Q2 arc investor overview
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Transcript of Q2 arc investor overview
Information is current to March 31, 2015 unless otherwise indicated
Investor Overview
As a document solutions company our goal is to improve efficiencies and reduce costs wherever our architectural, engineering and construction (AEC) customers’ documents exist.
We have a relentless focus on reducing the use of paper, improving document workflow, and providing instant access to our customers’ documents anywhere, anytime, and in any form.
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We believe the cloud and mobile technology will transform document management and
communications in the AEC industry.
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We can deliver documents and information with secure mobile access anywhere, anytime and to any device.
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Project Documents
…involving architectural, engineering and design
drawings and documents, largely involving plans and
specifications.
Archived Documents
…related to all aspects of business, including project documents, specialized use
documents, and office documents.
Office Documents
…related to business management and administration such as financial, contractual,
compliance, marketing, HR, and other activities.
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• …average annual print cost per person is $2,500 to $3,500
• …document-related costs are the third largest office expense after people and locations
• …printing project documentstypically costs twice as much as managing documents digitally
• …delays from document organization errors increase project schedules by days and sometimes weeks
• …the majority of document storage boxes are left untouched on the shelf for 16 years
For most of our customers…
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ARC Developed Three Document Solutions
CDIMConstruction Document
& Information Management
MPSManaged Print
Services
AIMArchive & Information
Management
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• …reduces annual print costs per person from $250 up to $1,000
• …reduces all document-related costs by as much as 30%
• …provides technology and services that eliminate paper and printing from document management
• …deliver solutions that strip days and weeks from project schedules
• …makes all legacy documents searchable and instantly accessible
ARC Document Solutions…
We save our largest customers millions of dollars per year.
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CDIM
Construction Document& Information Management
Primary Technology
• SmartScreens• Tablets• Web-enabled Printers• Multi-Function Printers• Scanners
Equipment & Hardware
• Hyperlinking• BIM, File Conversion• Color Production• Onsite/Offsite print facilities• Software Support• Digital shipping
Supporting Services & Technology
CDIM is a suite of cloud-based tools and services to manage and distribute construction documents and improve the efficiency of construction teams.
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• Multi-Function Devices• Large Format Printers• SmartScreens• 3D printers
Equipment & Hardware
• Mail Room • Onsite Staffing • Software Installation &
Support • Offsite Overflow Printing • 3D Modeling
Supporting Services & Technology
MPS
Managed Print Services
Primary Technology
MPS is an outsourced printing environment that reduces costs and improves the efficiency of office document management and production.
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• Scanners• SmartScreens• Web-enabled
Plotters
Equipment & Hardware
• Onsite/Offsite Scanning• Hardcopy/Box Pickup & Delivery • Document Retention &
Information Governance Consulting
• Financing
Supporting Services & Technology
AIM
Archive & InformationManagement
Primary Technology
AIM is a cloud-based archival platform that captures documents of any size or type, with powerful search tools to make legacy information available instantly.
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CDIM AIM
A single location
where all documents,
and all information…
…are available anytime,
anywhere, on
any device.
MPS
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Solutions are Unique to ARC
AEC-specific Disruptive Unprecedented value Create efficiencies Rooted in our industry
expertise
Solutions Address All Clients
Architects & Designers Engineers Industry-specific General/Sub-Contractors Multi-national Local & Regional
ARC has exclusive document management agreements with 22 of the Top 100 AEC firms in the U.S.
