David Stickney - VP of Corporate Communications and IR Suri Suriyakumar - Chairman, President and CEO Dilo Wijesuriya - COO Jorge Avalos - CFO.

Brandon Dobell - William Blair Chris McGinnis - Sidoti & Company Glenn Primack - Advisory Research.

Good day and welcome to the ARC Document Solutions Third Quarter Earnings Report Conference Call. Today's conference is being recorded. At this time I'd like to the turn the conference over to Mr. David Stickney, Vice President of Corporate Communications and Investor Relations. Please go ahead sir..

Thank you Jessica, and welcome everyone. On the call with me today are Suri Suriyakumar, our Chairman, President and Chief Executive Officer; Dilo Wijesuriya, our Chief Operating Officer; and Jorge Avalos, our Chief Financial Officer.

Our third quarter financial results for 2015 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 Solution's website at ir.e-arc.com.

Please note that today's call will contain forward-looking statements that fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are only predictions based on information as of today November 4, 2015.

And actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. This call will also contain references to certain non-GAAP measures, which are reconciled in today’s press release and in our Form 8-K. filing.

I’ll now turn the call over to our Chairman, President and CEO, Suri Suriyakumar.

Suri?.

Thank you, David and good afternoon. As we noted in our press release earlier, the third quarter produced success in several areas. Each of which have a positive long-term effect of health and well-being.

First, sales of Archiving and Information Management or AIM as we call it, grew 44%, more than doubling the growth of 16% achieved in the second quarter. Based on the number and diversity of clients we’ve acquired with this service, we have currently struck a chord with regard to the management of company archives and legacy documents.

Second, we released a new SKYSITE, ARC mobile document and information management application for construction professionals. Interest in this application has been growing steadily since its introduction at the beginning of the year. Much of this interest has resulted in thoughtful feedback from our customers.

And SKYSITE Version 2 incorporated many of these features and functionality, general contractors and subcontractors provided. No other compelling product offers the utility, simplicity and mobility that SKYSITE now delivers to its users.

Third, evaluation allowances against certain deferred tax assets was reversed in the amount of $76 million in the third quarter thanks to the past three years of strong financial performance. I’ll let Jorge cover the details shortly.

While our successes in the period were gratifying, our sales were challenged by continuing delays in MPS implementation and further declines in large format black-and-white printing.

We expected MPS sales to moderate from our second quarter results, but with the lack of new contracts during third quarter, we produced sales in this revenue line that were lower than our estimates. Decline in large format black-and-white printing were also greater than we anticipated.

Offsetting these declines, areas where of growth was strong in AIM, the increasing use of our document management services, and healthy sales in color printing. All told, they produced net sales of $106 million for the quarter, essentially flat when compared to the third quarter of 2014.

In the light of these circumstances, we are revising our annual guidance in 2015, ARC’s fully diluted annual adjusted earnings per share outlook is now in the range of $0.33 to $0.36. Annual adjusted cash flow provided by operating activities is expected to be in the range of $58 million to $61 million.

And annual adjusted EBITDA is expected to be in the range of $70 million to $73 million. Sales for the periods were as follows. Revenue from Construction Document and Information Management Services or CDIM as we call it was $54.7 million, down $650,000 or about 1% relative to the third quarter last year.

Sales from Managed Print Services or MPS as we call it were $35.9 million, a decrease of roughly $540,000 or about 1% from last year's results. Our bright spot as I mentioned earlier was our sales performance in Archiving and Information Management services otherwise known as AIM.

This service line delivered $3.8 million or 44% increase over the third quarter of 2014. Equipment and supply sales were $12 million, down by less than $0.5 million or 3% year over year. Our end market still appears to be healthy and on a part of solid growth.

Rumblings in the market about an economic slowdown haven’t seen be shake developer’s confidence. The Fed's actions have been conservative, vacancy rates across all segments are coming down and employment in construction is remarkably high.

While we no longer enjoy the seemingly direct correlation between construction industry growth and sales growth in our previous printing business, I would argue the environmental is still enormously favorable to ARC. Our customers are exploring new ways to work both with technology and with their most important documents.

