ARC Document Solutions, Inc. (ARC) CEO K. Suriyakumar on Q2 2019 - Earnings Call Transcript

Aug. 10, 2019 1:32 AM ETARC Document Solutions, Inc. (ARC)
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ARC Document Solutions, Inc. (NYSE:ARC) Q2 2019 Results Earnings Conference Call August 6, 2019 5:00 PM ET

Company Participants

David Stickney - VP of IR

K. Suriyakumar - Chairman, President and CEO

Dilantha Wijesuriya - COO

Jorge Avalos - CFO

Conference Call Participants

Alan Weber - Robotti Advisors

Brad Safalow - PAA Research

Operator

Good afternoon. My name is Bonita, and I will be your conference operator today. At this time, I would like to welcome everyone to the ARC Q2 2019 Earnings Report. [Operator Instructions] Thank you.

I would now like to turn the call over to David Stickney, Vice President of Investor Relations. Sir, please go ahead.

David Stickney

Thank you, Bonita, and welcome, everyone. On the call with me 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 2019 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 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 6, 2019, 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.

K. Suriyakumar

Thank you, David, and good afternoon, everyone.

With softness in the markets across-the-board, a slowing trend in housing and declines in the latest Architectural Billing Index, it wasn't surprising that the second quarter challenged ARC's forecast for 2019. Revenue performance was also affected by a significant drop in international equipment and supplies sales, which accounted for half of our overall decline.

While many of our new initiatives are producing positive results, the ongoing erosion in print volumes is affecting our ability to sustain growth. The erosion in print revenues has multiple factors to it. First, technology as we know is reducing print volumes.

Second, our customer sensitivity to environmental issues encourages alternatives to print. Third, the industry consolidation appends procurement and administration practices. Fourth, of course, our customers are always trying to reduce the cost of print.

We have seen these trends affecting us for some time but they're becoming harder to predict as the impact of one of them often exaggerates the other. For example, while the technology has always been about creating greater efficiencies, today, it is - not only disrupts workflows but it also changes customer's behavior, encourages them to aggressively focus on sustainability goals, all at the same time. Factors like this create a constantly changing sales environment and continue to move the industry away from traditional uses of print.

ARC has always adapted to change in the market to protect its cash flows and its profitability. This is amply demonstrated by our performance in the second quarter. But as I have pointed out, the industry is going through yet another change, and we must re-examine our assumptions and our value to our customers in the context - in this context.

Having reviewed ARC's results for the past 6 months, we believe it's time for us to critically examine and reevaluate the products and services we offer. The company has always provided an area of offering to the industry.

But going forward, we need to focus our sales team on business lines where we can sustain or grow our market share, build new ways to better forecast the needs of the industry and identify the opportunities for ARC.

For now, based on the company's performance to date, we are updating our annual forecast for 2019. We anticipate earnings per share to be in the range of $0.14 to $0.18. We expect annual cash provided by operating activities to be in the range of $45 million to $50 million, and annual adjusted EBITDA should be in the range of $49 million to $54 million.

At this point, Dilo will provide an operational overview of the second quarter, followed by a brief financial update from Jorge. And then we'll provide some time for Q&A. Dilo?

Dilantha Wijesuriya

Thank you, Suri.

The second quarter was challenging for most of the revenue line. Color services and customer on-site print services were down during the quarter. Print services for construction documents were stable as our sales teams acquired more construction sites as customers.

Our sales teams have also been able to win construction-related technology services, such as Hyperlinking, BIM and drone services. However, the revenue we generate from these services hasn't been able to overcome the reduction in print revenue from declining print volumes.

While overall color work was soft in the quarter, quick digital color printing is a growing market segment. Most customers are marketing their services digitally as well as using traditional printing of brochures and marketing collateral to advertise their services. ARC service centers and our quick-print capabilities are well placed to address this market.

Our sales team are fostering these opportunities, and we feel that we can grow our sales by focusing in this segment. Large format color services, including WallArt, is also helping us to diversify our print services.

In the coming weeks, we are launching a green initiative and partnering with our customers to participate in reforestation program. As Suri mentioned earlier, most of our customers are very passionate about environment and their use of paper.

While businesses still have a need to print, our program, in collaboration with the nonprofit One Tree Planted organization, is giving back to the environment by replenishing trees that are taken down to make paper for print.

