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

Christopher McGinnis - Sidoti & Company Aman Gulani - B. Riley & Company Bradley Safalow - PAA Research Glenn Primack - Promise Holdings.

Please standby, we are about to begin. Good day and welcome to the ARC Document Solutions' Second Quarter Earnings Report Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Stickney, Vice President of Investor Relations. Please go ahead, sir..

Thank you Don 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 second quarter results for 2017 were published earlier today in a press release.

The press release and other accompanying materials are available from our Investor Relations pages on ARC Document Solutions website at ir.e-arc.com. Please note that today's call will contain forward-looking statements 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, August 1, 2017 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 will now turn the call over to our Chairman, President and CEO, Suri Suriyakumar.

Suri?.

Thank you David and good afternoon everyone. We were gratified with our financial performance for the second quarter especially in the light of continuing headwinds in print sales and our ongoing transformation.

We moderated our sales declines with wins in CDIM and executed the plan we put in place to acquire more regional MPS accounts across the country. As we have discussed previously our technology offerings related to facilities, projects, and archives are generating excitement with our customers.

As noted in the press release we distributed earlier today, we generated nearly $4 million more in cash flow from operations in the first half of 2017 than we did in 2016. Our second quarter gross margin was nearly 34% and SG&A was essentially flat compared to 2016 even with all the investments in sales and marketing.

Over the past several years our overall strategy of continued focus on protecting our cash flows and aggressively reducing our debt has paid off. It has allowed us to renegotiate our debt agreement with our banks resulting in a more favorable and a more flexible capital structure for ARC.

Our previous agreements reflected a time when the company was working towards stabilizing its revenues after an extraordinary financial crisis. As many of you will recall during the recession we had little choice but to finance our needs through an expensive high yield bond due to the severe impact the downturn had on the construction industry.

Several years later as the markets recovered we were able to refinance to a Term B on and less than a year after that we were able to refinance again to a term A loan. Our recently completed amendment provides us with even better interest and amortization rate and more options for the use of our cash.

Today we have a proven track record in the strength and consistency of our cash flows and we have achieved the financial flexibility to continue our transformation by aggressively investing both in the growth of our market share in print and accelerating our revenues with our new technology offerings.

Overall the results for our second quarter are encouraging and as such we are maintaining our annual guidance for 2017 as follows; adjusted earnings per share $0.24 to $0.29, cash flow from operations of $49 million to $54 million, and EBITDA of $58 million to $63 million.

With that as an overview I’ll ask Dilo to provide a brief operational summary and then we'll wrap up our formal remarks with a review of finances with Jorge. Dilo..

Thank you, Suri. Our focus to acquire new customers continues to be our main objective. Many states have strong construction activity and as demonstrated by our sales performance in the second quarter we continue to win new customers for ARC Services.

When we win a new customer our goal is to expose and expand our sales by identifying other areas where our Services could add value in managing their projects. This includes our on-site and off-site offerings as well as technology.

For example several of our project customers who used us for print and document management turned to us for interior decor as the building finished, which added color imaging and finishing to the same account. ARC color services continued to be used by both AEC and non-AEC accounts to market their businesses during the period.

The investments we noted last quarter in upgrading our equipment and infrastructure are helping us to compete and win in a crowded marketplace.

Our existing MPS customers continue to print less in the offices but in the second quarter we added new local MPS locations in markets all around the country to help offset the declines from changing print practices and print optimization.

We have also been successful in securing new regional and larger MPS opportunities during the quarter and we see sustained interest in these services in every market. Our pipeline for AIM and facility Management Services continues to grow and we hope to convert many of these opportunities in the months to come.

Finally we launched a new release of SKYSITE during the second quarter, upgrading our infrastructure to a big data platform. This technology migration allows us to scale customers data efficiently and on the fly and compete aggressively for information management services related to construction.

With that as an operational backdrop I'll turn the call over to Jorge for a look at the numbers. Jorge..

Thanks Dilo. We've reduced declines in overall sales considerably in the second quarter. Sales were down 1.4% as compared to a 4.7% drop in the first quarter. Specific drivers of the improvement were the reduction in sales decline in CDIM.

They were down 2.1% as compared to being down 4.5% in the first quarter and 10.9% increase in equipment and supply sales that was driven by our China division. As a reminder for those of you building revenue models for the upcoming period, we will have one less business day in the third quarter as compared to the same period in 2016.