Standards are few and far between and the environment with regard to their adoption of new document workflow is rough and tumble. But no matter what our customers’ objectives are or how they choose to archive them, ARC can help them in ways no one else can.

Despite the small ups and downs, we’ve experienced since the recession, we have yet to come across any other company that offers the breath of product, service and experience that we provide to this enormous global market. While the current challenges demand our attention, our long-term focus is one of building this new company we have created.

Due to the foresight and efforts of the management team, the potential of this new company is enormous and we are excited. Our financial circumstances are outstanding, our capital structure is both robust and supportive of our operations and the company continues to generate very healthy cash flow.

With this in mind, I believe we have the time, the talent, and portfolio to archive our goals for sales growth and continuing profitability. At this point, I'll turn the call over to Dilo for a brief review of our operations for the period.

Dilo?.

Thank you, Suri. As many of you know our construction information management system category contains a number of different services which we offer to our design and construction customers. While net sales in this category feel slightly, we saw encouraging developments in its individual components.

Our technology document services, specifically our 3D rendering services and hyperlinking services have been in demand. Our cloud and mobile-based document management and information distribution platform SKYSITE is also showing sequential improvement.

The new version of the software was released in October and strengths the communication and distribution needs during the construction phase of a project. We currently have more than 300 paying customers. The new features we introduced last month have been greeted with enthusiasm and we look forward to continued growth in this area.

Color imaging also continues to grow incrementally with increasing work both inside and outside of the AEC market. We continue to be pleased at our ability to secure new and ongoing projects at this very competitive market.

In all, our performance in these two areas helped us to partially offset the 4% decline we experienced in project-related printing and distribution of large form and documents. Based on our research, project-related large format printing continues to drop across North America. Large format equipment manufacturers confirms the trend.

While ARC has been able to hold or improve market share, customer trends to produce print and move to technology solutions will continue to be a force to reckon with. MPS is a category where our sales are being affected the most. As many of you know, we require a new sales to keep growing in this area of our business.

After all, our value proposition to our customers is print optimization, cost savings and elimination of waste through the use of our technology tools in their print environment. Given the size of the customers we target for this segment, the delays we’ve experienced this year have had a larger than usual impact.

Had we been delayed one-on-one or even two accounts, we could have maintained our sales momentum for the year. But as we reported last quarter, having four accounts postpone implementations, contract signatures or both is challenging to overcome in the short-term.

That said, we were happy to renew a four-year agreement with HKS, a top hundred design firm headquartered in Dallas, Texas. And we also welcomed Chicago-based energy provider, Exelon to our MPS customer family in the third quarter. Year over year, we added more than 180 MPS contracts.

Archiving and Information Management grew significantly again in the third quarter as Suri mentioned. New business continued to come from a mix of clients such as school districts, city governments, design firms, medical facilities and municipalities.

Types of customers and types of jobs remain diverse and we continue to explore innovative ways to help our customers with their most challenging problems of searching and accessing their valuable information at any time on any device.

As a reminder, we aim in configuration from simple scanning services to the turnkey solution that includes our cloud-based storage and retrieval platform. Our offerings are far less expensive and easier to implement, relative to almost any customized archival solution and the growth opportunities are significant.

Equipment and supplies sales returned to a more normal pace in the third quarter, as sales decreased from unusual activity we saw in China in the second quarter. Demand in the third quarter was driven by more of a balance between US and Chinese sales. The development of our sales and marketing staff continues.

It has return some impressive results, as demonstrated by our AIM sales for the period and the interest we continue to generate in document management services inside CDIM. While sales decreases in MPS and the decline in traditional printing are making progress in other areas, we feel very confident about our solution and services.

With that as a summary of our operation in the quarter, I'll turn the call over to Jorge for a review of our financials.

Jorge?.

Thanks, Dilo. In our second quarter call, I outlined the primary drivers that produced strong cash generation and create the foundation on which ARC can grow in the future. These drivers included sales growth and gross margin expansion as well as discipline containment of our costs and ongoing reduction in interest expense.