Our global MPS team has been successful this year in adding new customers to our portfolio. However, the successes are not reflected in our top line due to the overall shrinkage of print. As Suri mentioned, we are critically examining all the services we offer our customers. We plan to focus on offering what our customers need, where we have a strong opportunity to grow market share and where we have internal production capabilities to deliver high-quality product.

With that as a backdrop for operation, I'll turn the call over to Jorge. Jorge?

Jorge Avalos

Thanks Dilo.

Overall sales for the quarter declined 5.1% year-over-year for reasons that were outlined earlier, including the significant drop in international equipment and supplies sales. While this business is not strategic for us and very low margin, it accounted for half of our sales drop during the quarter. Declines were partially offset by double-digit growth in AIM.

A drop of just 20 basis points in our gross margin demonstrates the strength of our cost control, especially when compared to the drop in second quarter sales. SG&A for the second quarter dropped by $300,000 as medical cost stabilized but they still remain higher than usual and are likely to remain so throughout the end of the year.

We also felt year-over-year pressure from base salary increases effective in the second quarter. This was the result of our 2018 compensation plan designed to support employee retention.

Adjusted EBITDA was down $1.7 million due to the drop in sales. At $60.3 million, cash flow from operations came in lower year-over-year due to the timing of payables but still produced a healthy double-digit cash flow yield.

We ended the second quarter with nearly $22 million in cash on the balance sheet and paid down our senior debt by another $5 million, thus reducing our leverage ratio, net of cash, to under 2x. We also used a portion of our excess cash to repurchase approximately 350,000 shares during the quarter.

I'll close with a few reminders for those of you who are new to us for developing your forecast. Our effective tax rate will be approximately 30% for the year as a result of the new tax law. Our historical operating losses of nearly $80 million remain at our disposal, and we'll keep our cash taxes well under $1 million for the foreseeable future.

In the last quarter financial statements, you'll see a gross-up on our balance sheet of approximately $50 million as a result of the new accounting guidance for operating leases. This new guidance had no material impact to the income statement or cash flow.

With that, I'll turn the call back to Suri. Suri?

K. Suriyakumar

Thank you, Jorge. Operator, at this time, we're available to take our listeners' questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question is from the line of Alan Weber with Robotti Advisors.

Alan Weber

I guess the first question is regarding the buyback. What is your kind of general thoughts now?

K. Suriyakumar

You're talking about the share buyback, Alan?

Alan Weber

Yes.

K. Suriyakumar

Yes. I mean so we - I think we did say in the last quarter that we are planning to - we got Board approval for share buyback.

Jorge Avalos

We got a share buyback approval up to $50 million.

K. Suriyakumar

$50 million.

Jorge Avalos

Over the next two years. We were out of - we're buying them in the open market to the extent we can. Obviously, the volume on our shares isn't that great. So we bought as much as we could, and we felt good about what we were able to get. Going forward, we'll think about some of the similar strategy and be opportunistic.

Alan Weber

And then I guess in the past, can you just talk about, as printing contracts, kind of why haven't we seen or maybe have seen more of your competitors go out of business? Or what really is taking place there?

K. Suriyakumar

Yes. So obviously, in that space, Alan, there aren't other public companies who primarily focus on reprography, which is construction-related printing. There are a lot of people who do construction-related printing, lot of the copy bureaus, smaller construction, what do you call it, smaller printing company.

Now obviously, there are still hundreds. There used to be thousands of what you referred to as reprographic companies once upon a time during the heyday. But now we have much, much less competitors. They are also mostly small family-owned companies many of them, many of them - I mean there are few exceptions. But none as large as we are. So there is no comparison, and you don't get to hear of them. But many of them have folded up, closed down or consolidated. That is the truth.

But there are lot of small competitors though, which are basically print bureaus or what you refer to as corner print shops. They are fairly hard to compete with. They are local shops.

Alan Weber

And just my final question is when you talk about the decline in print, is there a way that you can quantify what you think the volumes are among the different categories?

K. Suriyakumar

We've been trying to think about how we can even put our arms around it. That's a very difficult thing to do. I tell you why. So there is certain amount of erosion which takes place, for example, in the small format black and white. That's just - think about people like you and me using less print, using mobile devices or iPads or using computers to review documents. That's against printing, right? So that part is there. But what happens is - so that's on the small format black and white.

But then if you take the large format, that's a different story. That's now - you're talking about construction companies moving on to the use of SaaS or web to distribute documents. So that's at a different rate.