Gross margins of 33.7% for the quarter represented a year-over-year decline of 130 basis points. The decrease was primarily due to the dilutive impact on margins from the increase in low margin equipment sales. SG&A for the quarter was in line with our expectations at $25.6 million.

While we continued to invest in sales and marketing, we have been able to mitigate the increases in expenses by aggressively managing our costs in other areas. Keeping the company financially healthy during our transition remained a primary objective.

As evidenced by our strong cash flows which are nearly $2 million higher in the second quarter compared to last year and the amendment to our credit facility which improves our capital structure.

The credit agreement lowered an already low interest rate by 25 basis points, reduced the Term A loan to $60 million, and increased the revolving line of credit to $80 million. The balance of the outstanding debt under the credit facility remains unchanged at $110 million.

Required annual principal payments dropped from $17.5 million to $4.5 million, a reduction of $13 million. In keeping with our plan to keep the company financially healthy, in the short-term we will continue to delever by paying down debt at a level similar to prior years.

Although adjusted EBITDA dropped $1.2 million year-over-year as we pushed to resume our sales growth, we made significant progress towards our objectives and performed to our expectations for the period. At this point I will turn the call back to Suri.

Suri?.

Thank you, Jorge. Operator, at this time we are happy to take our listener's questions. .

[Operator Instructions]. And we will take our first question from Chris McGinnis with Sidoti & Company. .

Hi, good afternoon. Thanks for taking my questions, nice quarter. .

Sure Chris, thank you. .

So, I guess we can just -- can you just talk obviously CDIM is a little bit better this quarter than it has been and can you maybe just talk about the makeup of the sounds you're having, you have talked about a new SKYSITE platform or upgrade.

Can you just maybe talk about how the customer is taking the services now versus the legacy versus the new and what you're seeing with the newer technologies?.

Sure, so there are a bunch of questions here. I think they are just to -- overall in CDIM I can actually get Jorge to do a little more color inside CDIM which we refer to as construction document and information management Chris.

But, what we are basically doing is as we have been talking last quarter and the quarter before, we reconsidered our sales teams and invested in trying to also not just go after the technology sales but also accelerated the print related revenues. And those efforts are starting to show off.

What it is allowing us to do is really moderate the declines which is very good from our perspective because in spite of the headwinds we're still able to generate healthy margin and healthy cash flow. With regard to the platform itself and when I finish I will get Jorge to touch on the details on CDIM.

With regard to the platform itself it is largely not experienced by clients directly Chris.

What it is earlier we used to be on a Microsoft platform and our servers would be the SQL servers and what it simply meant is that every time we brought in additional new customers and expanded our revenues we would also -- our cost also would relatively go up.

Because that would simply mean we would have to continue to pay more license fees to Microsoft and for SQL servers and so on and so forth, that is one issue. Second thing is the speed with which we can scale.

So by moving to an open platform it's our own IP and therefore we are not indebted to anybody else for having that data managed on that platform. So we are now on big data platform and we do not actually have to pay license fee for others so that's a cost benefit.

The second benefit is that if we as planned bring more technology customers than we can scale them very comfortably without the loss off speed or efficiency on that platform.

So that’s the use of or that’s the benefit of shifting to a big data platform but however in order to do that you really have to be able to you know develop and nurture serious technology which our technology team is very capable of. So that’s what we were able to do last quarter. Jorge would you like to give a little color on the CDIM. .

Sure, with the CDIM how we were able to achieve the 2% decline with two ways we got there. One if you recall our historical traditional reaper graphics call it our large format blue printing was dropping at a rate of 4% to 5% and in some quarters even north of that 5%.

So with all the efforts we did, the investments we did in our print side of the solutions and focus on getting market share we were able to mitigate that decline to a little bit less than 4%. And as you know that makes up roughly or the traditional reaper graphics makes up roughly 50% of the CDIM revenue.

The other big chunk of the CDIM revenue is our color print. In regards to our color print we've talked about and Dilo mentioned a little bit as well in his script that we've been making a lot of investments on color equipment and focus on getting color work out there.

And we were very successful in the second quarter in garnishing net worth and we have actually seen a growth in our color revenue of a little bit over 2%.

So when you combine those two components, the moderation and the tradition reaper graphics, growth in the color printing that's how we're able to achieve the 2% decline as opposed to the roughly 5% decline we saw in the first quarter. .

