ARC Document Solutions, Inc. (NYSE:ARC) Q4 2023 Earnings Call Transcript
ARC Document Solutions, Inc. (NYSE:ARC) Q4 2023 Earnings Call Transcript March 2, 2024
ARC isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, everyone. Welcome to the ARC Document Solutions to report 2023 Fourth Quarter and Year End Results Conference Call. At this time, I would like to hand things over to David Stickney, Vice President of Investor Relations. Please go ahead, sir.
David Stickney: Thank you, Lisa, and welcome, everyone. On the call with me today are Suri Suriyakumar, our CEO and Chairman; our President and Chief Operating Officer, Dilo Wijesuriya; and Jorge Avalos, our Chief Financial Officer. Our fourth quarter and full year results for 2023 were publicized earlier today in a press release. The press release and other company materials are available from our Investor Relations pages on ARC Document Solutions website at ir.e-arc.com. Please note that today's call will contain forward-looking statements and are only predictions based on information as of today, February 28, 2024, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. Any non-GAAP measures discussed today are reconciled in our press release and Form 8-K filing. I'll turn the call over to our Chairman and CEO, Suri Suriyakumar. Suri?
Kumarakulasingam Suriyakumar: Thank you, David. If there was a year that validated our efforts to transform the company, 2023 might have been it. The challenges were easy to see, but so were the opportunities that balance them. Watching the progress we made in offsetting declines in our older business lines with our more contemporary services, namely color and document scanning, was extremely gratifying. I can see a time in the not-too-distant future when our strategic business lines will come to dominate our revenue mix. Business conditions were fairly predictable for us after the first quarter of 2023. Capital spending was constrained due to interest rate hikes, market activity was strong but focused on short term, return-to-office initiatives lost much of their momentum, and while the country and the general business environment seemed like it was improving, sentiment was muted.
As much as we prefer bigger long-term projects, seasonal and event-driven marketing work helped us build growth in our color services throughout the year. The trend for converting paper documents to digital information that began with the pandemic continued to gain momentum throughout the year and dramatically increased demand for scanning historical documents from the office and from warehouse storage. While the short-term growth of this service is gratifying, the volume of such information and the compelling need for it to be converted are both enormous and likely to last for decades. While you've seen declines in our on-site services as employees continue to work from home, sales in 2023 began to stabilize, and we had significant success in the fourth quarter.
You will hear more about that from Dilo later on this call. In this economic environment, construction projects were much more difficult to justify as for the purchases of large equipment. So it wasn't much of a surprise when construction plan printing got off to a sluggish start, and the equipment and supply sales followed suit. But our ability to adapt to changing market conditions drove an increase in the fourth quarter revenue, limited declines in annual revenue to less than 2%, and our skill and experience in managing costs held gross margin steady for the year. We had higher hopes, of course, but the continuing progress we made in identifying new markets, launching new and exciting products and finding new partners and making the necessary investments to take promising services to the next level positioned us well for 2024 and beyond.
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