Financial Data and Key Metrics Changes - The company experienced a sales drop of over $90 million due to the pandemic but managed to align its cost structure with a new revenue model, resulting in strong earnings and unprecedented cash generation [6][8] - Annual earnings per share matched 2019 levels, and cash flow from operations increased year-over-year, surpassing $50 million [8][18] - Adjusted EBITDA reached nearly $45 million, with an EBITDA margin of 15.5%, a 260-basis-point increase from the prior year [8][17] Business Line Data and Key Metrics Changes - The education sector continued to order distancing and signage, while the construction vertical utilized plan printing services [11][12] - Large color projects for signage and merchandising remained active, although NPS and equipment sales were impacted due to reduced office activity [13] - The company enhanced its scanning operations to meet increased demand for digital document conversion [12] Market Data and Key Metrics Changes - The pandemic led to a significant decline in revenue, but the company adapted by focusing on non-construction-oriented businesses, which are expected to continue growing [9][16] - Economic lockdowns in key markets like California and New York City affected operations, but a return to normalcy is anticipated with the rollout of vaccination programs [14] Company Strategy and Development Direction - The company aims to maintain a diversified customer portfolio and has shifted its marketing efforts towards non-construction markets [16] - Strategic controls implemented during the pandemic are expected to continue benefiting the company as it seeks to grow market share [14][15] - The management is confident in the company's strategic vision and plans to leverage its broad service portfolio to adapt to changing market conditions [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic but expressed confidence in the company's ability to adapt and grow [9][15] - The expectation for 2021 is a recovery in sales as offices and schools reopen, leading to improved business conditions compared to 2020 [24] Other Important Information - The company resumed its dividend program and increased its quarterly dividend by 100% within two months, reflecting a strong financial position [6][19] - Cash on the balance sheet exceeded $50 million, and the company reduced its leverage ratio to 1.3 times net of U.S. cash, indicating a stronger capital structure [19] Q&A Session Summary Question: What is the outlook for topline revenue in 2021? - Management indicated that the 2020 topline is viewed as a new baseline, and they expect 2021 to be better due to improving conditions and the return of some legacy business [22][23][24]

Part I [Business](index=6&type=section&id=Item%201.%20Business) ARC Document Solutions provides a comprehensive suite of document distribution and graphic production services, primarily targeting the architectural, engineering, construction, and building owner/operator (AEC/O) industry - The company's core service offerings include: **Offsite Services**, **Specialized Color Printing**, **Managed Print Services (MPS)**, **Archive and Information Management (AIM)**, **Web-Based Document Management Applications**, and **Equipment and Supplies Sales**[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - ARC serves over **45,000 customers**, with no single customer accounting for more than 2% of overall revenue, and is the largest document solutions provider to the AEC/O market in North America[20](index=20&type=chunk)[22](index=22&type=chunk) - A significant portion of the company's revenue is geographically concentrated, with approximately **32% of total revenue in 2020 derived from California**[26](index=26&type=chunk)[58](index=58&type=chunk) - As of December 31, 2020, the company employed approximately **1,750 people**[29](index=29&type=chunk) - Key competitive strengths include **strong domain expertise in the AEC/O market**, extensive customer relationships, a wide variety of specialized printing capabilities, a large service center footprint, and a unique combination of onsite, offsite, and cloud-based offerings[36](index=36&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, high dependency on the cyclical AEC/O industry, revenue concentration in California, and high fixed costs making earnings sensitive to revenue fluctuations - The **COVID-19 pandemic** has adversely affected and is expected to continue to adversely affect the company's financial condition and results of operations[49](index=49&type=chunk)[50](index=50&type=chunk) - The business is highly dependent on the **AEC/O industry**, which accounted for approximately **69% of net sales in 2020**, and a downturn in this industry could significantly harm revenue and profitability[57](index=57&type=chunk) - A significant portion of overall costs are fixed (estimated at **36% in 2020**), making earnings highly sensitive to changes in revenue[63](index=63&type=chunk) - The company faces risks related to its debt, including **restrictive covenants** in its Credit Agreement, where a substantial downturn could cause a breach of financial ratios, leading to default[54](index=54&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - The common stock is subject to market price volatility and risks **delisting from the NYSE** if the average closing price falls below $1.00 over 30 consecutive trading days[89](index=89&type=chunk)[93](index=93&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[94](index=94&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) As of year-end 2020, ARC operated 148 service centers globally, occupying approximately 1.0 million square feet, with the vast majority of facilities being leased - The company operated **148 service centers** at the end of 2020, with 126 in the U.S. and 22 internationally[94](index=94&type=chunk) - Total occupied space was approximately **1.0 million square feet** as of December 31, 2020[94](index=94&type=chunk) - Nearly all service centers and administrative facilities are leased[94](index=94&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings from normal business operations and does not expect their resolution to have a material adverse effect on its financial condition - The company is involved in routine legal proceedings from the conduct of its business[96](index=96&type=chunk) - Accruals are made for probable and reasonably estimable losses, and management does not currently anticipate a material adverse effect from these matters[96](index=96&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[97](index=97&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ARC's common stock trades on the NYSE, a quarterly cash dividend of $0.01 per share was declared, and a $15.0 million stock repurchase program is active - The company's common stock is listed on the NYSE under the symbol **"ARC"**[98](index=98&type=chunk) - A quarterly cash dividend of **$0.01 per share** was declared in December 2020[100](index=100&type=chunk) Issuer Purchases of Equity Securities (Q4 2020) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share ($) | Dollar Value Remaining in Program (thousands) | | :--- | :--- | :--- | :--- | | Nov 2020 | 114 | 1.34 | 10,551 | | Dec 2020 | 467 | 1.39 | 9,901 | - The Board of Directors approved a stock repurchase program authorizing up to **$15.0 million** in purchases through March 31, 2023[102](index=102&type=chunk) [Selected Financial Data](index=20&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company for this reporting period - Not applicable[103](index=103&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The COVID-19 pandemic caused a 24.3% sales decline to $289.5 million in 2020, but net income more than doubled to $6.2 million due to significant cost reductions and improved liquidity [COVID-19 Pandemic Impact](index=23&type=section&id=COVID-19%20Pandemic) The pandemic negatively impacted demand and profitability, prompting significant cost-saving measures while the company maintained essential business operations at reduced volumes - The pandemic caused a decline in demand for products and services starting in late March 2020, negatively impacting sales and profitability[113](index=113&type=chunk) - Mitigation efforts included reducing working capital, suspending share repurchases and dividends for a portion of 2020, postponing capital expenditures, and reducing operating and discretionary