Pitney Bowes Inc. (NYSE: PBI), a global technology company that
provides commerce solutions in the areas of ecommerce, shipping,
mailing, and data, today announced its financial results for the
first quarter 2019.
Quarterly Financial Results:
- Revenue of $868 million, a decline of 3
percent; a decline of 2 percent when adjusted for the impact of
currency; a decline of 1 percent when adjusted for both the impact
of currency and market exits
- GAAP EPS of ($0.01), which included a
$0.10 loss related to the previously announced sale of direct
operations in 6 smaller European markets
- Adjusted EPS of $0.12
- GAAP cash from operations of $70
million; free cash flow of $32 million
- Repurchased $39 million of stock, or
5.6 million shares
- The Company is updating its 2019 annual
guidance
“While we delivered first quarter revenue that was largely
in-line with our expectations, we fell short on profitability.
Clearly, we are not pleased with our profit performance, but are
confident that the actions we are taking will improve profitability
and continue to position us for sustained growth for the
long-term,” said Marc B. Lautenbach, President and CEO, Pitney
Bowes. “We continued to make progress against our long-term
objectives as we move our portfolio of business to the growth areas
of the market. For the second consecutive quarter, our Commerce
Services business was the largest component of our overall revenue
and our shipping-related revenues counted for approximately
one-third of our total revenue.”
First Quarter 2019 Results
Revenue totaled $868 million, which was a decline of 3 percent
versus prior year. Revenue declined 2 percent versus the prior year
when adjusted for the impact of currency and declined 1 percent
when adjusted for both the impact of currency and the previously
announced sale of direct operations in 6 smaller European markets
(market exits).
Commerce Services revenue grew 5 percent as reported and 6
percent adjusted for currency. Small and Medium Business (SMB)
Solutions revenue declined 10 percent as reported and 9 percent
when adjusted for the impact of currency. SMB revenue declined 7
percent when adjusted for both the impact of currency and market
exits. Software Solutions revenue declined 4 percent as reported
and 2 percent adjusted for currency.
GAAP earnings per diluted share (GAAP EPS) were ($0.01), which
included a $0.10 loss related to the market exits.
Adjusted earnings per diluted share (Adjusted EPS) were
$0.12.
GAAP and Adjusted EPS include a $0.03 per share impact for a
charge related to a SendPro C tablet replacement program to address
an underlying battery longevity issue.
The Company’s earnings per share results for the first quarter
are summarized in the table below:
First Quarter*
2019 2018
GAAP EPS ($0.01)
$0.32 Discontinued operations
$0.01 ($0.05)
GAAP EPS from continuing
operations ($0.01) $0.27 Loss from market exits
$0.10 - Restructuring charges, net $0.01 - Transaction costs
$0.01 -
Adjusted EPS
$0.12 $0.28 * The sum of the earnings
per share may not equal the totals above due to rounding.
GAAP Cash from Operations and Free Cash Flow Results
GAAP cash from operations during the quarter was $70 million and
free cash flow was $32 million. Compared to the prior year, free
cash flow was lower partially due to the timing of reserve account
deposits and the decline in net income offset by the timing of
working capital requirements.
The Company repurchased $39 million worth of its shares and
returned $9 million in dividends to its common shareholders.
Adoption of New Lease Accounting Standard
The company adopted the new lease accounting standard, ASC 842,
effective January 1, 2019 using a modified retrospective
approach, which requires the Company to recognize and measure
leases at the beginning of the earliest period presented. Beginning
with the quarter ending March 31, 2019, the Company’s financial
information will reflect adoption of the standard with prior
periods adjusted accordingly. Certain reclassified historical
financial information on a basis consistent with the new standard
can be found within the Financial Reporting section of the
Company's Investor Relations web site, or at
www.investorrelations.pitneybowes.com/financial-information This
reclassified historical information does not take into account any
other reclassifications that may be made to historical financial
information to conform to the current year presentation.
First Quarter 2019 Business Segment Reporting
The business reporting groups reflect how the Company manages
these groups and the clients served in each market.
The Commerce Services group includes the Global Ecommerce and
Presort Services segments. Global Ecommerce facilitates global
cross-border ecommerce transactions and domestic retail and
ecommerce shipping solutions, including fulfillment and returns.
Presort Services provides sortation services to qualify large
volumes of First Class Mail, Marketing Mail and Bound and Packet
Mail (Standard Flats and Bound Printed Matter) for postal workshare
discounts.