Okay, thank you for that. That was really helpful.

And so I guess when thinking about the rest of the year, you think you could even see that rate kind of decline more in terms of as the sales force gets out, I think a little bit more experience under their hand -- under their belt, should that decline abate even more or do you think this a common new base line?.

So that is, what I would -- it's going to be a loaded question and its really loaded answer Chris depending on how we are looking at it. So fundamentally obviously we would like to think all the efforts we are making in order to gain market share or rather moderate the decline is working, definitely working.

But as you know when that happens one quarter we can’t claim it as a trend we got to be able to repeat it more and more. But there are multiple factors for it and against it. For it is that obviously sales teams are getting settled down, we have in a rhythm. We are continuing to drive that segment hard. So that's a positive.

So there is a chance that this plan can continue. What works against us is that remember Jorge said there is one less working day on the calendar that's number one. Number two, we are going into the softer segment of the year, right.

The second half of the year is traditionally softer than the first half of the year and especially the second quarter generally there has been exceptional years but generally second quarter is a strong quarter. We ourselves don't expect the third and the fourth quarter to be as strong.

Now therefore I'm not predicting that we won’t do as well as the second quarter because, ourselves in a rhythm and we’re definitely hoping that we’ll continue to perform like that. But it's likely that the second half will get moderated from where we are today from an overall perspective of the complete year.

Does it make sense?.

Yeah, it does make sense. I totally understand what you're saying. And I appreciate that.

I guess not to jump away but now I guess if we think about MPS, what's that, I am sorry?.

I just wanted to say one thing Chris, so just to put a little color to serious problems that we're going to have one less business day. From our standpoint one less business in the quarter equates to $1.5 million to $2 million. So when you apply that towards $100 million roughly for a quarter that could have an impact of about 1.5%.

So just wanted to give that to you so you could kind of quantify that number. Sorry, go ahead with your next question. .

I was going to go on with those questions but I will now just stay on that for a minute or two.

Yeah, I was thinking traditionally it's about 2% I guess is what…?.

Yeah, 1.5% to 2%. .

That is just exactly the right way to look at it. .

And so I was thinking I guess for the remaining guidance for the year, I guess that range of roughly was it $0.12 to $0.15 or $0.12 to $0.17, you know, you could give guidance.

I guess you're thinking that tomorrow probably Q4 than Q3 weighted I guess, is that correct?.

Right. .

Okay, I appreciate that. And last question and I'll jump back in the queue, I just wanted to ask about MPS, it sounds like it was a little bit stronger than you may be expected and you talked about some maybe some bigger deals.

Can you just elaborate on that a little bit?.

Sure, I mean fundamentally this is the impact of our drive to accelerate the sales. We are on the print side we are putting a little more effort in terms of marketing, getting the sales people out there, letting our presence know. So, we are not taking the foot off the print side of the business because we are still the largest play in this space.

So, by focusing on that segment some segments like that can go out. MPS largely Chris is dominated by the small format which also shrinks very fast because as you would know from your own personal experience how much of paper you use today as against what you did three years ago or five years ago, right. So, that acceleration continues to occur.

But what we're able to do is to get more new customers. This is why we were talking about the gaining market share. By acquiring new customers we are able to moderate that shrinkage allowing us to actually grow that business. So there are two to three elements. One segment of the business is small customers in multiple locations.

We have one or two or three machines, that is the large majority of our customers regionally and divisionally. Divisionally and locally and then regional customers is what Dilo was finding out in his script where we have started going after some regional customers and we have had some wins.

So the combination of regional customers and the small customers is allowing us to show a little pop on that. But we got to continue to stay on that, that is the challenge. Because it's a shrinking market and you continue to take market share in order to offset that shrinkage. .

Okay, appreciate that. I'll jump back in queue. Thank you very much. .

Okay, thank you. .

We will go next to Aman Gulani with B. Riley & Company..

Hey guys. Congratulations on the quarter. .

Thank you. .

On your new credit facility, you amended it, you got a lower interest rate now, and you also have more flexibility around the use of excess cash.

Do you see maybe repurchasing shares this year?.

So, we -- that is not our primary motive to do this Aman. The whole idea is that when we renegotiated this, we were trying to kind of be a little more clearing our script. When we originally did our bank agreements, this is I am talking post downturn, immediately after the downturn. Obviously we had a high yield.

