Thursday, August 8, 2013

ARC Document Solutions reports financial results for Q2 2013 (and 1st Half 2013)

I always encourage reprographers to read ARC’s financial-results-reports; they are informative, and one can learn from that.  YOU are never too old to learn.  [And NONE of you are geniuses {with the exception of David Limbaugh)].

ARC Document Solutions (ARC) reported Q2 2013 financial results, after the market closed on Tuesday, and you can access ARC’s 10-Q by visiting the investor section at 

I did not listen in on the earnings call that ARC held late Tuesday afternoon, but, on Wednesday morning, I did access, and read, the written transcript of the earnings call, which can be found at  Listening to earnings calls (or reading the transcripts of earnings calls, if you don’t have time to listen to the live earnings calls), can also be quite informative.

Here’s my very brief “takeaway” on ARC’s Q2 results:

Sales of “services” in Q2 2013 were almost equal to sales of “services” in Q2 2012.  However, within the numbers, ARC’s revenues from “traditional reprographics” (and, revenues from “digital” services, since those are generally tied to revenues from “traditional reprographics” services) were down.  But, on the other hand, ARC’s revenues from its FM/MPS business segment were up.

The A/E/C industry has been healthier this year than last year; more projects to print this year than last year; that good news probably offset somewhat by A/E/C customers continuing to “print less” “per project.”  Revenues from “traditional reprographics” services were down, but revenues from “OnSite” services were up.  As ARC continues to push FM/MPS services, it could well be that some customers, whose revenues were formerly counted as “traditional reprographics” revenues, were, at some point, “converted” to FM/MPS customers.

ARC’s gross margin expanded 220 basis points, Q2 2013 vs. Q2 2012; and, to me, that’s a stunning achievement, especially since this margin expansion was not driven by increased sales.  As most reprographers know, the incremental gross margin on incremental “traditional reprographics” services revenues can be very, very high; my estimate of that incremental margin is 50-85% (depends on prices charged), so, when a company’s gross margin improves, and improves quite a bit, without the benefit of increased traditional reprographics services revenues, that means that the company has controlled (and cut) costs in a very meaningful way.  That’s what ARC said it was going to do.  And, it’s quite obvious that ARC has done that. 

The reprographics industry is still in a recovery mode.  Yet, ARC managed to post positive EBITDA, EBIT and Net Income.  Take a few minutes to compare ARC’s EBITDA %age to Service Point Solutions’ EBITDA %age.  Interesting comparison, for sure!

1 comment:

  1. Thanks Joel, always appreciate you delving into q's numbers instead of just posting press release.