costs[116](index=116&type=chunk) - As an essential business serving infrastructure, housing, and healthcare, the company kept almost all of its **148 service centers** open at reduced volumes[117](index=117&type=chunk) [Results of Operations (2020 vs. 2019)](index=24&type=section&id=Results%20of%20Operations) Net sales fell 24.3% to $289.5 million in 2020, but significant SG&A reductions and a lower effective tax rate contributed to a rise in net income to $6.2 million Consolidated Results of Operations | Financial Metric (In millions) | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total net sales** | **$289.5** | **$382.4** | **$(92.9)** | **(24.3)%** | | CDIM | $175.5 | $205.5 | $(30.0) | (14.6)% | | MPS | $79.3 | $123.3 | $(44.0) | (35.7)% | | AIM | $12.3 | $14.1 | $(1.8) | (12.7)% | | Equipment and Supplies | $22.3 | $39.5 | $(17.2) | (43.5)% | | **Gross profit** | **$92.9** | **$125.2** | **$(32.3)** | **(25.8)%** | | **SG&A expenses** | **$79.0** | **$107.3** | **$(28.2)** | **(26.3)%** | | **Net income attributable to ARC** | **$6.2** | **$3.0** | **$3.2** | **105.2%** | | **Adjusted EBITDA** | **$44.8** | **$49.4** | **$(4.6)** | **(9.3)%** | - The decline in MPS sales was primarily driven by office employees working from home, significantly reducing print volumes in customers' offices[124](index=124&type=chunk) - Gross margin decreased by only 60 basis points to **32.1%** despite the large sales drop, aided by cost savings and a reduction in lower-margin Equipment and Supplies sales[128](index=128&type=chunk) - The increase in net income was largely driven by a significant decrease in the income tax provision, as 2019 included a large tax expense related to expired nonqualified stock options[136](index=136&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company demonstrated strong liquidity management in 2020, increasing its cash to $55.0 million and generating $54.5 million in operating cash flow while reducing debt and capital expenditures Key Liquidity Metrics | Metric (In thousands) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,950 | $29,425 | | Working capital | $32,500 | $20,008 | | Total debt obligations | $97,236 | $106,157 | - Cash flows from operations increased to **$54.5 million** in 2020 from $52.8 million in 2019, reflecting sustained profitability and active management of working capital[151](index=151&type=chunk)[152](index=152&type=chunk) - Capital expenditures were significantly reduced to **$6.4 million** in 2020 from $12.9 million in 2019 as a cash preservation measure during the pandemic[153](index=153&type=chunk) - As of Dec 31, 2020, the company had **$22.8 million** available for borrowing under its revolving credit facility[160](index=160&type=chunk)[164](index=164&type=chunk) [Critical Accounting Policies](index=35&type=section&id=Critical%20Accounting%20Policies) Key accounting policies involve significant estimates for goodwill impairment, revenue recognition, leases, and income taxes, with no goodwill impairment found in 2020 - The annual goodwill impairment test as of September 30, 2020, indicated **no impairment**, with the fair values of the two reporting units with goodwill exceeding their carrying values by more than 100%[168](index=168&type=chunk)[171](index=171&type=chunk) - Revenue is recognized when control transfers to the customer, which for most services like CDIM and AIM, occurs at the point of delivery of the physical or digital documents[175](index=175&type=chunk)[176](index=176&type=chunk) - The company maintains a valuation allowance of **$2.1 million** against certain deferred tax assets as of December 31, 2020, for which realization is not more likely than not[181](index=181&type=chunk)[262](index=262&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company - Not applicable[184](index=184&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's audited consolidated financial statements and accompanying notes are included in Part IV, Item 15 of this Annual Report on Form 10-K - The full financial statements and supplementary data are filed as part of the report, beginning on page F-1[185](index=185&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=38&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[185](index=185&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of December 31, 2020 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[187](index=187&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020, based on the COSO framework (2013)[188](index=188&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, internal controls[190](index=190&type=chunk) [Other Information](index=39&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[190](index=190&type=chunk) Part III [Directors, Compensation, Security Ownership, and Accountant Fees](index=40&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14 is incorporated by reference from the company's 2021 Proxy Statement, to be filed within 120 days of the fiscal year-end - Information regarding Directors, Executive Officers, and Corporate Governance (Item 10) is incorporated by reference from the 2021 Proxy Statement[192](index=192&type=chunk) - Information regarding Executive Compensation (Item 11) is incorporated by reference from the 2021 Proxy Statement[193](index=193&type=chunk) - Information regarding Security Ownership (Item 12), Certain Relationships (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the 2021 Proxy Statement[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=41&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and all exhibits filed with the report, including debt agreements, incentive plans, and Sarbanes-Oxley certifications - The filing includes the Consolidated Financial Statements and Notes to Consolidated Financial Statements[198](index=198&type=chunk) - A list of exhibits is provided, including the Sixth Amendment to the Credit Agreement (Exhibit 10.40) and various executive employment agreements and stock plans[201](index=201&type=chunk)[204](index=204&type=chunk) - Certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are filed as exhibits[205](index=205&type=chunk) [Financial Statements and Notes](index=48&type=section&id=Financial%20Statements%20and%20Notes) The consolidated financial statements present ARC's financial position and results of operations, with key notes detailing goodwill, debt, leases, and income taxes [Report of Independent Registered Public Accounting Firm](index=49&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The company's financial statements received unqualified audit opinions for 2020 and 2019, with Revenue Recognition and Goodwill Impairment identified as Critical Audit Matters for 2020 - Armanino LLP audited the 2020 financial statements and issued an **unqualified opinion**[225](index=225&type=chunk) - Deloitte & Touche LLP audited the 2019 financial statements and issued an **unqualified opinion**[220](index=220&type=chunk) - The 2020 audit identified two **Critical Audit Matters (CAMs)**: Revenue Recognition and Goodwill Impairment, due to the complexity and judgment involved[229](index=229&type=chunk)[230](index=230&type=chunk)[233](index=233&type=chunk) [Notes to Consolidated Financial Statements](index=58&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant revenue concentration in California, a goodwill balance of $121.1 million with no impairment, total debt of $97.2 million, and total lease liabilities of $88.0 million - Sales in California represented approximately **32% of total sales** in 2020, and purchases from the three largest vendors comprised approximately **53% of total inventory and supplies purchases** (Note 2)[256](index=256&type=chunk)[257](index=257&type=chunk) - The carrying amount of goodwill was **$121.1 million** as of December 31, 2020, with **no impairment** recorded during the year (Note 3)[305](index=305&type=chunk)[309](index=309&type=chunk) - Total lease liabilities were **$88.0 million** as of December 31, 2020, composed of $45.7 million for operating leases and $42.2 million for finance leases (Note 7)[330](index=330&type=chunk)[332](index=332&type=chunk) - The company had federal net operating loss carryforwards of approximately **$79.6 million** as of December 31, 2020 (Note 8)[351](index=351&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________ Form 10-Q _______________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-32407 _____________________________________ ...