And when we put together our bank agreement, the banks were concerned this is a construction industry. Yes, we know you guys are a great company, you have good management and you generate good cash but you are in the construction industry.

So we had to give them comfort and in showing them we can still generate that amount of cash and pay this debt down. Now under Term A or a Term B and these really don't have to be under a high yield which is as you know it's extraordinarily expensive.

So our first effort is to go to Term B and very quickly we’ve showed them how strong our cash flow is when we went to Term B. And those conditions which we negotiated were strictly to give us a chance to prove that we are capable of servicing that debt.

Which we did and before even in the year, right Jorge, is it less than a year, we renegotiated and because we aggressively paid down the debt and we said we be told you so and we deliver the goods and renegotiated to a Term A at a significantly lower interest rate. However the conditions were still same.

They had tight conditions on us with regard to where we can invest, when we can invest, and the use of cash, there were restrictions on that. So what we did this time is when we renegotiated we said that phase is over.

Our debt has significantly come down, our cash flows are continuing to be strong therefore we want to renegotiate this debt so that it will allow us to actually if we had a very large client or a very large opportunity whether in print or whether in technology we want to be able to invest.

For example in the first half of the year I think it was almost $5 million that we invested in equipment right, Jorge? Now we may not be doing that every quarter but when we wanted we should be able to quickly have access to the cash to be able to make those investments whatever they maybe.

So what we did is, we went and renegotiated our conditions so that we don't have ugly covenants hanging on our head when we are thinking about transforming the business than building the business. So the transformation stage as you know Aman is hard because of the shrinking revenues and we’re trying to build a technology revenues.

So during this time when we are investing we really need to have the flexibility, that’s what we were able to accomplish. With regard to a share purchase repurchase itself you know we’ve always maintained it's going to be based on the best ROI.

I mean if we have the ability to invest would it be best in investing in future technology or confusing this morning to print technology or is it better to buy the stock back. And time and again it has shown buying the stock back at this point of time may not be the best investment for us.

So that's not what we have predominantly in mind although if conditions change we will still do that..

Yes, okay makes sense. Okay and I guess turning to MPS you added 590 locations in the quarter.

I mean when you look at in the sense of hike how many locations do you need to add in the quarter for revenue to maybe be flat as opposed to declining?.

Dilo you want to answer that. .

So 590 deals that we have by choice year-over-year for the quarter and our goal is to double it because we want to add about 1000 new installation each year that's our immediate goal the management team has.

And sometimes it's not the number of deals that helps in getting MPS to a breakeven point of the growth area, it’s the size of the customer as well right. We haven't had a good breakthrough in some of our global type of customers and we are getting traction, we are some of the hard work we put in the last 18 months are paying off.

Many of the customers are continuing to speak to us, negotiate with us different types of solutions for it may not be global It could be regionally and then off once even a regional project our goal is to somehow take it national and then to globally as well.

So there are multitude of things that we need to do to get to a growth area and I feel very confident that as team we are focused on those initiatives and hopefully someday some quarters down the line we can show you the growth..

Okay, thanks for that. That’s all the questions I had..

Sorry, it's very good one more point to add is that I think the point Dilo was saying is that there are -- it's not -- because the number of installations is not necessarily the deciding factor because they don't always necessarily generate the same amount of revenue depending on the customer.

So some one customer might have 15 output devices while the other customer might have three output devices. So the way we actually judge that is to how much revenue each customer is generating and like Dilo said larger customers will generate much larger revenue which will allow us to actually offset those numbers. .

Got it, okay. Thanks for that color. .

We will take our next question from Brad Safalow with PAA Research..

Hey guys, thanks for taking my question. I just want to go back to the question of capital allocation, you made a statement you plan to continue to reduce debt at the same pace.

Can you just clarify exactly what you mean by that?.

Yeah, so the opportunity we have is that we still have 110 million in debt and we will continue to pay debt down so that we will have the ability to have that extract cash in hand in case we needed to invest. Obviously at some stage in 2018 or 2019 if we keep this space up we will have the chance to extinguish the debt.

I am not saying it was paid down to zero but for now our strategy is with the excess cash we have, we continue to pay the debt so we can create this cushion and keep a revolver we have to be substantially psyched. So if we had an opportunity to invest in one of the areas which will allow us to actually grow the sale we want to be able to do that.

Jorge would you like to add to that. .

