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 e-arc.com. 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 seekingalpha.com (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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