The SMB Solutions group offers mailing and shipping solutions,
financing, services, supplies and other applications for small and
medium businesses to help simplify and save on the sending,
tracking and receiving of letters, parcels and flats. This group
includes the North America Mailing and International Mailing
segments.
Software Solutions provide customer engagement, customer
information, location intelligence software and data.
The results for each segment within the group may not equal the
subtotals for the group due to rounding.
Commerce Services
($ millions) First Quarter
Revenue 2019
2018 Y/Y
Reported
Y/Y
Ex Currency
Global Ecommerce $266 $247 8% 9% Presort Services
135
134 0% 0% Commerce
Services $401 $381 5% 6%
EBITDA Global Ecommerce $2 $7 (72%) Presort Services
22 33 (34%) Commerce
Services $24 $40 (40%) EBIT
Global Ecommerce ($15) ($8) (89%) Presort Services
15
27 (44%) Commerce Services
$0 $19 (98%)
Global Ecommerce
Revenue increased from prior year driven by growth in domestic
parcel and shipping solutions volumes partially offset by lower
cross border volumes. EBIT and EBITDA margins declined from prior
year driven by a shift in the mix of business to faster growing,
lower margin services. Margins were also impacted by investments in
market growth opportunities, which includes marketing programs and
new facilities, operational excellence initiatives and higher labor
costs. Additionally, margin was impacted by a temporary delay in
the approval of one of the Company’s Negotiated Service Agreements
with the USPS, which has subsequently been approved.
Presort Services
Revenue growth was driven by higher volumes of Standard Class,
First Class and Flats processed offset by lower revenue per piece.
EBIT and EBITDA margins declined from prior year primarily due to
higher labor and transportation costs. A changing client mix
towards larger clients drove the lower revenue per piece, which
also contributed to the margin decline.
SMB Solutions
($ millions) First Quarter
Revenue 2019
2018
Y/YReported
Y/YEx Currency
Y/Y Ex Currency& Market
Exits*
North America Mailing $315 $341
(7%)
(7%)
(7%)
International Mailing
79 98
(20%)
(14%)
(6%)
SMB Solutions $394 $439
(10%)
(9%)
(7%)
EBITDA North America Mailing $117 $136
(14%)
International Mailing
14 20
(28%)
SMB Solutions $131 $156
(16%)
EBIT North America Mailing $111
$129
(14%)
International Mailing
12
16
(26%)
SMB Solutions $122
$145
(15%)
* Excluding $9 million related to market
exits and $6 million related to the impacts of currency
North America Mailing
Revenue declined on lower equipment sales and recurring revenue
streams. EBIT and EBITDA margins were impacted by a charge of $9
million related to a SendPro C tablet replacement program to
address an underlying battery longevity issue. The tablet upgrade
provides the latest technology and results in an improved client
experience.
International Mailing
Excluding the effect from currency and market exits, equipment
sales and recurring revenue streams both contributed to the revenue
decline. The equipment sales decline was driven by weakness in
Germany and France partially offset by growth in the UK and Japan.
EBIT and EBITDA margins decreased versus prior year primarily
driven by the lower revenue.
Software Solutions
($ millions) First Quarter
2019
2018 Y/Y
Reported
Y/Y
Ex Currency
Revenue $73 $76 (4%) (2%) EBITDA $4 $5 (12%) EBIT $2 $2 (32%)
Software Solutions
Revenue declined from prior year driven by lower license revenue
partially offset by higher data updates, SaaS and services revenue.
Revenue also benefited from continued growth in smaller deals.
Prior year license revenue benefited from a $7 million Location
Intelligence deal. EBIT and EBITDA margins decreased from prior
year largely driven by the lower license revenue.
2019 Guidance
The Company is updating its 2019 annual guidance and now
expects:
- Revenue, on a constant currency (CC)
basis, to be in the range of 1 percent to 3 percent growth when
compared to 2018.
- Adjusted EPS from continuing operations
to be in the range of $0.90 to $1.05.
- Free cash flow to be in the range of
$200 million to $250 million. Free cash flow guidance includes the
funding of third party financing initiatives.
This guidance discusses future results, which are inherently
subject to unforeseen risks and developments. As such, discussions
about the business outlook should be read in the context of an
uncertain future, as well as the risk factors identified in the
safe harbor language at the end of this release and as more fully
outlined in the Company's 2018 Form 10-K Annual Report and other
reports filed with the Securities and Exchange Commission.