Now having said that, it's hard for us to judge the rate. For one, it varies from region to region and that there is no consistent way of adoption. Technology is not adoption in a consistent way. On top of that, Alan, now if we have a good two months, let's say, in San Francisco and it so happens that particular - those particular projects use more paper because some general contractors use more paper than the others.

So can you see the variations depending on the contractors, depending on type of the projects, depending on the geography of the region? The slide is not consistent across-the-board. It's very, very, vary.

So even if we track single markets, one month, it's 2%; next month, it might be 4%; and next month, it might be flat. So it's all over the map depending on what the market conditions are and how much business we get, like for example, if you got more market share that quarter, probably the erosion is hard to calculate.

So that's - I think it's a bit of long answer. But the point is it's hard to put your arms around it specifically. But in general, when we look at print volumes, literally every customer we have, if you take what they do the next year, they print less. So that we know for sure print volumes are declining. The way we're offsetting that is acquiring new customers.

Alan Weber

My final question is you give - you have kind of an estimate for cash flow. Can you just talk about what you expect for the balance of the year or for the year in terms of capital spending and capital leases?

K. Suriyakumar

Sure. Jorge?

Jorge Avalos

I think it'll be at the similar rate the you saw on the second quarter, which was a bit of a drop from the first quarter. But I would think that's a rough justice for forecasting purposes or use that as a gauge for the balance of the year.

Operator

Your next question is from the line of [Ben Andrews] from Andrews Capital Management.

Unidentified Analyst

Suri, I was having a little hard time hearing you in your conclusion, and maybe you can drill down and give me some more color into it. It sounded like you're going to examine these businesses again, and you're going to look for ways to grow them. Or can you just give me more color on what you're trying to do here?

K. Suriyakumar

Sure thing. Absolutely. Ben, can you hear me better now? I just moved the phone closer to me. Rather, I moved closer to the phone.

Unidentified Analyst

Yes.

K. Suriyakumar

Great, excellent. Yes. So historically, Ben, if you look at the company, we grew through acquisition. And over a period of time, we have a myriad of services in the constructions space, right? Anything related to print or construction-related services.

So let's say, for example, large-format black and white, large-format colors, small format, small-format black and white, what you call site graphics, construction-related graphics. Then drone services, BIM services, hyperlinking, archive-related services. So we have a range of services. We pretty much have been providing that across-the-board. So pick a number. If you have 130-plus locations, almost in every location we provided all these services.

So with what's going on in the marketplace, what we are thinking about is that the need for such services might be greater, for example, in larger or bigger cities, such as New York, San Francisco or Los Angeles or Chicago, the big markets, Texas, Houston. But that may not be the so in a branch in Maryland or somewhere in Florida, a smaller location.

So what we're doing is we are looking at it and saying, "Should we have the entire portfolio of services in these locations? And therefore, should we be equipped to do all that work?"

So what we're doing is we're looking at it and saying, "Do these services - do we sell those services? Is there a need for those services or products and lineup in those markets?" And what we are trying to do is we want to optimize that. We want to say, "Okay. These markets will only provide these basic services." But once you come to a larger market like New York or San Francisco or Los Angeles or Chicago, maybe we have wider array of services depending on how much customer traction we have for such services. Does that make sense?

Unidentified Analyst

Yes. So you're not talking about trying to drive revenue. You're trying to - you're talking about improving margin.

K. Suriyakumar

Yes. Absolutely. So identify where the opportunity is and align with sales people to go after those opportunities. Because even marketing programs - as you know, these days, we are spending money on advertising digitally and so on and so. There is Google office, book or whatever that is. So we can focus on the market and the products more specifically. So it can be more aligned.

So we are simply trying to focus on areas that is better opportunity for us to market and try and sustain the growth there. In other words, when I say sustain the numbers, what I'm saying is, as I told you, there is decline across-the-board, how do we make up for it with market share or selling more services to those customers.

Unidentified Analyst

So let's drill in to that a little bit. Are you anticipating that by aligning those services that you reduce cost of goods sold or you improve EBIT margin by doing that? Or you're just trying to move those - go ahead.

K. Suriyakumar

Yes. No. I mean there will be some margin improvement in the sense that where there we don't have to have personnel or where we don't have to have certain facilities. We can actually focus those assets in the bigger markets so that we don't spin our wheels, that's what I would say, in markets where there isn't opportunity, enough opportunity.

So it's all a question of fine-tuning the business and saying where do we have the best impact for these services and what kind of customers we are going after and focus on that.