ARC Document Solutions, Inc. (NYSE:ARC) Q3 2020 Earnings Conference Call November 4, 2020 5:00 PM ET Company Participants David Stickney - Vice President, Corp Communications and Investor Relations Suri Suriyakumar - Chairman, President and Chief Executive Officer Dilo Wijesuriya - Chief Operating Officer Jorge Avalos - Chief Financial Officer Conference Call Participants Ben Andrews - Andrews Capital Glenn Primack - Primestor Asset Operator Ladies and gentlemen, thank you for standing by, and welcome to th ...

Financial Data and Key Metrics Changes - The company generated $10.7 million in EBITDA on approximately $64 million in sales during Q2 2020, indicating a sustainable operating model moving forward [12][21] - Cash flow from operations for the second quarter was $23.5 million, which is over $7 million higher than the previous year [21] - The gross margin for the quarter was nearly 32%, with an EBITDA margin of 16.6%, reflecting a 200 basis point improvement from Q2 2019 [21] Business Line Data and Key Metrics Changes - The company has restructured its operations to focus on graphics and imaging services, on-site print services, and digital services, adapting to new customer needs due to the pandemic [18][19] - Significant changes were made to sales and marketing, operations, and technology to align with the new business environment [11][15] Market Data and Key Metrics Changes - The pandemic has permanently altered customer behavior, leading to a shift towards digital solutions and remote work, which has impacted traditional revenue streams [8][9] - The company is positioned to capture new market opportunities in sectors such as healthcare, education, and retail, which have increased demand for signage and document management services [16][52] Company Strategy and Development Direction - The company is undergoing a transformation to reengineer its business model, focusing on new revenue opportunities that are more sustainable than historical lines [10][12] - The strategy includes maintaining gross margins above 30% and improving EBITDA margins while strengthening cash flows and the balance sheet [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to the post-pandemic environment, emphasizing the importance of agility and responsiveness to customer needs [14][19] - The management team acknowledged the challenges posed by the pandemic but highlighted the successful implementation of cost reductions and operational changes [11][21] Other Important Information - The company increased its cash balance from $38.1 million on March 31, 2020, to $58.4 million on June 30, 2020, all generated from operations without incurring additional debt [21] - The company deferred approximately $3 million in capital lease payments, which will be paid back over the lease terms [70][72] Q&A Session Summary Question: What will the company look like going forward? - Management indicated that the company has reengineered itself to generate consistent EBITDA and cash flow, with a base revenue expectation of around $55 million per quarter [25][26] Question: What is the plan for returning cash to shareholders? - Management stated that dividends were temporarily put on hold due to the pandemic, but they are open to reinstating them if business conditions remain stable [32][73] Question: How is the company positioned in the current market? - Management noted that smaller competitors are likely to be weakened, providing an opportunity for the company to gain market share [50][52] Question: What is the company's approach to acquisitions? - Management expressed that it is unlikely to pursue acquisitions at this time, focusing instead on organic growth opportunities [78] Question: How will the company report on new business segments? - Management acknowledged that while operational changes are being made, reporting on new revenue lines may lag due to SEC requirements [65]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________ Form 10-Q _______________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |--------------------------------------------------|-------------------------------- ...

ARC Document Solutions, Inc. (NYSE:ARC) Q1 2020 Earnings Conference Call May 5, 2020 5:00 PM ET Company Participants David Stickney - Vice President Corporate Communications and Investor Relations Suri Suriyakumar - Chairman, President and Chief Executive Officer Dilo Wijesuriya - Chief Operating Officer Jorge Avalos - Chief Financial Officer Conference Call Participants Operator Ladies and gentlemen, thank you for standing by, and welcome to the ARC 2020 Q1 Earnings Report Conference call. [Operator Instru ...

