production resources
Components$216 $220 $221 $213 $205
$51 $52
2013 2014 2015 2016 2017 Q1 17 Q1 18
40%50%
10%Color Printing(~60% construction, ~40% retail & display)Construction
Printing(large/small format
black & white)
Services & technology(e.g., BIM, SKYSITE, etc.)
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MPSmanaged print service
REVENUE CATEGORY
Percent of Revenue:
Historical Revenue
Addressable market includes a subset of the $14.5 billion global MPS market with a variety of printing and document management needs associated with construction, including:
• Corporate offices• Job sites• AEC back offices• Offices in closely-related fields
like energy and manufacturingValue Add: MPS
• Optimize/outsource print environment• No capital outlay• ARC software for tracking & rule-based printing• Equipment agnostic – not tied to a manufacturer• Leverage service center network
33%60%
40% Locally-servedCustomersTypically <5 devices
EnterpriseCustomersTypically>100 devices
Customer Base:$128 $141 $144 $132 $129
$32 $31
2013 2014 2015 2016 2017 Q1 17 Q1 18
Gross Margin: 29% - 32%
Value Add: AIM• Digitize hardcopy to reduce storage• Organize information & add business intelligence• Provide a searchable hosting platform• Cloud-based infrastructure & applications
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AIMarchiving & information management
REVENUE CATEGORY
Percent of Revenue:Gross Margin: 35% - 38%
Historical Revenue
Addressable market includes building and facilities managers who make up part of the worldwide $7 billion global records management market, including:
• Engineering and construction companies
• Commercial real estate• Education and medical
campuses• Municipalities• State/Local governments
Target Customer Segments:
Healthcare
Government
Education
3%$11 $11
$13 $14$13
$3.2$2.9
2013 2014 2015 2016 2017 Q1 17 Q1 18
33%33%
33%
ARC’s Strategic Objectives
10
1. Protect Print Revenue
2. Grow Tech Services
3. Preserve Cash Flows
4. Resume Organic Sales & EBITDA Growth
11
CDIM 53%
MPS 32%
E&S12%
AIM 3%
CDIM 52%
MPS 33%
ConstructionPrinting26%
ColorPrinting21%
E&S12%
AIM3%
Svc/Tech5%
CDIM 62%
MPS 22%
ConstructionPrinting38%
ColorPrinting18%
E&S13%
AIM3%
Svc/Tech6%
ARC’s Current Revenue Mix
Q1 2018 2017
2010
Addressing shifting markets — digital plans, color printing, facilitiesConstruction printingis less exposed to cyclical nature of construction, open to market share gainsMPS sales are recurring, stable, contracted revenue
EBITDA% in tight range, despite revenue drops and investments.
Legacy of cost control demonstrated by $7mm increase in EBITDA from 2012 to 2013 on flat revenue.
Currently investing to protect print sales and grow technology sales
$423$406 $407
$424 $429 $406 $395
$67 $61 $68 $72 $72 $62 $54
16% 15% 17% 17% 17% 15% 14%
2011 2012 2013 2014 2015 2016 2017
Revenue Adj. EBITDA Adj. EBITDA %
ARC’s Historical Revenue & EBITDA
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2011 2012 2013 2014 2015 2016 2017
Cash Flow from Ops Free Cash Flow
$49
$38$47 $50
$60$53 $52
$34
$17
$29
$37$46
$41 $43
Maintaining attractive, high free cash flow business model
Cash allocation remains focused on debt reduction to maintain a healthy leverage ratio and low interest rate on our senior debt
More than $80 million in Net Operating Losses (NOL’s) effectively eliminates cash taxes for the next several years
ARC’s Historical Cash Flows
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$226 $223$220
$204$173 $158
$145
3.4 3.7
3.22.8
2.4 2.52.7
2011 2012 2013 2014 2015 2016 2017
Total Debt Debt to EBITDA
Reduced Bank Debt to under $100mm as of March 31, 2017
Since Jan 1, 2014 ARC has paid ~$34mm more than required in principal payments on its term loan facilities
Debt/EBITDA has dropped from 3.7x to 2.7x in the past five years
Annual interest costs have fallen from ~$20mm to ~ $6mm
ARC’s Historical Debt Service
10.5% NOTES 6% Trm B 3.1% Trm A + refi
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Recent Results: Q1 18
Financial Highlights:Three Months
EndedMarch 31,
(All dollar amounts in millions, except EPS) 2018 2017Net Sales $ 97.7 $ 98.7
Gross Margin 30.9% 31.2%
Net income attributable to ARC $ 0.6 $ 1.8
Adjusted net income attributable to ARC $ 0.5 $ 1.9
Earnings per share - Diluted $ 0.01 $ 0.04
Adjusted earnings per share - Diluted $ 0.01 $ 0.04
Cash (used in) provided by operating activities $ (2.0) $ 6.9
EBITDA $ 10.2 $ 12.8
Adjusted EBITDA $ 10.9 $ 13.6
Capital Expenditures $ 2.9 $ 2.0
Debt & Capital Leases (including current), net of unamortized deferred financing fees $ 138.1 $ 154.3
Earnings Per Share: $0.10 - $0.16Cash from Operations: $44mm - $50mmEBITDA: $48mm - $54mm
2017
Key Metrics
Revenue: $394.5mmGross Margin: 31.4%Adj. EPS: $0.15Adj. EBITDA: $54.0mmCF from Ops: $52.4mmCapEx: $9.1mmShares O/S: 46,207,000
2018
Annual Guidance
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