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ARC Document Solutions, Inc. (ARC)

NYSE - NYSE Delayed Price. Currency in USD
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2.7000+0.0300 (+1.12%)
At close: 04:00PM EDT
2.7500 +0.05 (+1.85%)
After hours: 04:50PM EDT
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  • H
    Harvey
    Can this be right? I saw an article that said ARC raised the dividend to $.12 per quarter. Can this be right? I e-mailed the company for confirmation.
  • H
    Harry
    Nice investor presentation this morning. Here's a link (if Yahoo will allow it)

    https://www.wsw.com/webcast/threepa37/

    I added some ARC shares. Not sure who would sell down here, but I thought the same thing around $3
    Three Part Advisors 2022 East Coast IDEAS Conference
    www.wsw.com
  • H
    Harry
    Wish I knew what sellers were buying. Yes the markets are terrible right now. But ARC has a dividend yield over 6%. They just posted another great quarter, with EPS more than doubling. They sounded very bullish on the CC heading into their 2 seasonally stronger quarters. And there's over $50M in cash on the books! If there's a cheaper stock with a higher dividend yield, would appreciate the ticker...
  • A
    Azamat Bogatov
    what are everyone's thoughts on the sustainability of revenues. do you think they could recover what they last due to the pandemic?
  • V
    Volo
    Just heard that ARC got alerted at (http://market-engross.club). I hope it pushes us higher!
  • M
    Maximus
    Financial results in 2/3 hours… we should expect less debt, very few shares repurchased and earnings going towards 0.10 per quarter, maybe not yet but soon. 0.4 per year (50% dividend payout @0.2 per share).

    I’m sure mgmt would try to get more shares. In their minds they’ve done something unbelievable.

    We should expect someone tries to buy out the Company @ a fair price (50/100% premium 5-7 USD per share). Perfect LBO candidate with no debt, strong and stable cash flows and subpar mgmt.
  • M
    Maximus
    Financial results were as expected. Solid results. Boring story. Increased revenues and increased expenses. The company is going back to precovid levels with less debt. That’s the story.
  • b
    bbb
    Another terrible quarter in light of economy up and running post Covid, but realize it’s not where we r at right now but where we are going. Believe management wants to promote shareholder value, and revenues can only go up from here. Hopefully by the end of the year. Gl
  • P
    Perun2029
    Is this company’s stock about to take off?!?!?!?!?
    Bullish
  • b
    bbb
    What’s with the bizzare price action after hours lately, up 7% today. Previous day someone added $2k shares at $4.15. Small volumn but strange non the less.. Gl bulls let’s hope for signs the return to office is added noticeable improvement to top line.
  • N
    Nacho Libre
    $10/share not too long into the horizon…as long as we get earnings, sentiment will follow… glta!
  • b
    bbb
    Added today, too cheap, will be back above $4 shortly, gl bulls
  • b
    bbb
    Typical sell off ex dividend on low volumn, I’ll take some under 3.6. I hope we get a strong quarter just to see the sp rocket for all the naysayers. Gl bulls
  • M
    Maximus
    Congrats to all patient shareholders.

    I think the CFO finally did what he was expected to do. Remember this is only roughly USD8.5 mn (42 mn shares times 0.2), which is not much. They have more available for buybacks and a lot less debt.

    This is what u’d expect when you buy a company in a declining industry. Not many investments available for growth and money given back to shareholders. It should get better with time.

    To be perfectly clear, am a large shareholder - I was a lot larger @UsD1 - of the Company, I was the one buying shares @0.35 (I could only buy 200…) and I was also in touch with the company 2 years ago to recommend this plan (I can show u the emails).

    My recommendation was first buybacks and then when the price was closer to 4 big dividends. So I’m happy with this.

    However, you should be careful in case the market goes down. There’s not much liquidity in this hare. The market is very rich right now.

    But it should go up to a more normal valuation… USD5 per share at least (4% dividend yield and 15% FCF yield, assuming only USD30/35 mn of FCF and almost no debt).
  • M
    Maximus
    Well, the longer they stay at these prices the more shares they can buy back, selling shares of ARC at these prices makes no sense.

    My estimate is they have bought 2/3 million shares @1.7/1.8 since they re-started the program in December according to what they published together with the 100% dividend hike (USD5 million spent in buybacks - 2 million of those in 2019 - and USD10 million left for buybacks, plus the dividend). They will authorize more buybacks for 2021 and the 0.08 dividend (100% hike) might be a prudent way of telling us the net income we can expect for FY2020 (50% Pay-out?, 0.16 EPS???).

    As I posted a while ago I expect the No. of shares outstanding at 40/41 mn (down from 43 mn). They have been slow at buying and remember management has been paid in stock (30%/50% salary cuts - compensated by almost 500,000 of stock options due February 12th)... Now shareholders and management are better aligned, the higher the SP goes the more they get. So employees have every incentive to keep the SP going up.

    My estimates for FY 2020: USD7-8 mn FY Net Income (USD4,5mn 9 months + another 3 million like last quarter). Remember they have less sales, but fewer salaries and interest payments. The USD60 mn outstanding revolving credit facility pays at 1.6% (they are paying USD1 - 1.5 mn less interest per year than in 2019... that USD1 – 1,5 mn was roughly the prior dividend!).

    So, USD7.5 mn Net Income / 40/41 mn shares = 0.17 EPS (13x PE at today's prices Vs. market @23x PE, with 3.5% Dividend Yield). That tell us that we should be trading at least at 5 USD now.