[Forward-Looking Statements](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section discusses forward-looking statements regarding financial results, cash flows, capital requirements, foreign exchange, and tax rates, highlighting inherent risks and uncertainties - The report contains forward-looking statements regarding the impact of the COVID-19 pandemic on financial results, future cash flows, capital requirements, foreign exchange rates, and the Company's anticipated effective tax rate[6](index=6&type=chunk) - These statements involve risks and uncertainties, particularly those amplified by the COVID-19 outbreak, which could cause actual results to differ materially from projections[6](index=6&type=chunk) - The Company disclaims any obligation to publicly update or revise forward-looking statements and advises consulting future SEC filings for further disclosures[7](index=7&type=chunk) [Part I—Financial Information](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for ARC Document Solutions, Inc., including balance sheets, statements of operations, comprehensive (loss) income, equity, and cash flows, along with their accompanying notes, for the quarter ended March 31, 2020, and comparative periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric (in thousands) | March 31, 2020 | December 31, 2019 | Change ($) | Change (%) | | :------------------------ | :------------- | :---------------- | :--------- | :--------- | | Total Assets | $368,709 | $363,157 | $5,552 | 1.53% | | Total Liabilities | $221,515 | $213,117 | $8,398 | 3.94% | | Total Equity | $147,194 | $150,040 | $(2,846) | -1.90% | | Cash & Cash Equivalents | $38,210 | $29,425 | $8,785 | 29.86% | | Total Current Assets | $114,533 | $106,383 | $8,150 | 7.66% | | Total Current Liabilities | $78,751 | $86,375 | $(7,624) | -8.83% | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Sales | $88,425 | $97,122 | $(8,697) | -8.95% | | Gross Profit | $27,597 | $30,675 | $(3,078) | -10.03% | | Income from Operations | $2,662 | $2,143 | $519 | 24.22% | | Net Income | $462 | $447 | $15 | 3.36% | | Net Income Attributable to ARC Shareholders | $683 | $592 | $91 | 15.37% | | Basic EPS | $0.02 | $0.01 | $0.01 | 100.00% | | Diluted EPS | $0.02 | $0.01 | $0.01 | 100.00% | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change ($) | Change (%) | | :------------------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Income | $462 | $447 | $15 | 3.36% | | Foreign Currency Translation Adjustments, net of tax | $(974) | $(774) | $(200) | 25.84% | | Comprehensive Loss | $(512) | $(327) | $(185) | 56.57% | | Comprehensive (Loss) Income Attributable to ARC Shareholders | $(158) | $24 | $(182) | -758.33% | [Condensed Consolidated Statements of Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) | Metric (in thousands) | Balance at March 31, 2020 | Balance at December 31, 2019 | Change ($) | Change (%) | | :------------------------------------------------------ | :------------------------ | :--------------------------- | :--------- | :--------- | | Total ARC Document Solutions, Inc. Shareholders' Equity | $140,876 | $143,368 | $(2,492) | -1.74% | | Noncontrolling Interest | $6,318 | $6,672 | $(354) | -5.31% | | Total Equity | $147,194 | $150,040 | $(2,846) | -1.90% | - Treasury shares increased from **$11,410 thousand** at December 31, 2019, to **$13,842 thousand** at March 31, 2020, reflecting share repurchases[17](index=17&type=chunk) - Cash dividends of **$0.01 per share**, totaling **$427 thousand**, were paid during the three months ended March 31, 2020[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change ($) | Change (%) | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Cash Provided by Operating Activities | $2,774 | $2,665 | $109 | 4.09% | | Net Cash Used in Investing Activities | $(1,048) | $(3,030) | $1,982 | -65.41% | | Net Cash Provided by (Used in) Financing Activities | $7,543 | $(9,644) | $17,187 | -178.21% | | Net Change in Cash and Cash Equivalents | $8,785 | $(10,663) | $19,448 | -182.39% | | Cash and Cash Equivalents at End of Period | $38,210 | $18,770 | $19,440 | 103.57% | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business and Basis of Presentation](index=11&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - ARC Document Solutions is a leading provider of document solutions to architectural, engineering, construction, and facilities management professionals, offering services like Construction Document Information Management (CDIM), Managed Print Services (MPS), Archive and Information Management (AIM), and Equipment and Supplies sales[22](index=22&type=chunk) - The interim financial statements are prepared in accordance with GAAP and SEC requirements, with certain footnotes condensed or omitted[23](index=23&type=chunk) Net Sales by Service/Product | Service/Product | March 31, 2020 | March 31, 2019 | Change ($) | Change (%) | | :------------------------- | :------------- | :------------- | :--------- | :--------- | | CDIM | $49,160 | $50,805 | $(1,645) | -3.24% | | MPS | $27,308 | $30,907 | $(3,599) | -11.64% | | AIM | $3,600 | $3,262 | $338 | 10.36% | | Equipment and Supplies Sales | $8,357 | $12,148 | $(3,791) | -31.21% | | **Net Sales** | **$88,425** | **$97,122** | **$(8,697)** | **-8.95%** | - The Company early adopted ASU 2019-12 (Income Taxes) on January 1, 2020, with no material impact on its consolidated financial statements[32](index=32&type=chunk) - The Company operates as a single reportable segment due to similar products, services, customers, production processes, distribution methods, and economic characteristics across its business activities[34](index=34&type=chunk) - The Company's operating results and financial condition are significantly affected by economic factors influencing the architectural, engineering, construction, and building owner/operator (AEC/O) industry, which have been amplified by the COVID-19 pandemic[35](index=35&type=chunk) [2. Earnings per Share](index=13&type=section&id=2.%20Earnings%20per%20Share) Weighted Average Common Shares Outstanding | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Weighted average common shares outstanding during the period—basic | 43,676 | 45,118 | | Effect of dilutive stock awards | 135 | 237 | | Weighted average common shares outstanding during the period—diluted | 43,811 | 45,355 | - For the three months ended March 31, 2020, **5.3 million common shares** were excluded from the calculation of diluted net income attributable to ARC per common share because they were anti-dilutive, compared to **5.5 million** in the prior year period[37](index=37&type=chunk) [3. Goodwill and Other Intangibles](index=13&type=section&id=3.