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Solutions are Interconnected
MPS, AIM & CDIM share infrastructure on the Amazon Cloud
Share equipment Can be sold separately,
but offer tremendous cross selling opportunities
Solutions are Global
Cloud-based services release ARC from geographical limits, but…
Service center footprint of 199 locations provides enormous competitive advantage
ARC has transformed to a new and growing business with a bigger addressable market, and a better value proposition for the future
Annual recurring revenue now represents 34% of net sales via MPS, and is expected to grow with new revenue lines
Management team of experienced, entrepreneurial veterans sensitive to future needs
Better growth, margins and cash potential in the future Stock is undervalued given we are at the beginning of a
non-res recovery cycle, and there is a lack of awareness of ARC’s transformation
2014 performance is clear evidence of ARC’s direction and its opportunities
Investment Opportunity
Financial Discussion
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CDIM MPS AIM52.4% of Net Revenue in Q1 15YOY Growth of 2.4%Sales of $54.6mm in Q1 15Estimated gross margin: 37%-40%
34.4% of Net Revenue in Q1 15YOY Growth of 8.7%Sales of $35.9mm in Q1 15Estimated gross margin: 32%-35%
2.7% of Net Revenue in Q1 15YOY Growth of 8.6%Sales of $2.8mm in Q1 15Estimated gross margin: 35%-38%
Equipment & Supplies(defensive)
10.5% of Net Revenue in Q1 15YOY Decline of 3.9%Sales of $11mm in Q1 15Estimated gross margin: 18%-21%
Revenue growth in MPS and stabilizing non-res construction Gross Margins grow by leveraging fixed costs against revenue growth and targeted
margin improvement exercises EBITDA grows from sales and gross margin improvements Cash Flows grow from improved financial performance, deleveraging senior debt, and
payment of minimal cash taxes due to approximately $85mm in NOL's Free Cash Flow grew 40% YOY from $29.1mm in 2013 to $40.7mm in 2014*
Adjusted EBITDA ($mm)
Q1 '13
Q1 '14
Q2 '13
Q2 '14
Q3 '13
Q3 '14
Q4 '13
Q4 '14
Q1 '14
Q1 '15
$0.0
$3.0
$6.0
$9.0
$12.0
$15.0
$18.0
$21.0
15.9 16.118.3
20.9
16.618.3 17.4 17.0 16.1
16.8
Q1 '13
Q1 '14
Q2 '13
Q2 '14
Q3 '13
Q3 '14
Q4 '13
Q4 '14
Q1 '14
Q1 '15
$90
$95
$100
$105
$110
$100 $100
$105
$109
$101
$107
$101
$107
$100
$104
Q1 '13
Q1 '14
Q2 '13
Q2 '14
Q3 '13
Q3 '14
Q4 '13
Q4 '14
Q1 '14
Q1 '15
24.0%
28.0%
32.0%
36.0%
32.4%33.8%34.0%
36.0%
32.5%33.9%33.0%
32.5%33.8%
34.5%
Revenue ($mm) Gross Margin
Financial Leverage
* Free Cash Flow calculated from Adjusted Cash Flow from Operations
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Revenue grew 3.9% year-over-year Gross margin was 34.5%, a year-over-year increase of 70 basis points Adjusted cash flow from operations was $6.4 million vs. $8.1 million in Q1 2014; decrease largely due to timing of accounts
receivable collections Adjusted EBITDA of $16.8 million; grew 4% in line with sales despite planned investments in SG&A Maintained 2015 fully-diluted annual adjusted earnings per share projected to be in the range of $0.37 to $0.41; annual
adjusted cash provided by operating activities projected to be in the range of $61 to $66 million; and annual adjusted EBITDA to be in the range of $75 million to $80 million
Q1 2015 Performance Update Three Months Ended
March 31,
(All dollar amounts in millions, except EPS) 2015 2014
Net Revenue $ 104.3 $ 100.4
Gross Margin 34.5% 33.8%
Net income attributable to ARC $ 4.4 $ 1.4
Adjusted Net Income attributable to ARC $ 3.2 $ 1.8
Earnings per share - Diluted $ 0.09 $ 0.03
Adjusted earnings per share - Diluted $ 0.07 $ 0.04
Adjusted EBITDA $ 16.8 $ 16.1
Adjusted Cash provided by operating activities $ 6.4 $ 8.1
Capital Expenditures $ (3.5) $ (3.6)
Debt & Capital Leases (including current) $ 200.2 $ 216.4
1.) Margin Expansion
2.) Deleveraging
4.) Transformation
3.) Revenue Growth
Restructure MIM & Consol. Rev. Growth MPS & Mix Shift
Refinance Senior Debt Continue to Pay Down Debt…
Organic Growth New Business Cycle Recovery
Growth in Technology Services
2013 2014 2015 2016-forward
• Strategic customer relations, not transactional• Make customer better at what they do• Long term vs. short term• Recurring revenue
Value Drivers of ARC
Thank you for your interest.
For further information, please contact David Stickney, ARC’s VP of Corporate Communications & IR at 925-949-5114