    But PE doesn't tell the true story about this investment (the company related to its SP). It is Free Cash Flow what needs to be compared with total debt obligations - bank debt (revolving credit facility) plus Finance and Operating Leases - to get the whole picture.

    FCF = USD40 mn? (let’s be prudent).
    Financial debt = USD 50 mn? (USD60 mn outstanding revolving debt Q3 2020 - USD10 repaid in Q4?).
    Cash = USD45/50 mn (same as Q3 2020 - USD10 mn debt repaid + USD5/10 mn FCF generated in Q4?).
    NET DEBT = USD50 mn - USD50 cash = USD0 mn
    Finance & Operating Leases = USD100 mn.

    If we take the average historical multiple for the market: 15x FCF.

    15 x 40 FCF = USD600 mn - USD0 mn Net Debt (0 = USD50 mn cash - USD50 mn revolver) - USD100 mn Leases = USD500 mn or implied Share Price of USD12.5 per share (500mn / 40 mn shares outstanding) if fairly valued in a normal market.

    I agree USD12.5 sounds high, and that the Company has operational risks and that they can get disrupted and so on (remember, as any company in the World... even Apple or Amazon), but as long as they can sustain the USD40 mn FCF (which they have been surprisingly good at even with 30% sales declines), and they keep buying shares at these prices and repaying debt, the sky is the limit for shareholders.

    As a reminder, in 2019 they bought 2 mn shares in the open market @USD1.2 per share (that's a 100% capital gain on those shares).

    Besides, with thr USD10 mn they have left from 2019/2020 they could end up with 4 mn shares less if they keep buying at today's prices, but if SP goes up to 5 / 6 USD I would argue that the best use for cash flows would be hiking dividends again.

    The story is: they have USD40 mn per year to burn. USD50 mn in bank debt of which they can pay down USD20 mn per year (that would free up to USD500,000 in interests for dividends or other uses) and the rest is for Shareholders. So USD20 mn for shareholders in the form of dividends or buybacks and a USD100 mn market cap (20% return per year). If it goes up to USD5 per share (USD200 mn market cap) and they decide to pay USD20 mn in dividends... 10% dividend yield. That is why it should be trading at USD10 per share (5% implied dividend yield), and why I don’t mind holding to the shares.

    We will have an update on February 23rd and we will see if I’m right because these are only estimates based on 10 years plus observation of the Company.
  • b
    bbb
    Hoping for a strong quarter, bent up demand should show in revenues hopefully in the 75 m area and eps closer to 8 cents at current net margin rates. Company should have fcf closer to 45 million this year, current dividend payout at 8cents is $3.5 million. Could easily 2x dividend at $7 million and still net $35+ million in cash flow for the year. Do u think the ceo who owns over 1 million shares has an interest in seeing the dividend increased. Would get us to $4+ sp. Think it’s going to happen either this quarter or in the next few quarters. Keeping the faith, gl bulls.
  • M
    Maximus
    New shareholder - almost 6% - Verdad Asset Management. They look like the kind of long-term holders the share needs. Deep Value analysts. Representative position for them.
  • M
    Maximus
    No, it wasn’t me… but it was a relevant question. I’ve been in touch with the Management occasionally, in fact, some of their good decisions for shareholders came after my emails (believe it or not, maybe we think alike). Now we are all better aligned. At some point when you make so much cash, and after you pay down debt you don’t know what to do with the shareholders’ money and occasionally you do the right thing. The amount of stock options they hold now could be good news for us as well.

    In the coming quarters they’ll make a lot more cash because the business is cyclical and I hope we get nice surprises.

    So far this year they have given us back only USD2,5 mn in dividends and 800k in buybacks. USD3,3 mn which’s nothing.

    They can do up to USD10-15 mn according to the revolving credit facility terms, which they have almost already paid down.

    They are paying USD1,5 mn in net interest… that could be distributed as well.
  • M
    Maximus
    Cheapest share in terms of FCF in the whole investment universe. Boring but profitable business, sinage needed during the pandemic... (largest printing company in the US). Smart enough to be considered essential business because they print for hospitals...

    Efficient after they got rid of 30% of redundant costs. 50% Free Cash Flow yield is insain. No one could buy a healthy and boring business like this at these prices outside the stock market.

    Trading at 2x FCF after 50% share price increase - market currently at 22 - 25 x (15x historical average last 125 years). If we get a conservative 10x FCF valuation... 10 USD per share. Good luck if you are short.

    When large funds could buy the stock and they increase liquidity this could easily go to 10 USD per share in this kind of market in virtually days/months. If the market turns down they still get the buybacks at better prices which they haven't used much.

    15 million annual allowance for dividends and share repurchases under financing agreement... (20% plus annual return to shareholders at these prices) and virtually no bank debt (65 mn withdrawn and 50 million in cash + Q4 10 mn FCF?). The rest are leases, which are not really financial debt.

    Take a look at the number of shares outstanding in the next financial release... below 40 mn is my guess. That would increase Earnings and FCF per share, plus the capital gain of shares bought below 1,9 USD.

    Increasing business dut to sinage. The pandemic is not going away anytime soon and re-opening will be phased and need for sinage everywhere.

    83 million market cap
    Net Financial Debt: 30 mn - 80mn Revolving Credit Facility - 60 mn withdrawn of which 50 mn sits on the Balance sheet
    Conservative 40 mn FCF with 30% sales decline due to pandemic. 30% plus gross margins.

    No brainer...
    Bullish
  • b
    bbb
    Up coming quarter going to be interesting, hoping guidance will return now that pandemic is behind us. Going to need a strong quarter to get sp moving above $4 ps - $78+ million and .10 cents+. Gl bulls
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