Yeah I mean and kind of to add a little more color to what Suri said. We have been paying down anywhere between 5 million to 8 million a quarter in debt and we plan to stay in that realm as we move forward for the next few quarters and back to service point.

But the new credit facility really allows us to do since now the bigger chunk of the credit facility is in the revolver so now when we pay down the debt we will pay it down through revolver. Now circling back to Suri's point, the capacity is still there.

The dry powder is still there as we pay it down it's not going away as opposed to when you have a Term A law you pay it down. That money's gone there at that point, you can't grab it back. So we thought it would be prudent to continue to do, likewise keeping our leverage ratio which were roughly at 2.4 leverage ratio.

We think optimal for us is to get under a 2 leverage ratio as I made in my comments. One of our primary goals is to ensure we maintain the financial health of the company and we think that would be a prudent thing for us to do here in the short-term.

So if you think about it Brad when we refinance now your 80 million actually in the revolver and 60 million is our Term A. And what we want to do is we want to keep that revolver as flexible as we can. So, if he had to draw $10 million, $15 million, and $20 million we will have no trouble growing.

So, the short-term strategy at least in the next two, three, four, five quarter is for us to continue to pay down the debt, create that elbow room, really take advantage of the structure we put in place. We had a specific plan as to how we think about that and we're happy that we can execute on that..

So, just to clarify, I guess I was reading between the lines on the credit agreement and press release that maybe your concerning acquisitions more actively than you had in let's say the last nearly five years, is that not the case?.

Not really because, I mean there are two ways to think about that Brad. We have the one segment of the business is print related, the other segment is technology related. We don't think it's prudent to acquire a print related business at this point of time.

Because the print related business itself is changing very fast and we have significantly modernized and optimized our print related business. Any other business which may come up for sale is often retained with all the challenges we went through two to three years ago. We don’t want to acquire those assets and struggle with it.

So, in actual what I'm saying is if we just bought a business which is -- which has finally and in revenues likely by the time we clean up it will be $3 million. And so, for us it really doesn't make any sense to buy print related business. We have actually couldn’t infuse more technology into our customers and how we serve the customers.

So, they are not saying absolute no, who knows what will come up in the horizon. But we don’t certainly see that coming up in the print related business. As for the technology side acquisition, as you know technology company acquisitions can be very expensive and we're not good at this in point to make technology acquisitions.

We have been building our technology. But what is most important is that if indeed we feel there is a compelling opportunity and we needed to build an infrastructure to go after that, we want to be able to spend that money or invest that money in a large archival client or in a large MPS client without having restrictions on our bank agreement..

Okay, put me in the camp that I don't mind if you and I'm a shareholder, don’t mind that you pursue acquisition obviously at reasonable multiples. I'd much prefer you did that than buy back stock which for businesses that faced kind of secular challenges that you guys have, shareholder value destruction comes in the form of share buyback.

So I want to see you guys which sounds like you are going to get on the pathway of if you’re going to invest, investment is sustainable revenue and EBITDA.

With that my one last question, can you give me any sort of update on SKYSITE, I know you just -- you talked about what you did on the backend, really more on the client side if there is anything you can talk about in terms of momentum, how you are thinking about where the trials, subscriptions things like that and I'll turn it over, thank You?.

Sure, the idea in SKYSITE is you built a very strong platform and it's fundamentally a platform which allows us to distribute customers document and information to facilitate communication that’s what we think about that platform, right. It's fundamentally a platform to distribute documents and information to facilitate communication.

That's what we did with paper. We just used paper as the medium now we're using cloud and mobile access as a medium. But using that platform Brad we can actually address three different segments in our customer space, right. We can not only address the projects space but we can also address the build space in the construction world.

So we have the three segments being projects. So SKYSITE can be used for projects, SKYSITE can be used for facilities, and SKYSITE also can be used for archives. So our focus now is to be able to you know get the product to be used in different areas.

We're working on projects, we're working on facilities, and we're working on archives, all three of them. But our main focus is could we get into more facilities because that is the space which is the largest in the construction arena, right. Because there is more built space than the space we are building right now.

So while we are addressing the new projects and while we are addressing the archives, one of our focuses is trying to build the revenues from the built space which is facilities. And it is very exciting for us because all of our new efforts is starting to show results. We have good customer excitement.