While we were working hard to overcome the lag in consolidated sales, our margins remain consistent on a year-over-year basis and we continue to maintain our usual discipline over our costs.

With regards to reducing interest payments and overall debt, we had another very successful quarter, thanks to the 23% improvement in adjusted cash flow from operations, which allowed us to continue our aggressive pay down of our senior debt.

With these broad strokes as a backdrop, I'm going to focus on some of the details behind our third quarter performance. The continuing leveraged we applied to our labor and overhead costs and the strength of our cost controls produced gross profit of $35.9 million, which translates to a gross margin of 33.8%, essentially flat compared to 2014.

We expect a similar year-over-year comparison to continue for the remainder of the year. SG&A for the quarter decreased year-over-year by approximately $500,000, primarily due to the trade secret litigation costs we incurred in the third quarter of 2014.

The decrease was partially offset by continuing sales and marketing investments in support of our technology enabled offerings. Interest expense decreased by more than $2 million year over year, largely due to the refinancing of our previous term loan. We finished the third quarter with an effective interest rate of 2.6% on our new term loan facility.

Year to date, we have paid down $22 million in principal, nearly $11 million more than what was required. As you can see, our steady march towards a one-point times leverage ratio continues.

Cash taxes were minimal for the third quarter due to our cumulative net operating losses from previous years, which adds even more momentum to the generation of our cash. As I stated before, we expect this favorable tax environment to continue for several more years.

With the reversal of our valuation allowance, the use of our deferred tax assets will now be showing on our consolidated financial statements, thanks to the past three years of strong financial performance. The valuation allowance reversal is a non-cash transaction, but it does significantly affect the presentation of our financials.

You will see the impact on this $73 million income tax benefit reported on our Q3 statement of operation, which affects our net income and earnings per share dramatically. You also see a dramatic change to our balance sheet as it includes more than $70 million of deferred tax assets, which were previously netted against the valuation allowance.

With that said, we're still encouraging the use of a pro forma tax rate of 39.5% for the remainder of the year. Our adjusted earnings per share of $0.09 represents a significant year-over-year improvement over 2014, primarily due to a combination of steady sales and gross profit as well as the lower interest on the new term loan.

As I mentioned earlier, despite the moderation in our sales, adjusted cash flow from operations in the third quarter of 2015 was $21 million, a 23% increase from prior year. Our DSO was 55 days for the third quarter, compared to 54 days in the second quarter. The slight increase was due to the timing of sales and collections.

Our adjusted EBITDA of $17.9 million represents a slight decrease of 2% compared to 2014, reflecting the slight decrease in sales and gross margin, but was at a level that allowed us to continue to generate exceptional cash flows from operations.

For the full year, we’re still projecting consolidated sales growth, but we expect fourth quarter sales to continue to be challenged. Gross margin should remain steady and strong, culminating in our well-established trend and generating strong cash flows. At this point, I'll turn the call back to Suri.

Suri?.

Thank you, Jorge. Operator, we are ready for the questions..

Thank you. [Operator Instructions] And we’ll first go to Brandon Dobell from William Blair..

Thanks.

Focusing on the interplay between MPS and the P&L, I guess how long would it be or how long would it take for, let's call it, sluggish MPS results to start impacting how you guys think about sales and marketing spend? And maybe the other way to ask that question is, is there a scenario where MPS just kind of limps along in this, let’s call it, $35 million to $37 million quarterly revenue number for a handful of quarters.

So we get, let’s call it, a negative impact or a negative pressure on both gross and operating margins through the first part of ‘16 maybe.

Is that a scenario we should think about or is it - or are you pretty confident that some of these MPS deals that have been delayed are going to come back in and we start to see some leverage on some of the expenses?.

Right. So, Brandon, we basically, that's a hard part to exactly predict how it’s going to happen. Now, for example, we actually very well expected many of these contracts to be implemented.

And by the way, this has happened to us in the previous years as wells, where there is a lag because one or two or three companies called onto the implementation for a little while. And on the other hand, if two of them come together, then it's like the floodgates opening and then immediately, the numbers will change.