%20Goodwill%20and%20Other%20Intangibles) - An interim goodwill impairment analysis was triggered as of March 31, 2020, due to the COVID-19 pandemic's impact on the global economic environment, a revision of forecasted future earnings, and a decline in market capitalization[39](index=39&type=chunk) - The analysis concluded that the fair value of each reporting unit exceeded its carrying value, and goodwill was not impaired as of March 31, 2020[39](index=39&type=chunk) - The Company assessed its long-lived assets for possible impairment as of March 31, 2020, due to the effect of the COVID-19 pandemic on expected future operating cash flows, and concluded that its long-lived assets were not impaired[47](index=47&type=chunk) Intangible Assets | Asset | Gross Carrying Amount (Mar 31, 2020) | Accumulated Amortization (Mar 31, 2020) | Net Carrying Amount (Mar 31, 2020) | Gross Carrying Amount (Dec 31, 2019) | Accumulated Amortization (Dec 31, 2019) | Net Carrying Amount (Dec 31, 2019) | | :------------------------ | :----------------------------------- | :-------------------------------------- | :--------------------------------- | :----------------------------------- | :-------------------------------------- | :--------------------------------- | | Customer relationships | $98,952 | $97,875 | $1,077 | $99,127 | $97,430 | $1,697 | | Trade names and trademarks | $20,267 | $19,981 | $286 | $20,279 | $19,980 | $299 | | **Total** | **$119,219** | **$117,856** | **$1,363** | **$119,406** | **$117,410** | **$1,996** | Estimated Future Amortization Expense | Year | Estimated Future Amortization Expense (in thousands) | | :--------------------------------------- | :--------------------------------------------------- | | 2020 (excluding the three months ended March 31, 2020) | $901 | | 2021 | $166 | | 2022 | $94 | | 2023 | $41 | | 2024 | $39 | | Thereafter | $122 | | **Total** | **$1,363** | [4. Income Taxes](index=15&type=section&id=4.%20Income%20Taxes) - The income tax provision for the three months ended March 31, 2020, was **$1.1 million** on pretax income of **$1.6 million**, resulting in an effective income tax rate of **70.6%**, a significant increase from **38.8%** in the prior year period[52](index=52&type=chunk) - The increase in the effective income tax rate was primarily due to shortfalls in stock-based compensation, changes in valuation allowances against certain deferred tax assets, non-deductible expenses, and the financial impact from COVID-19[52](index=52&type=chunk) - The Company has a **$2.5 million** valuation allowance against certain deferred tax assets as of March 31, 2020[56](index=56&type=chunk) [5. Long-Term Debt](index=16&type=section&id=5.%20Long-Term%20Debt) | Debt Type | March 31, 2020 | December 31, 2019 | Change ($) | Change (%) | | :------------------------ | :------------- | :---------------- | :--------- | :--------- | | Revolving Loans | $75,000 | $60,000 | $15,000 | 25.00% | | Various Finance Leases | $46,715 | $46,157 | $558 | 1.21% | | **Total** | **$121,715** | **$106,157** | **$15,558** | **14.66%** | | Less Current Portion | $(17,364) | $(17,075) | $(289) | 1.69% | | **Long-Term Debt** | **$104,351** | **$89,082** | **$15,269** | **17.14%** | - The Credit Agreement was amended on December 17, 2019, increasing the maximum aggregate principal amount of revolving loans from **$65 million to $80 million** and fully repaying a **$49.5 million** term loan[59](index=59&type=chunk)[60](index=60&type=chunk) - As of March 31, 2020, the Company's borrowing availability of Revolving Loans was **$2.8 million**, after deducting outstanding letters of credit of **$2.2 million** and outstanding Revolving Loans of **$75.0 million**[61](index=61&type=chunk) - The Company was in compliance with its financial covenants (Total Leverage Ratio and Fixed Charge Coverage Ratio) as of March 31, 2020[66](index=66&type=chunk) - A new dividend program was supported by the amendment, with a quarterly cash dividend of **$0.01 per share** declared in February 2020[68](index=68&type=chunk) [6. Commitments and Contingencies](index=17&type=section&id=6.%20Commitments%20and%20Contingencies) - The Company leases machinery, equipment, and office and operational facilities under non-cancelable operating lease agreements[71](index=71&type=chunk) - Indemnification agreements are in place with each director and named executive officer, providing indemnification under certain circumstances[72](index=72&type=chunk) - The Company is involved in various legal proceedings in the normal course of business, but does not believe their outcome will have a material effect on its consolidated financial position, results of operations, or cash flows[73](index=73&type=chunk) [7. Stock-Based Compensation](index=17&type=section&id=7.%20Stock-Based%20Compensation) - As of March 31, 2020, **1.3 million shares** remained available for issuance under the Company's stock plan[74](index=74&type=chunk) - During the three months ended March 31, 2020, the Company granted options to acquire **0.5 million shares** and **0.3 million restricted stock awards** to certain key employees[77](index=77&type=chunk) - Stock-based compensation expense decreased to **$0.5 million** for Q1 2020, compared to **$0.6 million** for Q1 2019[78](index=78&type=chunk) - Total unrecognized compensation cost related to unvested stock-based payments was **$2.5 million** as of March 31, 2020, expected to be recognized over a weighted-average period of approximately **2.0 years**[78](index=78&type=chunk) [8. Fair Value Measurements](index=18&type=section&id=8.%20Fair%20Value%20Measurements) - The Company categorizes its assets and liabilities measured at fair value into a three-level fair value hierarchy based on input observability[79](index=79&type=chunk) - As of March 31, 2020, the Company's assets and liabilities measured at fair value were not material[79](index=79&type=chunk) - The carrying amount of the Company's finance leases approximates fair value, and the fair value of borrowings under its Credit Agreement was **$75.0 million** as of March 31, 2020[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2020, highlighting the significant impact of the COVID-19 pandemic on sales, profitability, and liquidity, along with the proactive measures taken in response [Business Summary](index=18&type=section&id=Business%20Summary) - ARC Document Solutions is a leading provider of document solutions to design, engineering, construction, and facilities management professionals, aiming to reduce costs and increase efficiency for customers by improving document access and control[83](index=83&type=chunk)[84](index=84&type=chunk) - The Company's service and product offerings include Construction Document and Information Management (CDIM), Managed Print Services (MPS), Archiving and Information Management (AIM), and Equipment and Supplies sales[85](index=85&type=chunk) - Sales to the AEC/O industry accounted for approximately **75% of net sales** for