Customers like what we have and relatively it's a new space for us and we're very excited about it and that's the one we're saying look we need 18 to 36 months really to fine tune this, get into a rhythm of really capturing that market share..

We’re taking our next question from Glenn Primack with Promise Holdings. .

Hi team, how is it going?.

Good, very good Glenn..

How does ARC on the technology side like compare and contrast drop box which affects some of your customers use?.

Alright, so at the initial stages Glenn, Drop Box was very popular especially going back if you just went back 36 months to 48 months. It was new, it was heavily promoted and marketed, it was marketed as a free tool so a lot of people got on to Drop Box and Box.

As a tool to actually move files around but as the construction space becomes more mature in using technology. And as you know it's plays very well. We are -- it's a legacy space but they are getting very comfortable with the technology.

They are realizing both Drop Box and Box do not have the ability to really meet their requirements if they wanted to mark the document or if they wanted to you know do some audio files which is called requests for information. If they wanted to store an attack photographs as we can do certain projects.

There are a lot of things especially when the use of large form of drawings is becoming very uncomfortable. Can they load 50,000 drawings in a Box or in a space and keep the data there, sure they can.

Can they sort it out, can they search it, can they have the same kind of structure we have, specifically separated as mechanical, electrical, plumbing and the various disciplines in the construction space, they don't have that.

So as a result you know my view is over a period of time the use of Box and Drop Box for the construction space will continue to shrink as more players in this space start coming out with solutions for the construction space specifically designed for the space given the size of the space. .

Okay, great. I mentioned it because I think at some point they're going to probably become public with a big banker behind them and I'm sure they'll probably talk about construction as an area.

California are you still like 30 percentish plus revenue coming out of the state?.

Yes, it is still your major dominant area for the user technology is heavy in this side, absolutely it is still the case. .

And if you had like put your finger in there in terms of business conditions and your market is a green, yellow, or red?.

I would say it’s looking more greenish you know than yellow..

Just the numbers that we see that are out on like for projects and stuff and seem like its greenish?.

Yes. I would agree. That’s a good assessment Glenn. Definitely there is growth all over the place which is offset by this shrinking paper and the use of technology. And the use of technology is very -- it's not consistent across the constructions space. They're using multiple tools, they're getting comfortable with the technology.

There is no specific technology completely dominant in the space. There are a lot of moving parts in this space.

It’s an evolving space but one thing I can assure you though and you probably notice then from your perspective is that there's a lot more players whether it is venture capital, banks or private equity focusing on the construction space, knowing and understanding the depth of this and the breadth of this space. .

Sure, but they don’t serve us like you do. .

Yes, and that's our hope that we would be the player who can actually drive this market given our domain knowledge and history in the space. .

So it’s pretty good that it's green today at the same time that you think you're doing a good job of recovering market share?.

Absolutely, we feel good about what we're doing. We are challenged because of the challenging business environment. Because of the obvious reasons because technologies are reducing paper. People want to be green, people want to be environmentally responsible, so that’s another ramie [ph] against us.

So there are multiple reasons why there is shrinkage understandably so. But knowing that and going after and increasing our market share is our strategy so that we can actually really moderate the declines in our revenue.

And who knows if you continue to stay on this path we might actually even breakeven in terms of how much business we are gaining as against what we are losing. In the meantime our technology efforts have not slowed down. We’re continuing to focus on the technology.

So when you start seeing growth on that segment and that’s the one we’re saying transformation time, we need time then I think you'll be in a good place. .

And your competitors on that traditional, is it safe to say they're getting weaker, because they are not as weak as they were?.

I would say yeah, they're not as big and in terms of saying weaker what it is they're probably relatively speaking maybe weaker.

They're not getting weaker but they are not actually making the improvements and the advancements that they need to make in order to keep that space modernized because customers habits and behaviors are significantly changing. Even when they order print it's very different the way they ordered and used print five years ago. .

Okay and then traditional business, are more customers coming to you saying hey, you know what, what the heck and why don't I print this off in color and you can give me the wiring in red and the plumbing in blue, is that I think?.

Sure, that is definitely the case. In fact one of the reasons our black and white is also taking a bigger beating is we're finding a segment of the customers are saying color is so cheap, we may ask to print the same color.

And that's happening all over and there's no such thing as a small format black and white printer anymore as you know every printer can do all the colors, that the market is just affording. .

So when you're talking color you're not just talking riot, you're talking a big architectural firm that's looking at a project and say, you know what let's do this in color and this you can deliver -- okay..