So, because these are larger companies, what affects our numbers at this level is the implementation of larger MPS contracts in global companies and often, they can get delayed because they had something else show up or they got caught up in a larger project or a new acquisition, all of those things are various scenarios that we are dealing with.

So we certainly expect next quarter, some of the contracts to be signed, but you could never guarantee and say that that's going to go away next quarter, maybe it will go into the second quarter, we don't know that, but we are working fast and furious on many of these contracts and working on new - several other new opportunities..

Okay. Looking back, I guess, since the second quarter of ‘14, the business has kind of bounced around, I don't know, 35 million, 36 million, 37 million bucks in revenue per quarter, and yet you guys have continued to add a pretty good number of clients.

So I'm trying to figure out how to reconcile the continued client growth with what it feels like a little bit of a sequentially flat revenues.

Is that because some of the contracts start at a certain dollar figure, then work their way down as you gain efficiencies or on a one-year renewal cycle, do the contracts have the risk of getting smaller? Again, because there are efficiencies, fewer devices, that kind of thing, or is there something else going on that’s kind of holding the revenue back on the existing base of contracts?.

Right. The way we are looking at it is our two large segments where we have revenues coming up, and that is large format black and white business, although we are getting new customers or the existing customers, they’re trending less.

We know that because that’s the trend, which is going on, and that's an ongoing trend because people are moving to use digital tools for the distribution of documents.

And then of course we talked about MPS very clearly saying how the MPS has, we actually build that efficiency for our customers, that's our promise, so we will know that's always there. However, the new clients are being acquired also, because Brandan, most of our new services are getting - becoming very attractive to many of other clients.

So customers are starting getting lot of new clients who are from information management, lot of new clients for SKYSITE and they will, when they start, when we cross-sell, those clients will start generating income.

So the short answer is, while the traditional business is soft, we are focused on building this new revenue models and all of the new areas we're looking at such as archival information management, all CDIM, we call it CDIM, what it is, it’s project related document management and distribution.

In that there are three or four segments which is SKYSITE sales, which is the software and then we have hyperlinking sales, which is the solution we provide and the VIM. All those areas have sequential growth and more customers.

So what’s happening is, like I said in my script, we are focused on building this - it’s almost a new company we are building, a new revenue model we are building and the traditional revenues are little sluggish at the moment.

When these new revenues start overtaking those drop in traditional revenues, then we will be on our way and our margins will be better too. That’s the focus right now.

We are not taking the foot off the gas of the new efforts we are doing while we know all the traditional areas such as the large format printing and some of the management services are having a little bit of lack..

Okay.

Maybe focusing on AIM for a second, any sense of kind of where or what contribution that segment is making to gross margin or operating profit margins? I would assume it’s on a gross margin basis profitable but probably not on an operating margin basis, so maybe the near term dynamics there around margins and how we should expect that to impact especially gross margin looking out the next year and year and a half..

Yeah, and regards to MPS, I mean, we are - our margins are in the range of 32% to 35% and we’ve actually seen steady progress towards that 35% and we anticipate that growing as we become more proficient on optimizing the customer’s network, it also makes us more efficient and hence generate some more profitability for us.

So we anticipate it staying in that range. So that is the MPS -.

Okay.

Yeah, on the AIM segment, how does that look?.

On the AIM segment, in regards to the AIM segment, our margins there are between 35% and 38% and like-wise they are not same business as we create AIM centers and drive more revenue to one location, we’ve also seen a steady increase going closer or moving towards that 38%.

So the more volume we get in, the more ability we have to generate more better margins off of that, just the economies of scale..

So, Brandon, in order to add to that if you take the AIM segment of the business, right now we have going into PDFs.

[ph] We started this AIM, complete archival information management only about a year ago or a year and a half ago now Jorge?.

Year and a half..

And we have grown, we are starting to see improvement in margins. And I expect this margin to continue to improve, because as we continue to gather more AIM customers, the business is largely front loaded with a lot of scanning business.

And once we scan them and have them in our cloud, then our annuity business which keeps coming repeat itself, the recurring annuity business with each of those customers are at a much different level. So if they had for example say 100,000 documents or a million documents and we scanned and uploaded them, there is a cost to that.