the three months ended March 31, 2020, with the remaining **25%** from businesses outside this industry[87](index=87&type=chunk) [Costs and Expenses](index=19&type=section&id=Costs%20and%20Expenses) - Cost of sales primarily consists of materials (paper, toner), labor, and indirect costs like equipment and service center facilities expenses; paper price increases are typically passed on to customers[88](index=88&type=chunk) - The Company maintains low inventory levels and has historically leased equipment due to attractive finance lease rates[89](index=89&type=chunk) - Research and development costs, mainly salaries and equipment for data storage and development centers, are primarily recorded to cost of sales[90](index=90&type=chunk) [COVID-19 Pandemic](index=20&type=section&id=COVID-19%20Pandemic) - The COVID-19 pandemic negatively impacted the Company's sales and profitability for Q1 2020, with a material decline beginning in March due to stay-at-home orders, particularly in California (**34% of total revenue**)[91](index=91&type=chunk)[99](index=99&type=chunk) - The Company expects Q2 2020 to be the most significantly impacted quarter, with a current belief for sequential improvement during the second half of 2020[91](index=91&type=chunk) - Proactive actions taken to improve liquidity include drawing on the revolving credit facility, reducing working capital, suspending share repurchases and future dividend payouts, postponing capital expenditures, and reducing operating costs and workforce[94](index=94&type=chunk) - As an essential business, almost all of the Company's **170 service centers** remained open, albeit at reduced volumes, to fulfill customer needs[95](index=95&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) [Net Sales](index=22&type=section&id=Net%20Sales) Net Sales by Service/Product | Service/Product | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | CDIM | $49.2 | $50.8 | $(1.6) | -3.2% | | MPS | $27.3 | $30.9 | $(3.6) | -11.6% | | AIM | $3.6 | $3.3 | $0.3 | 10.4% | | Equipment and Supplies Sales | $8.4 | $12.1 | $(3.8) | -31.2% | | **Total Net Sales** | **$88.4** | **$97.1** | **$(8.7)** | **-9.0%** | - Total net sales decreased by **9.0%** year-over-year due to the negative impact of the COVID-19 pandemic on all service offerings, with the exception of AIM revenues[99](index=99&type=chunk) - The number of MPS locations grew to approximately **10,950** as of March 31, 2020, representing a net increase of approximately **370 locations** compared to March 31, 2019[102](index=102&type=chunk) - The decline in Equipment and Supplies sales was primarily driven by the COVID-19 slowdown in China, with sales from the Chinese joint venture (UDS) decreasing from **$6.9 million** in Q1 2019 to **$3.4 million** in Q1 2020[104](index=104&type=chunk) [Gross Profit](index=22&type=section&id=Gross%20Profit) Gross Profit and Margin | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :----------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Gross Profit | $27.6 | $30.7 | $(3.1) | -10.0% | | Gross Margin | 31.2% | 31.6% | -0.4 pp | -1.27% | - Despite a significant drop in net sales due to the COVID-19 pandemic, gross margin decreased by only **0.4%**, remaining essentially flat, aided by a drop in low-margin Equipment and Supplies sales from UDS and cost-saving activities[106](index=106&type=chunk) [Selling, General and Administrative Expenses](index=22&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) SG&A Expenses | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :----- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | SG&A | $24.3 | $27.6 | $(3.3) | -11.9% | - The reduction in SG&A expenses was due to cost-saving activities from a Q3 2019 restructuring plan and new measures in response to the COVID-19 pandemic, including headcount and salary reductions, travel suspension, and reduced discretionary spending[107](index=107&type=chunk) [Amortization of Intangibles](index=23&type=section&id=Amortization%20of%20Intangibles) Amortization of Intangibles | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Amortization of Intangibles | $0.6 | $0.9 | $(0.3) | -33.3% | - The decrease in amortization of intangibles was due to the completed amortization of certain customer relationship intangibles related to historical acquisitions[108](index=108&type=chunk) [Interest Expense, Net](index=23&type=section&id=Interest%20Expense%2C%20Net) Interest Expense, Net | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Interest Expense, Net | $1.1 | $1.4 | $(0.3) | -22.4% | - The decrease in net interest expense was due to the pay down of long-term debt[109](index=109&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes) Income Tax Provision and Rate | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Income Tax Provision | $1.1 | $0.3 | $0.8 | 289.8% | | Pretax Income | $1.6 | $0.7 | $0.9 | 128.57% | | Effective Income Tax Rate | 70.6% | 38.8% | 31.8 pp | 81.96% | - The significant increase in the effective income tax rate was primarily due to shortfalls in stock-based compensation, valuation allowances against deferred tax assets, non-deductible expenses, and the financial impact from the COVID-19 pandemic[109](index=109&type=chunk) - Excluding certain discrete items, the effective income tax rate would have been **33.4%** for Q1 2020 and **31.1%** for Q1 2019[109](index=109&type=chunk)[110](index=110&type=chunk) [Noncontrolling Interest](index=23&type=section&id=Noncontrolling%20Interest) - Net loss attributable to noncontrolling interest represents **35%** of the income of UNIS Document Solutions Co Ltd (UDS) and its subsidiaries, which comprise the Company's Chinese joint venture operations[111](index=111&type=chunk) [Net Income Attributable to ARC](index=23&type=section&id=Net%20Income%20Attributable%20to%20ARC) Net Income Attributable to ARC | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | Net Income Attributable to ARC | $0.7 | $0.6 | $0.1 | 15.4% | - The increase in net income attributable to ARC was driven by a decline in selling, general and administrative expenses, which more than offset the decline in gross profit[112](index=112&type=chunk) [EBITDA](index=23&type=section&id=EBITDA) EBITDA and Adjusted EBITDA | Metric | Three Months Ended March 31, 2020 (in millions) | Three Months Ended March 31, 2019 (in millions) | Change ($) | Change (%) | | :-------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :--------- | | EBITDA | $10.9 | $10.6 | $0.3 | 2.6% | | EBITDA Margin | 12.3% | 10.9% | 1.4 pp | 12.84% | | Adjusted EBITDA | $11.4 | $11.2 | $0.2 | 1.6% | | Adjusted EBITDA Margin | 12.9% | 11.6% | 1.3 pp | 11.21% | - The increase in adjusted EBITDA margin for Q1 2020 was primarily due to the significant decline in Selling, General and Administrative expenses[113](index=113&type=chunk) [Impact of