Yeah, pretty much. .

And your customers, that black and white is like kind of a whammy, your customers aren't giving you any whammy, just looking at the website and seeing the reviews that you have over there?.

Yes, I mean if you notice that something that [Indiscernible] started and this is clearly again showing the trend of we are saying even on the print side we’re using social marketing and their marketing to be able to engage our customers and talk with them.

And you are saying that -- I mean it's hard to find a three star in terms of review on that site and we get them week after week after week and we get nothing but absolute kudos about how good the service is and is allowing us and other customers are seeing that and we're getting greater traction of customers using our web presence to actually reach out to us which is good news for us I mean those are things we have in this one.

Dilo do you agree.

And that's a strategy that we put together last probably a year, year and a half ago is to empower every employee at ARC to give great exceptional customer service and retain those customers and grow the business within the same customers. So that's a part of when we talked about growing market share in the print industry.

Yes we can grow market share because we have good equipment, good quality services and so forth. But nothing like the relationships our employees at every level can build with the local employees, with the local customers. That empowerment is the one that is helping us to keep the customers and get the repeat business and sell additional services.

So that's part of our strategy to build market share is to protect what we have and grow into new customers and exceptional customers service is what we are focusing around the country by all our employees..

Super and on MPS, Suriya you're going to also like the top 50 top 100 at all that is in those E&R list and making calls are…?.

Sure, constantly there is something that we're doing constantly Glenn but having said that, that appears as you know and you can track there is so much turmoil going on, there is so much consolidation going there.

No, but I think since you are the guy in there that that's probably placing your favor for the most part.

Occasionally there might be a consolidation where you don’t win but I'm guessing more often than not that probably helps you out?.

Absolutely and that is our hope. Actually track record clearly shows that we as a company can consistently perform at that level and that's where we have the reviews and the references we get are very, very good.

And we’re seeing signs of that companies coming to us and saying okay, we really want to -- we wanted to make a change and we didn’t get a chance to do it. We were reluctant but now we think we should do it. So yeah, our hope is that it will continue to add more momentum to our efforts to gain market share Glenn. .

Okay and the tech group, how are you measuring like success over there?.

So, it's too early. Right now we’ve formed the team, we have put the processes in place. It's a very different ballgame so you know we have a group of people trying to monitor that and establish how that moves along.

So that is a very early stage in terms of really being able to talk about it Glenn but we will do so more and more in the coming quarters as we gain a little more traction. .

Okay, but you have to have internally some sort of goal, you don’t have to share it but, you have one. And so if we want to [Multiple Speakers]. Yes I know because I’ve heard the stories about counting the rubber bands and stuff over there. So, I'm like I'm comfortable with you guys and the cash.

In terms of allocation I get more comfortable if I know that if you're going to put something X. Factor with the other guy if you get an opportunity to build sustainable revenue on EBITDA.

That's great as long as what that return profile is there as well?.

That's the transformation we are talking about. We are excited about it. We can't talk about it yet, we don’t know enough to talk about it. That is the unchartered waters we are in. We are hoping sooner than later we will be able to talk about it. .

I hope, more sooner. Last one on the use of cash.

I know that the debt pay down you have done it you've got like if there's opportunities on an archival cause that's a little bit more cash upfront right?.

Yeah depending on the customer and what kind of customer. .

Depending on the customer. And then the same thing with MPS and if you are out like whale hunting within that E&R that's cross, and that's like I like that use of cash. But man, the stock here is like around 350.

I think you and I agree that it's probably worth a lot more? So if you could allocate a little bit of that free cash towards like total stock buyback -- I would still do something for that to assist that seems given what you have done to try to steer the Arc ship in the right kind of green, you might as well put some more green into your pocket, because every share you buyback is going to be worth more to you guys given I think you probably own more than me.

I am just thinking about you..

Thank you for that advice. As you know I always listen to you guys, my investors and point goes noted, thank you. .

Hey, I appreciate your time and good luck. .

Thank you. .

There are no additional questions at this time. So I'll turn the conference to David Stickney for any additional or closing remarks..

Thanks very much ladies and gentlemen for your attention this evening. We appreciate your support of ARC Document Solutions and we look forward to talking with you next quarter. Take care, bye-bye. .

This does conclude today's conference. Thank you for your participation. You may now disconnect..