ARC Document Solutions Reports Mixed Q3 Results, Declining Profitability Amid Revenue Growth

ARC Document Solutions, Inc. reported its financial results for the three and nine months ended September 30, 2024, showing a mixed performance compared to the same periods in 2023. For the third quarter, net sales increased by 4.8% to $74.4 million, up from $71.1 million in 2023. For the nine months, net sales rose by 3.8% to $220.4 million, compared to $212.3 million in the prior year. Digital printing services were a significant contributor, with sales increasing by 7.1% for the quarter and 5.4% for the nine months.

Despite the revenue growth, profitability declined. The company reported a net loss of $101,000 for the third quarter, a stark contrast to the net income of $3.1 million in the same period last year. For the nine months, net income decreased to $5.4 million from $8.9 million in 2023. The decline in profitability was attributed to increased selling, general, and administrative expenses, which rose by 20.8% for the quarter and 10.2% for the nine months. Additionally, the EBITDA margin fell to 7.5% for the third quarter, down from 13.3% in 2023.

The company’s total assets increased to $313.5 million as of September 30, 2024, from $310.1 million at the end of 2023. Current liabilities also rose to $74.7 million, up from $71.2 million. Stockholders’ equity increased slightly to $155.0 million, reflecting a stable financial position despite the operational challenges.

Strategically, ARC Document Solutions entered into a merger agreement with TechPrint Holdings, LLC on August 27, 2024. Under the terms of the agreement, each share of ARC common stock will be converted into cash of $3.40 per share, with the merger expected to close in the fourth quarter of 2024. This transaction will result in ARC becoming a private company, ceasing its SEC reporting obligations. The company has also incurred costs related to the merger, amounting to $3.2 million for the third quarter and $4.1 million for the nine months.

In terms of cash flow, net cash provided by operating activities for the nine months was $19.2 million, down from $22.9 million in 2023. The company’s cash and cash equivalents decreased to $51.3 million as of September 30, 2024, from $56.1 million at the end of 2023. The company continues to maintain compliance with its financial covenants under its credit agreement, with borrowing availability of $27.8 million as of the reporting date.