Thursday, November 3, 2016

Takeaways from ARC Document Solutions’ Q3 2016 Results and Earnings Call Transcript

Yesterday, ARC released its Q3 2016 results.  If you want to look in detail at ARC’s Q3 results, you can access that file by visiting  After the stock market closed yesterday and shortly after ARC released its results, ARC, as it always does each quarter, held an earnings-call.  The transcript of that earnings call is available at (you have to register to read the full transcript, but registration is simple and free.)

Mentioned in the transcript:

ARC will be bringing on a new head of sales.  (I don’t know who that person is or when that will happen, but I suspect that will happen very soon.) 

In September 2012, ARC announced that Pat Welch (formerly an executive with Office Depot) would be joining ARC as ARC’s Executive Vice President of Sales.  Pat Welch departed from ARC after being there for approximately two years.  I suspect that the new guy (or gal) who joins ARC as chief of sales will have a deep understanding of technology sales, since Suri has gone at length to explain ARC’s current and future initiatives to drive technology sales.

ARC has been experiencing a decline in sales of print services.  ARC expected that, but that does not mean that ARC isn’t just sitting back and letting that happen:

ARC will (quoting from the transcript) be “making the required changes to our sales and operations teams, to accelerate our growth in our new offerings in technology services while protecting our revenues in the print segment. Revenues in the print segment of our business are continuing to shrink and we aware of that. However, our size and strength in this business, a greater focus on gaining market changes segment, will allow us to minimize the decline and generate additional sales while we build our new technology services placements.” 
Also pulled from the transcript, “those executives with expertise and long experience in more traditional print-based services of our portfolio have been assigned to hunt aggressively for construction document printing and related services.”
And, also pulled from the transcript, “we understand the importance of our traditional print revenues especially in light of our ongoing transformation. Over the past several months we have taken significant measures to protect our traditional revenues and give ourselves the necessary time to build up our technology sales.”
And, also pulled from the transcript, “So in general the use of print is declining that's a given. Our strategy after this quarter we have been talking about given of experience and knowledge in that space we are the biggest print provider for the construction space in terms of traditional services. So what we are saying is we're going to focus a group of people and really go after that business and try to gain that market share and that's what we have started doing. Now needless to say this quarter we had a fairly good quarter compared to the previous quarter in terms of traditional revenues but I won't attribute that to market share gain just yet. Now if that happens three quarters in a row then I would be more confident in telling you now we are starting to gain market share.”
Based on the statements made in the transcript, I think it’s easy to conclude that ARC is, and will be, aggressively selling traditional print (reprographics services) and will be trying to increase its market share of those services - - and, when in the past I’ve heard companies use the words “aggressive” and “increase market share”, that often resulted in prices being lowered to achieve market share gains.  ARC’s margin declined year over year (Q3’s 2016 and 2015 compared); one wonders if “lowered prices” have attributed to the margin decline.
As to the decline in traditional print revenues that ARC has been talking about and specifically mentioned in the Q3 transcript, not all reprographers are experiencing that decline, at least not in 2016 compared to 2015.
I’m currently in the process of conducting two different surveys, and, in one of those surveys, we asked these two questions:
How would your characterize your company’s A/E/C plan printing business so far in 2016?
Responses so far:
Better than in 2015 – 37.5%
Worse than in 2015 – 12.5%
About the same as in 2016 – 50.0%
If your company’s A/E/C plan printing business so far in 2016 has been better than it was in 2015, to what factors do you attribute this? (Please select all that may apply):
Responses so far:
We’ve gained market share – 33.3%
We’ve raised prices – 44.4%
Our existing A/E/C customers have ordered more plan printing this year than last year – 55.6%

All that pointed out, there have not been a sufficient number of survey responses to draw any concrete conclusions as to whether ARC’s performance (sales) of traditional reprographics services are trailing the rest of the reprographics industry, or are not.  Since ARC is the largest company in the industry and nearly nationwide in scope, it could well be that “most” reprographers are experiencing the same decline that ARC is.

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