However, the revenue would be much lower once you finish all the scanning, but it will be at a much higher percentage rate, so we expect over a period of time, because this largely technology driven, the AIM business to continue to improve the margin. Right now it is between 35 and 38. We expect that to continue.

Like Jorge said, same way in MPS, that’s starting to go from 32% to 35%, that’s margins we haven’t seen before starting to come in. In CDIM, construction document management, that is where you have the SKYSITE component and you have the VIM component as a hyperlinking, we are right now having 37% to 40% margin.

They are again with the increase of technology services, increase of sales in SKYSITE we expect that margin to also start going up. So overall we are seeing the margin trend in the right direction.

Would you agree, Jorge?.

Yeah, I definitely agree and just to add on one other thing with the AIM and just to answer your specific question there, Brandon, I mean if our gross margins are between 35% and 38%, when we look at that there's no material costs involved in that. There's labor component, but the equipment, it’s fixed.

We have the same machines, they are the same scanners sort of a fixed cost, so you get more volume going in there, when you look at it from a contribution margin, that contribution margin is going to be well in excess of 40%, call it 60% plus for that reason.

Okay, does that make sense? Does that answer your question?.

Yeah, that makes sense. Yeah. And then Jorge final one for you. Capital lease obligations incurred in the quarter were I think down 40%, 50% and year-to-date obviously down as well.

I assume there is a number of things that are driving that, but how much of a predictor is I guess second and third quarter capital lease obligations coming down as much as they have for some part of the revenue line or are you shifting from using capital lease obligations to doing something else or is the business just not needing as many of those capital leases being set up now?.

It goes back to the conservation we were having earlier of the delays and lags in getting some of these big accounts signed and rolled out. So that’s really what is driving it there. Once you see the revenue growth come back in the NPS business, then you will see that number also increase..

Okay, got it. All right, thanks, guys..

All right, thank you..

Thank you..

We will now go to Chris McGinnis from Sidoti & Company..

Good afternoon. Thanks for taking my question..

Good afternoon..

Can you maybe just talk about - I know it’s early, but with the second version of the SKYSITE, maybe is there a greater rate of adoption that you are seeing or greater interest..

Definitely.

SKYSITE 2.0 has been really exciting, in fact it has been sort of anticipated and awaited ever since we released SKYSITE because even as we release the program SKYSITE we knew the other features will come along and we just didn’t want to delay the release because wanted customers to start using the product, sensing the product, know what it can do and so on and so forth.

So we knew well in advance when we released SKYSITE as a product, the 2.0 would have much better features and that’s exactly what happened.

Dilo, would you like to add some color to it?.

Absolutely. The 2.0 version is good shift for us because 2.0 features allow more contractors to participate in the project, right, because we make revenue by number of feeds or number of licenses customers buy for that project.

So unlike in the Version 1,Version 2 creates more opportunities for the contract team to come and collaborate on the same documents and information and the information is not one way, it’s going to - it’s two way, multiple ways of information flowing back between the architects, the owners, the contractor and the general contractor.

So more wider adoption of feed [ph] licenses will take place with 2.0.

Okay.

And then just on the confidence level that you sign these contracts that you are talking about in MPS, is there a risk that they are walking away, or is it really just you still feel comfortable to talk about that they should end up converting into revenue?.

Sorry, I didn’t quite follow that, Chris. Repeat that question again.

Are you talking about will they walk away from it, meaning you are talking about the renewal rates or what do you have in mind?.

No, on the MPS, on the contracts you are talking about that are just delayed in terms of its implementation..

Yeah, absolutely, okay. Yes, the usual challenge for large companies who are global in nature, when they start implementing an MPS program is to come to grips with the fact that they have to let all of these things handled by a single vendor, because usually large companies are buying these services from multiple vendors.

They might actually use one manufacturer, say, in San Francisco and use another manufacturer in Seattle and a completely different one in, say, for example Philadelphia or Washington DC or whatever that might be. So multiple vendors, so it is information or services is actually bought in those companies by multiple purchases.