Unidentified Analyst

And can that significantly improve margin? Or what are you thinking?

K. Suriyakumar

I mean one of these I always said is in a company like ours, we've always executed very well, right? I mean if you historically know our company, always produced good results. So we're not going to find big - one big black hole anywhere in the company. But it's a question of, okay, as the markets continue to challenge us, what other things we should be thinking about to be creative in our management style so that we can sustain our numbers.

I can't tell you exactly what those numbers will be because they will be - we'll be picking up improvements in various places. But that's an exercise we plan to do in the next two quarters, which we think will positively impact us, while we try to grab market share.

Unidentified Analyst

Can you give me some color on AIM and facilities?

K. Suriyakumar

Yes. So AIM continues to grow in a particular - I mean, it's not fast growing. It's continuing to add value to our portfolio. Again, those customers are not everywhere. They're in larger cities. On the facilities side, we've been getting some traction. Customers like what we offer in our facilities, and they've been using our services. And the growth is not good enough for us or rather meaningful enough for us to say that it's actually impacting the revenue positively. But it's certainly on the right track.

Unidentified Analyst

Suri, when we look at - if we go back 4 years ago or so and these big overarching factors that affected your industries started to kick in and you said, "Hey, we're going to put our nose to the grindstone, and we're going to rework things. And we're going to work on changing the company to - should be - company or growth company again." And if we go back 3, 4 quarters ago, we start seeing that happening.

And after your three years of doing this changing, and then it's kind of petered out a little bit. And you're kind of putting your nose back to the grindstone and trying to figure things out again. As the Board sees this, what is the mandate from the Board? What is the Board saying to you about this and this struggle going on to do this recreation?

K. Suriyakumar

Well, I mean obviously, the Board knows what's going on in the marketplace, right, I mean basically how difficult this is because obviously they all see all the numbers, Ben, as much as you guys see the numbers.

So the bottom line is we have had a large component of our business tied to print. Print is declining. The truth is the decline of print is big amount because we have had so much print-related revenues. So if we have $4 million, $5 million, $6 million, $10 million drops in - certainly as we have had that. To make up for that, it takes a while to build - whether it’s your technology business or color business or whatever.

And we go through all sort of cyclical changes. Like for example, this quarter is the perfect example, right? Across-the-board, we found softness in the market, and there's not a whole lot - I mean that's well reflected by the Architectural Billing Index. The entire industry is reflecting there is softness in the market.

So right away, all those new services we are selling, which actually doesn't make up for the print drop, are not sold as effectively. But the print drop is still there because people are getting - that's a different element of the business altogether where people behaviors are changing, they're using more technology and they're becoming environmentally more responsible. So everybody is like, we want to try to print less. We want to avoid printing. In e-mails, you get "Be responsible. Don't print."

So the two element, this erosion due to technology influence is not something that we can predict or manage. What we can do is manage the revenues we get in a way that every dollar which comes in the door, we make more money out of it in order to make sure that we give value to our investors.

So I mean that's what you'll see. Even in spite of the drops, you'll see our margins are still pretty decent, which I have, sometimes, surprised myself how well we can hold on to those margins because usually when start eroding like that, very quickly, margin erodes as well.

But this is something that - like you said, 2, 3 years, we talked about it. We are constantly looking at. It's almost become a culture in the company to try to manage our expenses, and that's how we've been reasonably steady in terms of the margins and the cash we generate.

Unidentified Analyst

What's going on in the equipment sales? Can that continue or be affected more so by these trade negotiations that are going on with Asia?

K. Suriyakumar

Well, those have no impact on us, fortunately, trade negotiations. So two things. One is...

Unidentified Analyst

Just on the equipment and supplies sales. Doesn't that affected somewhat because it's coming from China?

K. Suriyakumar

No, not at all, not at all. The effect we have has all to do with the fact that the equipment business itself, just leave us out of the picture, is actually - is under pressure, serious pressure. So if you look at Xerox's numbers, if you look at HP's numbers, if you look at Canon numbers or maybe you don't look at them, but hey, they have had significant depths. And almost all of those companies have gone through major, major reorganizations, right? HP went through that a few years ago. Xerox obviously has gone through a lot these days.

Canon has gone through the same thing, Ricoh setting has gone through the same thing. I don't know of many manufacturer who hasn't had significant slippage in their missions. That's indicative of what the market is doing.

