American Reprographics' CEO Discusses Q2 2012 Results - Earnings Call Transcript

American Reprographics Company (ARC)

Q2 2012 Earnings Call

August 7, 2012, 5:00 p.m. ET

Executives

David Stickney - VP, Corporate Communications

Suri Suriyakumar - Chairman, President & CEO

John Toth – CFO

Dilo Wijesuriya – COO

Jorge Avalos - CAO

Analysts

Andrew Steinerman – JPMorgan

Scott Schneeberger – Oppenheimer & Co.

Tim O’Connor

Presentation

Operator

Operator

Good afternoon, my name is Alaya, and I will be your conference operator today. At this time, I would like to welcome everyone to the ARC Second Quarter Earnings Results Conference 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)

I would like to turn the call over to our host, Mr.Stickney. Sir you may begin your conference.

David Stickney

Thank you, Alaya. I’d like to welcome everyone to our call today. Joining me are Suri Suriyakumar, our Chairman, President and Chief Executive Officer; Dilo Wijesuriya, our Chief Operating Officer; John Toth, our Chief Financial Officer; and Jorge Avalos, our Chief Accounting Officer.

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. We are webcasting our call today as usual and the 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 7, 2012 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, in the second quarter of 2012, ARC delivered $106.2 million in revenue, a gross margin of 31.8% and $4.5 million in cash flow from operations. Adjusted earnings per-share for the quarter came in at $0.02.

Year-to-date our cash flow remains strong at nearly $17 million and as noted, [inaudible] remains undrawn.

As you seen in the past, we continue to manage our business effectively, even under very challenging market condition, enabling us to meet our financial obligations comfortably. We have also repeatedly said that we are positioned in the company for recovery. Most of this positioning has been in the form of structural changes to our work force, footprint and construction.

During the past two quarters however, we have also started to aggressively increase our investments in the business with the recovery in mind. During the second quarter, we hired more than 65 college graduates from all over the country, and get them in a intern and focus training program, and we are now in the process of deploying them in the field under the guidance of executive mentor, senior sales people, and of course, our deeply experienced sales management team.

Our business is rewarding in to a much more [inaudible] technology driven document solutions and [inaudible]. And our new recruits are coming to the business because the preconception that often accompany experience reps from all traditional market, bringing a fresh inclusion of energy and feel in to the company, will also help us change our culture, which has been structured to serve a traditional business.

This investment is an acknowledgment that our customer culture is changing to. Technology continues to exert its influence over tradition, an on-going economic pressure on the industry, continues to acts of [inaudible] the adoption of new techniques for managing construction. A positively change, while sometimes difficult, it’s a critical component of our evolution as it becomes acknowledged enabled document solution company.

In addition, through announcing our sales team, we deployed a single CR system across the entire company, completing the sales team integration that began with the consult tradition of our brand at the beginning of 2011. We now have complete visibility in to the sales activity, anywhere we operate, which allows us to direct sales operations more efficiently and effectively than ever before.

This is a major improvement over, more than 40 separate managed sales teams, we all signed the best. These investments in sales, among two, [inaudible] cost of estimated $4 million, with more than $2 million effecting our 2012 results.

With regard to generating new sales opportunities, we were very pleased to announce a major technology and marketing partnership with Hewlett-Packard at the end of the second quarter. As some of you may have seen in the press releases and advertising, we integrated our PlanWell Collegiate software in to HPs line of engineering printer, offering customers the ability to both [inaudible] their documents from the cloud, and post new documents to the cloud, directly from the device itself, with no need for a connective computer.

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