So the print services might be bought by a print services person, but the paper and the toner might be bought by individual departments and the service contract and the IT services might be done by the IT division.

So what happens is when we actually put together a management services program, we incorporate the devices, we incorporate the paper, toner, we also incorporate the IT and the software network.

So three or four teams together in large companies have to work together to pull the trigger, so companies will operate it in a very traditional way as always found it difficult to bring this under one umbrella and that is the challenge we have faced in almost every large installation we have had.

And the ones who have done it have successfully reduced their cost and we have been able to prove to them. So these cases studies are the ones which allow us to actually show that to these newer companies that we can substantially save money, because your cost buried in different silos, Chris.

And that is something that is ongoing and when companies see the value, then they take a little while to actually then appoint the right person to say, okay, you take over this function and now buy all of these together. That’s what happens.

So it tends to take a little time, but my perspective is that eventually almost every company will go to a management services solution. There are people like not just ourselves, Xerox and Canon and HP and Konica Minolta and Ricoh Savin, all of them promote manage print services.

What we do is, we go two or these steps above that in addition to the standard managed print services program offered by the manufacturers, we also provide them offsite services, overflow services, IT services, because we have 200 locations onsite, we can actually give a higher level of service especially for the construction company.

So we are certain that this is not going to go away, instead it’s going to grow, but it’s just taking time..

All right, great.

And then Jorge, just one comment on the gross margin you said for the next quarter, be inline this quarter, is that what you said, was that the prior year?.

In-line with prior year fourth quarter..

Great. Thank you very much for the time..

We’ll now go to Glenn Primack from Advisory Research..

Hi, good afternoon. Did you talk about the maturation of the new sales people that I think you started hiring last year around this time, and how long have they productivity --..

Absolutely, Glenn. Yes, so that is something that we are continuing to work on. In fact, I just came back after meeting the sales team members in Chicago in your area, talked to them one on one, where exactly company is going, what we are doing, so that’s an ongoing transitioning of these sales force.

So the new people we have hired, a portion of them have continued to stay on and develop and some of them have left, so that’s a normal erosion that is nothing big on that. And we are continuing to hire new employees where we find the people on transition to technology solution sales as against the previous print sales.

The challenge we have or the opportunity we have is because we have 96,000 plus customers, how do we make sure we use those existing relationships to actually convert those customers to effectively use the technology solutions, that’s what we are dealing with. And the transition is taking a little time, like I said in my script.

While the traditional business is a little sluggish, I am not driving the sales people and saying go get more print business, just go get more print business because this is slipping.

We are avoiding our desire or our inclination to do that and we are saying, we know the traditional business has slipped and it’s going away anywhere, we know that, but drive our sales team and the marketing team towards transitioning them to selling the new product, which is more consultative, which is more solution oriented.

So the short answer is, the sales team is making the transition now and that’s part of our challenge in driving the sales force, in driving the organic growth..

Okay. And the six month period, nine month period, before a new sales person is able to - they cover, they are not pay for themselves..

So basically I would say - Dilo, would you say, 90 to 120 days or six months?.

I would say, close to about a six months..

Six months of --..

I mean, the first two, three months is to totally understand our workflow of the business and the customers’ workflow requirement. After that they are - they will be able to sell well.

And in a six months period time, I think we have our sales targets built in a way that a six months target, one year target and then they are after annually get to a certain number.

We expect a good sales executive to tackle the business, get to the first set of goals in six months, maybe next set by at the end of the year and transition into a higher portfolio of business thereafter..

Glenn, it seems one other additional comment I will give since you know the business, one of the challenges is that depending on what product this person is selling, certain products will come naturally and easily and some other products might be a little more complex.

And the element we have to also bear in mind is that as we transition this business, we also have to educate our customers.

For example, when we go to construction customer to a general contractor, we sometimes introduce this brand new concept of hyperlink, what is it and what does it do? And more often other contracts, wow, that makes it really easy for me, isn’t it? Yes, it does.