But this particular drop we talked about is all in China, is we have actually a partnership in China, and they sell a lot of equipment. And the sales in China are very different because there are the whole lot of kind of private companies, which mostly sold to state organizations in bids. And basically, that's how those sales are done.

So if you have a big bid, and we would have a big sale. And next year, we might not have a bid like that. That's what happens. So it's to do with the fact that they - their sales dropped significantly, which is a part of us.

But the good news is, it's not a big-margin business. Equipment business is very low-margin business. Again, it's a piece of business we did because our customers wanted us to be in. It's not because we love the margin. So again, that's another thing we look at and say, "Do we want to be in these markets, in these particular cities? Maybe not." So those are all the fine-tunings we'll do.

Jorge Avalos

But just to add, finalize on that or add a little bit to what Suri said. That equipment there is produced in China, sold in China. So it wouldn't have any impact with, yes, trade wars.

K. Suriyakumar

Yes. Nothing to do with trade wars. It doesn't impact us at all.

Unidentified Analyst

I know this is challenging, guys. Guys, who's going to be in Chicago this year?

K. Suriyakumar

Maybe David and Jorge. We haven't finalized that, but that's what we are thinking about, Ben.

Operator

Your next question is from the line of Brad Safalow with PAA Research.

Bradley Safalow

Just a quick fact question. What's the bank debt outstanding versus capital leases right now?

Jorge Avalos

Bank debt is $70 million bank debt, little over $40 million on the capital leases.

Bradley Safalow

And then just a broader question on SKYSITE. You guys really haven't said too much about it or at least not directly. Can you comment on - I guess two questions. One, what is the degree of traction that you're seeing on the project side versus the facilities management side? I don't know if you can speak to customer accounts.

And then secondarily, what do you need to do to get more traction with this product? I'm sure there's been - your competitors had offered this product. There's been quite a bit of, let's just say, enthusiasm in the marketplace for it. What are the - where are the holes in the products from a functionality perspective? And separately, what do you need to do on the sales side to actually accelerate that business?

K. Suriyakumar

So two-part question. So we reuse the same product really in the background for both new construction and existing or build space. What we refer to as build space, which is existing buildings. So what we use on existing buildings is what you are referring to as facilities, correctly so. We call that facilities so that there is no confusion about the product itself. But the base product we use is - at the background, is the same technology we use.

What we've been doing is because the - on the new construction, the market is crowded. We still have SKYSITE. We sell SKYSITE. We have customers on SKYSITE. That's not something that we aggressively sell, which is available. And if customers want to manage their documents during the construction cycle, we make them available to them. We sell licenses.

Even as we are talking, we issue new licenses. So that's something that we do. But it's not something that we are aggressively selling. But we basically have a traditional sales team. This is construction-related sales team best selling that product as a portfolio, part of the portfolio.

What we have on the facilities side, we have added a few more sales. We want to go after that market, which is referred to as the build market, and we do have sales there. That's the one we were talking about is we are pretty good. I mean we are excited that it's picking up traction, but not enough, material enough to offset or talk about a major trend. But does it have traction and other customers are liking it? Are we excited about it? Yes. I mean if you go to our company website, you can see the facilities product, and we have some traction on that.

So it's going in the right direction. But there isn't any momentum big enough to be able to really talk about it.

Bradley Safalow

Well, I guess as an outsider, is that not as big a strategic focus for you as an operator, as a management team as maybe I think it should be? Because you can - you don't talk about it that much, and it is one of your - one of yours that actually has growth and obviously significant growth potential.

K. Suriyakumar

Yes. So the reason we don't about it is in the calls, if the numbers are not material - obviously, if you're a startup, it's a different story, right? I mean you're winning at all kinds of information about it. And even if you're doing $3 million or $5 million in business, there'll be so much noise made about it. It's a different ball game altogether, Brad.

But in our case, being a public company, we have mainstream business, we talked about material numbers. Those numbers are not material yet. Are we not excited? No, that's not true. We're very excited about the opportunity in the marketplace. We also think we have a lot of know-how. We know the space very well. We understand the space very well, and the product is being received well. But we just don't have enough momentum to be able to talk about it just yet.

Bradley Safalow

Do you have a sense - is this a one-year, two-year, three-year, five-year kind of time frame for materiality for that particular business?

