American Reprographics Company's CEO Discusses Q2 2011 Results - Earnings Call Transcript

American Reprographics Company ( ARC)

Q2 2011 Earnings Call

August 4, 2011 5:00 PM ET

Executives

David Stickney – President, Corporate Communications

Suri Suriyakumar – Chairman, President and CEO

John Toth – CFO

Analysts

David Manthey – Robert W. Baird

Andrew Steinerman – JPMorgan

Ryan Davis – Oppenheimer

Presentation

Operator

Good afternoon. My name is Kristin, and I will be your conference operator today. At this time, I would like to welcome everyone to the ARC’s Second Quarter 2011 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. At this time, I would like to turn the call over to your host Mr. David Stickney, Vice President of Corporate Communications. Please go ahead, sir.

David Stickney

Thank you, Kristin. I’d like to welcome everyone to our call today. Joining me are Suri Suriyakumar, our Chairman, President and Chief Executive Officer and John Toth, our new Chief Financial Officer who joined us in mid-July.

The financial results of our second quarter were publicized earlier today in a press release. You can access the press release and the company’s other releases from the Investor Relations section of ARC’s website at www.e-arc.com. A taped replay of this call will be made available beginning about an hour after its conclusion. It will be accessible for seven days after the call. You can find the dial in number for this replay in today’s press release. As usual, we are webcasting our call today. And a replay of the webcast will be available for 90 days on the company’s website.

This call will contain forward-looking statements that fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the company including the company’s financial outlook. Bear in mind that such statements are only predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. These risks are highlighted in our quarterly and annual SEC filings.

The forward-looking statements contained in this call are based on information as of today, August 4, 2011 and except as required by law, the company undertakes no obligation to update or revise any of these forward-looking statements.

Finally, this call will contain references to certain non-GAAP measures. The reconciliation of these non-GAAP measures is set forth in today’s press release and in our Form 8-K filing.

At this point, I’ll turn the call over to our Chairman, President and CEO, Suri Suriyakumar. Suri?

Suri Suriyakumar

Thank you, David and good afternoon. As we reported earlier today, the second quarter of 2011 delivered $109.6 million in revenue, a gross margin of 32.6% and $7.3 million in cash flow from operations. Adjusted earnings per share for the quarter came in at $0.00. Unfortunately, the first half of the year turned out to be disappointing, macroeconomic conditions caused by the recovery to stall and based on the current industry projections it appears that the rest of the year will remain challenged.

The good news, however, is that we continued our progress in restructuring the company which resulted in significant improvements in our operating results and advancements on our key initiatives. Here are the highlights. In the second quarter of our revenue increased by $3.1 million while our adjusted EBITDA went up by $3.4 million, clearly demonstrating that our efforts to eliminate costs are producing immediate results.

Our MPS FM revenue is up 13.1% year-over-year and these revenues make up more than 23% of our overall revenues now. Our color revenue grew 2.5% year-over-year. Our global solutions team continues to making rules into the top 50 AEC companies. In July, we opened our first location in Hong Kong.

In the first six months after launching plan will collaborate, we placed 100 seats a month on average, during the time we’ve added 907 projects, 335 project files, and expose the product to more than 10,000 construction team members.

And later this month we will be releasing version 2.0 of ishipdocs adding to our Cloud based printing and file sharing application. While these products have yet to make meaningful contribution to our revenues is clear that our products and services are increasingly integrated into our customers work flow.

None of these things could have been accomplished as we not being bold enough to restructure our organization, and investing some of our new initiatives, in fact our results would have been entirely different. The company we were would have been a company with an oversized infrastructure with weak sales, struggling to find a way to maintain its profitability and size.

The company, we are have sized itself appropriate to the demands of the market generates excellent margins, strong cash flow and its position for growth. The management team at ARC is as nimble now as it ever has been, while current market conditions remained difficult. We are stronger, faster and more decisive knowing well that is necessary for all well-being now and for our future.

During the past seven months, we are engaged in a significant and ongoing restructuring that optimizes our operational and management structure for changing market conditions. Including the continuing technology transition occurring in our industry.

The consolidation of our brand has given us excellent opportunities to eliminate redundancies in share markets and to pool resources across geographical boundaries in ways we never considered in the past. By rationalizing our footprint, we’ve been able to bring more efficiency and productivity to our production teams and streamline our middle management. Again something we had not done previously. The difficult market conditions also appear to be accelerating the use of technology in document management.

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