Inflation](index=23&type=section&id=Impact%20of%20Inflation) - Inflation has not had a significant effect on the Company's operations, as price increases for raw materials like paper and fuel charges are typically passed on to customers[114](index=114&type=chunk) [Non-GAAP Financial Measures](index=23&type=section&id=Non-GAAP%20Financial%20Measures) - EBITDA and related ratios are supplemental non-GAAP measures used by management to assess operating segment performance, evaluate acquisitions, and determine consolidated-level compensation[115](index=115&type=chunk)[118](index=118&type=chunk) - Adjusted net income and adjusted EBITDA are presented to provide meaningful comparisons by excluding items such as deferred tax valuation allowances, other discrete tax items, and stock-based compensation expense[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) Adjusted Net Income and EPS | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change ($) | Change (%) | | :---------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Net income attributable to ARC Document Solutions, Inc. | $683 | $592 | $91 | 15.37% | | Deferred tax valuation allowance and other discrete tax items | $499 | $26 | $473 | 1819.23% | | **Adjusted net income attributable to ARC Document Solutions, Inc.** | **$1,182** | **$618** | **$564** | **91.26%** | | Basic EPS (Actual) | $0.02 | $0.01 | $0.01 | 100.00% | | Diluted EPS (Actual) | $0.02 | $0.01 | $0.01 | 100.00% | | Basic EPS (Adjusted) | $0.03 | $0.01 | $0.02 | 200.00% | | Diluted EPS (Adjusted) | $0.03 | $0.01 | $0.02 | 200.00% | [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) [Overview](index=26&type=section&id=Overview) - The Company's principal sources of cash are cash flows from operations and borrowings under debt and lease agreements, while historical uses include ongoing operations, debt payments, capital expenditures, and stock repurchases[130](index=130&type=chunk) Cash and Cash Equivalents | Metric | March 31, 2020 | December 31, 2019 | Change ($) | Change (%) | | :---------------------- | :------------- | :---------------- | :--------- | :--------- | | Cash and Cash Equivalents | $38,210 | $29,425 | $8,785 | 29.86% | - As of March 31, 2020, **$15.0 million** of cash was held in foreign countries, with **$13.1 million** in China, which could be subject to repatriation delays or adverse tax consequences[131](index=131&type=chunk) [Operating Activities](index=27&type=section&id=Operating%20Activities) Net Cash Provided by Operating Activities | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Net Cash Provided by Operating Activities | $2,774 | $2,665 | $109 | 4.09% | - The slight increase in cash flows from operations was due to an increase in net income and improved management of operating assets and liabilities[136](index=136&type=chunk) - Days Sales Outstanding (DSO) improved to **54 days** as of March 31, 2020, from **56 days** as of March 31, 2019[136](index=136&type=chunk) [Investing Activities](index=27&type=section&id=Investing%20Activities) Net Cash Used in Investing Activities and Capital Expenditures | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change ($) | Change (%) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Net Cash Used in Investing Activities | $(1,048) | $(3,030) | $1,982 | -65.41% | | Capital Expenditures | $(1,121) | $(3,196) | $2,075 | -64.93% | - The change in capital expenditures was primarily driven by the timing of equipment purchases and whether such equipment was leased or purchased with available cash[137](index=137&type=chunk) [Financing Activities](index=27&type=section&id=Financing%20Activities) Net Cash Provided by (Used in) Financing Activities | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Net Cash Provided by (Used in) Financing Activities | $7,543 | $(9,644) | $17,187 | -178.21% | - Net cash provided by financing activities was primarily due to a **$15.0 million** net borrowing under the revolving credit facility, partially offset by payments on finance leases and share repurchases[138](index=138&type=chunk) [Debt Obligations](index=28&type=section&id=Debt%20Obligations) Total Debt Obligations | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | Change ($) | Change (%) | | :------------------------- | :---------------------------- | :------------------------------- | :--------- | :--------- | | Borrowings from revolving credit facility | $75,000 | $60,000 | $15,000 | 25.00% | | Other debt obligations | $46,715 | $46,157 | $558 | 1.21% | | **Total Debt Obligations** | **$121,715** | **$106,157** | **$15,558** | **14.66%** | - The 2019 Amendment to the Credit Agreement increased the maximum aggregate principal amount of Revolving Loans from **$65 million to $80 million** and was used to fully repay a **$49.5 million** term loan[144](index=144&type=chunk)[145](index=145&type=chunk) - As of March 31, 2020, the Company's borrowing availability under the Revolving Loan commitment was **$2.8 million**[147](index=147&type=chunk) - The Company was in compliance with its financial covenants (Total Leverage Ratio and Fixed Charge Coverage Ratio) as of March 31, 2020, and currently believes it will remain compliant, despite high uncertainty due to the COVID-19 pandemic[150](index=150&type=chunk) - As of March 31, 2020, the Company had **$46.7 million** of finance lease obligations outstanding, with a weighted average interest rate of **4.8%**[155](index=155&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of March 31, 2020, the Company did not have any off-balance-sheet arrangements[156](index=156&type=chunk) [Contractual Obligations and Other Commitments](index=29&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) - The Company has entered into various non-cancelable operating leases primarily related to facilities, equipment, and vehicles[157](index=157&type=chunk) - The Company expects changes to the timing of lease payments due to ongoing deferment negotiations with landlords and lessors[157](index=157&type=chunk) - Legal proceedings are not believed to have a material effect on the Company's consolidated financial position, results of operations, or cash flows[158](index=158&type=chunk) [Critical Accounting Policies](index=29&type=section&id=Critical%20Accounting%20Policies) [Goodwill Impairment](index=29&type=section&id=Goodwill%20Impairment) - An interim goodwill impairment analysis was triggered as of March 31, 2020, due to the COVID-19 pandemic's impact on the global economic environment, revised future earnings forecasts, and a decline in market capitalization[161](index=161&type=chunk) - The analysis concluded that the fair value of each reporting unit exceeded its carrying value, and goodwill was not impaired as of March 31, 2020[161](index=161&type=chunk) - A sensitivity analysis indicated that a **50-basis point