K. Suriyakumar

Hard to predict. I would say in the next few years. Yes, I don't - we haven't put our arms around it, but it's going reasonably well. There is good customer traction, and of course, we are fine-tuning the product and making it - trying to make it better, based on customer feedback, a couple of customer councils. We sit and talk about that.

There's definitely good interest on that, but hard to predict as to when we'll be able to really - for it to be material, not just yet at least. We don't have enough data on the ground to be able to provide that. If we can, we would. We'd love to.

Bradley Safalow

Of course. Just switching gears now, the capital allocation. Obviously, you guys have done a lot of deleveraging the last couple of years. You did buy backs some stock. I'm sure everyone on this call wants to see you buy back more stock. Given liquidity of the stock, why aren't you guys considering some sort of Dutch tender?

Jorge Avalos

Well, in the short term, we want to be more opportunistic and kind of gauge depending on where the stocks at. And other options we have to use of the cash, we wanted to keep that flexibility. So we felt the most prudent thing, and obviously in conjunction with consultation with our Board, was just to go ahead and buy them in the open market. Now does that change down the road? Yes. We'll keep those options open. But for now, we figured just buy them in open market would be the prudent thing for us to do.

K. Suriyakumar

Yes. I mean because we obviously have - we have debt on the one side, and then obviously, that is being done very well. And we are very good, feeling very good about it. That's why we kicked off this purchase, stock purchase this year again because our approval, our bucket expired last year, and we got another one approved this year. We'll see how it goes. Right now, we're restricted by the number of shares we could buy in the marketplace because of the liquidity. But if we feel compelled enough we can do around, we may consider that. I'm keeping all options open at this point in time.

Bradley Safalow

I thing actually for a lot of people in this call that you guys should do something more than what you can possibly do with liquidity and stock and the restrictions you have between blackout days and what percentage of the volume you can represent. I know there's huge gating factors. Glad you bought some stock this quarter. If you're not going to buy stock, then you should find a better use of capital than paying down this debt at this point, given your EBITDA base.

K. Suriyakumar

I agree. We'll - that's point well taken. We'll take that into consideration. But then I agree. I agree with your general thoughts.

Operator

There's another question from the line of [Ben Andrews] with Andrews Capital Management.

Unidentified Analyst

Jorge, why was - why were - or the tax provisions formula in the quarter. Was that cash out the door?

Jorge Avalos

No. It was not cash out the door. It was just some nuances with valuation allowances in certain jurisdictions, that we needed to create valuation allowances for that. There's also the - some deferred, the expiring of stock options that were granted 10 years ago that were under water, and that was really the big component there. So that caused an accounting - it's all an accounting tax entry. So it was not cash out.

Hence, why we pro forma it out on our adjusted financials. Our true cash taxes, because of our historical NOLs from, let's call it, 2014 back - or 2013 back, that we were - that we created over $18 million of NOLs there. So we don't anticipate any meaningful taxes for the foreseeable future. So thinking about it as an accounting entry that we had to make.

Unidentified Analyst

And regarding debt, the goal is still to try to reduce it $5 million a quarter. Is that correct?

K. Suriyakumar

Not really, no. I mean what we need to pay the banks and what we pay the banks are two different things, obviously. What - the way we look at it is that we want to be opportunistic in paying the debt down. So that at no time, due to fluctuations in the market or valuation or whatever that is, we have any of those covenants hanging over our head. That's biggest concern Jorge has, and we've been able to address that.

And once we overcome that, then we should be looking at all the uses. And one of those is buying back stock, which is what we did last quarter, and you can - you examine that as we go along.

Jorge Avalos

Yes. I mean we were in a different place when we had $120 - $150 million of debt out there. As we bring it down, as we have - then yes, we may have to reassess. We are assessing some of those strategies.

Unidentified Analyst

And Suri, if you can make the conference at the end of month, I'd really enjoy seeing you.

K. Suriyakumar

Hopefully, Jorge and Dilo will be open to make it. We're planning for that. We'll see how it goes.

Unidentified Analyst

But you can't come out or no? You can't...

K. Suriyakumar

Very unlikely I will be able to come out. We'll see what the schedule is. I mean we're all buried up to our eyebrows trying to manage multiple parts of the business. But we'll see how it goes.

Operator

[Operator Instructions] There appears to be no further questions. Had any closing remarks?

David Stickney

No. Thank you, Bonita. Thanks, everyone, for listening to us this evening and for your interest and continued interest in ARC Document Solutions. We look forward to talking with you soon.

Thank you, and good night.

Operator

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

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