So one is educating our sales people and getting them up to speed, however, it’s not an automatic sale when they walk into a customer’s office, they got to actually work with the customer to show the benefits. So customer education is part of it as well because the industry is transitioning..

Okay.

And how many have you added net?.

Net in the sense, are you referring to a particular - are you thinking about MPS.

Of late for example, we had 180 new contracts for the quarter in MPS, or are you referring to SKYSITE or the sales people?.

Yeah, the sales people broken up by MPS, SKYSITE, AIM and Hyperlinking?.

So basically, we don’t break them down like that. Glenn, what we do is, between all of our sales people and all of the products and then we have what you refer to as business development executives for each of the products.

So we would have like for AIM, 10 or 12 different development executives, strategically placed across the country, so they can support their local sales teams, similarly for MPS and similarly for what you call archiving and information management and CDIM.

So doing that is our strategy in order to have business development executives services available to the sales rep, but to a general rep, we say - since you can sell all three products or all three solutions to the same customer that we expect our sales people to be proficient in all three of them..

Okay. And I am sure, Jorge is tracking all the stuff on a separate internal worksheet..

Definitely, we are always tracking what we are doing and getting an ROI in our own investments..

And then speaking of tracking, do you keep track of like the potential size of the backlog that considered as delays in MPS, but there - you have the best solution out there and there is companies that you have been working on for a while, so what’s the best-case, worst-case and just the size of the backlog not if it comes on through the archive printing presses..

Sure. I mean, obviously it’s hard, I wouldn’t predict any hard dollars on that, but the backlog is pretty good for us, Glenn in terms of like for example, AIM, like AIM is we had a backlog saying that these are the contracts we have already got, the customer is actually in the process of sending those boxes to us, we track that one.

And then one the MPS side, these are the potential customers in the pipeline.

Dilo, would you like to add?.

But Glenn, the backlog of services are very different to each of the individual services. So if you look at a management services segment, global customers when they sign up the backlog could be six months to nine months, could be an year, because depending on the number of locations.

When you sign up a local out of regional managed print services account, there is no backlog, you sign and you install within the next three to four weeks. When it comes to archival and information management, there is a backlog because customers give us large volumes of content to digitize and then upload into the cloud.

And the customers release us that content on a monthly basis or could be periodically and we clearly manage the backlog to make sure that our production centers are fed very, very clearly, very frequently it’s fed into the centers.

When it comes to CDIM project related, we don’t track the backlog, because - but you get people sending, send recurring business all the time for projects and so forth. So backlog really means to use much for global MPS as well as for archival work..

Okay, thanks.

But is it fair to say if I look at the Top 100 in that ENR Magazine, that given today’s market environment, it’s in their best interest to look for solutions that will make them more productive and save them money?.

Absolutely, I think we know we are very, very confident of our solution and what we can do for the customer, we are very, very bullish about that. Getting up - the first challenge is getting in front of the right buyer, the executive response of that firm to communicate that and the second challenge is to getting them to more away from status quo.

But those are the two primary challenges we have on the large MPS opportunities, but all the Top 400 customers in the ENR list, they have target, even at a global level or at regional level, they have a target and that’s where our 250 strong sales organizations continuously focusing on that customer base.

And many of those customers do business with us today, but they do it in different cities and they buy different services, not as a collective central one contract and that’s our goal, that’s our - the fish that we are going after of gaining them and bringing them to one centralized contract..

All right.

And then one last one, what’s your leverage ratio need to be at, I think you’re approaching that point in time as you look into next year where you can start using your cash to buy back stock versus paying down debt?.

Yeah, we are currently on our category map, leverage ratio of 2.5 allows us to buy back $8 million of total - not number of shares, absolute dollars of the shares worth. Once we drop down to 1.5 million - 1.5 times leverage that number expands to 25 million, now you could start talking about a more meaningful stock buyback.

So we are jugging along towards that, I mean, as I mentioned in the call, we are paying down the debt, we are doing all the necessary things to move in that direction..

All right, great. Well, I looking forward to you getting there 1.5 times..

So are we..

Thanks..

And it appears there are no further questions, I will turn the conference back over to David for any additional or closing remarks..

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