reduction** in projected 2020 EBITDA or a **50-basis point increase** to the weighted average cost of capital would not result in goodwill impairment[165](index=165&type=chunk)[166](index=166&type=chunk) - Significant judgment and estimates are involved in determining the fair value of reporting units, especially given the uncertainty created by the COVID-19 pandemic, and future impairment charges are possible if assumptions change[164](index=164&type=chunk)[167](index=167&type=chunk) [Income Taxes](index=30&type=section&id=Income%20Taxes) - Deferred tax assets and liabilities reflect temporary differences, adjusted for expected tax rate changes, with a valuation allowance recorded if realization of deferred tax assets is not more likely than not[168](index=168&type=chunk)[169](index=169&type=chunk) - The Company has a **$2.5 million** valuation allowance against certain deferred tax assets as of March 31, 2020[169](index=169&type=chunk) - The evaluation of deferred tax assets requires judgment, and changes in current estimates due to unanticipated events, such as the ultimate financial impact and recovery due to COVID-19, could materially affect financial condition and results of operations[55](index=55&type=chunk)[169](index=169&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 1, 'Description of Business and Basis of Presentation' within the interim Condensed Consolidated Financial Statements for disclosures on recent accounting pronouncements not yet adopted[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the Company - This item is not applicable to the Company[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the Company's disclosure controls and procedures, confirming their effectiveness as of March 31, 2020, and reporting no material changes to internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=31&type=section&id=Disclosure%20Controls%20and%20Procedures) - The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported timely[176](index=176&type=chunk) - As of March 31, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[177](index=177&type=chunk) [Changes in Internal Control over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes to internal control over financial reporting during the three months ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[178](index=178&type=chunk) [Part II—Other Information](index=32&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings in the normal course of business but does not anticipate any material adverse effects on its financial position, results of operations, or cash flows from these matters - The Company is involved in various legal proceedings and other legal matters from time to time in the normal course of business[180](index=180&type=chunk) - The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations, or cash flows[180](index=180&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, primarily focusing on the adverse impact of the COVID-19 pandemic on the Company's financial condition, operations, and stock price, as well as risks related to NYSE listing compliance, dividend policy, credit agreement covenants, and goodwill impairment - The Company's financial condition and results of operations for fiscal 2020 and beyond have been and are expected to continue to be adversely affected by the COVID-19 pandemic[182](index=182&type=chunk) - Potential impacts of COVID-19 include decreased business spending, reduced demand for products and services, increased customer losses, collectability risks, reduced productivity from remote work, and potential impairment charges[183](index=183&type=chunk) - The market price of the Company's common stock is volatile and has been significantly impacted by factors such as the COVID-19 pandemic and general market fluctuations[185](index=185&type=chunk) - The Company received a notice from the NYSE on April 7, 2020, regarding non-compliance with listing standards due to its common stock price falling below **$1.00 per share** for **30 consecutive trading days**[186](index=186&type=chunk)[188](index=188&type=chunk) - The Company does not currently intend to declare additional quarterly dividends or make additional share repurchases due to the effects of the COVID-19 pandemic on its business[191](index=191&type=chunk) - A substantial and sustained downturn in operations due to the COVID-19 pandemic could lead to a breach of financial covenants (Total Leverage Ratio and Fixed Charge Coverage Ratio) under the Credit Agreement, potentially causing acceleration of outstanding debt[192](index=192&type=chunk) - While an interim goodwill impairment analysis as of March 31, 2020, resulted in no impairment, future impairment charges are possible if assumptions regarding future revenue or profitability are not achieved, especially given the ongoing impact of COVID-19[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's stock repurchase activities during March 2020, indicating purchases made under a publicly announced program Stock Repurchase Activity | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (1) | | :---------------------- | :----------------------------------- | :------------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------- | | March 1, 2020 - March 31, 2020 | 2,011 | $1.17 | 2,011 | 10,704 | | **Total** | **2,011** | | **2,011** | | - On May 1, 2019, the Company's Board of Directors approved a stock repurchase program authorizing the purchase of up to **$15.0 million** of outstanding common stock through March 31, 2021[195](index=195&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from executive officers and XBRL documents - The exhibits include certifications from the Principal Executive Officer (31.1, 32.1) and Principal Financial Officer (31.2, 32.2) pursuant to the Securities Exchange Act and Sarbanes-Oxley Act, along with various XBRL taxonomy documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[196](index=196&type=chunk)[199](index=199&type=chunk) [Signatures](index=35&type=section&id=Signatures) This section contains the signatures of the Chairman, President, Chief Executive Officer, and Chief Financial Officer, certifying the filing of the report - The report was signed on May 6, 2020, by Kumarakulasingam Suriyakumar (Chairman, President and Chief Executive Officer) and Jorge Avalos (Chief Financial Officer)[198](index=198&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________ Form 10-K _______________________________________ (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-32407 _______________________________________ ARC DO ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________ Form 10-Q _______________________________________ (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |------------------------------------------------------------------------------------------ ...