This guidance excludes any unusual items that may occur or
additional portfolio or restructuring actions, not specifically
identified, as the Company implements plans to further streamline
its operations and reduce costs. Revenue guidance is provided on a
constant currency basis. The Company cannot reasonably predict the
impact that future changes in currency exchange rates will have on
revenue and net income. Additionally, the Company cannot provide
GAAP EPS and GAAP cash from operations guidance due to the
uncertainty of future potential restructurings, goodwill and asset
write-downs, unusual tax settlements or payments, special
contributions to its pension funds, acquisitions, divestitures and
other potential adjustments, which could, individually or in the
aggregate, have a material impact on the Company’s performance. The
Company’s guidance is based on an assumption that the global
economy and foreign exchange markets in 2019 will not change
significantly.
Conference Call and Webcast
Management of Pitney Bowes will discuss the Company’s results in
a broadcast over the Internet today at 8:00 a.m. ET. Instructions
for listening to the earnings results via the Web are available on
the Investor Relations page of the Company’s web site at
www.pitneybowes.com.
About Pitney Bowes
Pitney Bowes (NYSE:PBI) is a global technology company
providing commerce solutions that power billions of transactions.
Clients around the world, including 90 percent of the Fortune 500,
rely on the accuracy and precision delivered by Pitney
Bowes solutions, analytics, and APIs in the areas of ecommerce
fulfillment, shipping and returns; cross-border ecommerce; office
mailing and shipping; presort services; location
data; customer information and engagement software; services; and
financing. For nearly 100 years Pitney Bowes has been
innovating and delivering technologies that remove the complexity
of getting commerce transactions precisely right. For additional
information visit Pitney Bowes, the Craftsmen of Commerce, at
www.pitneybowes.com.
Use of Non-GAAP Measures
The Company's financial results are reported in accordance with
generally accepted accounting principles (GAAP); however, in its
disclosures the Company uses certain non-GAAP measures, such as
adjusted earnings before interest and taxes (EBIT), adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA), adjusted earnings per share (EPS), revenue growth on a
constant currency basis and free cash flow.
The Company reports measures such as adjusted EBIT, adjusted EPS
and adjusted net income to exclude the impact of special items like
restructuring charges, tax adjustments, goodwill and asset
write-downs, and costs related to dispositions and acquisitions.
While these are actual Company expenses, they can mask underlying
trends associated with its business. Such items are often
inconsistent in amount and frequency and as such, the adjustments
allow an investor greater insight into the current underlying
operating trends of the business.
In addition, revenue growth is presented on a constant currency
basis to exclude the impact of changes in foreign currency exchange
rates since the prior period under comparison. Constant currency
measures are intended to help investors better understand the
underlying operational performance of the business excluding the
impacts of shifts in currency exchange rates over the period.
Constant currency is calculated by converting our current quarter
reported results using the prior year’s exchange rate for the
comparable quarter. In addition, this quarter the Company reported
the comparison of revenue excluding the impact of currency and
market exits to prior year, which excludes the impact of changes in
foreign currency exchange rates since the prior period and also
excludes the revenues associated with the recent market exits in
several smaller markets. This comparison allows an investor insight
into the underlying revenue performance of the business and true
operational performance from a comparable basis to prior period. A
reconciliation of reported revenue to constant currency revenue, as
well as reported revenue to “revenue excluding the impact of
currency and market exits” can be found in the Company’s attached
financial schedules.
The Company reports free cash flow in order to provide investors
insight into the amount of cash that management could have
available for other discretionary uses. Free cash flow adjusts GAAP
cash from operations for capital expenditures, restructuring
payments, unusual tax settlements, special contributions to the
Company’s pension fund and cash used for other special items. A
reconciliation of GAAP cash from operations to free cash flow can
be found in the Company’s attached financial schedules.
Segment EBIT is the primary measure of profitability and
operational performance at the segment level. Segment EBIT is
determined by deducting from segment revenue the related costs and
expenses attributable to the segment. Segment EBIT excludes
interest, taxes, general corporate expenses not allocated to a
particular business segment, restructuring charges and goodwill and
asset impairments, which are recognized on a consolidated basis.
The Company has also included segment EBITDA as a useful measure
for profitability and operational performance, and an additional
way to look at the economics of the segments, especially in light
of some of the Company’s more recent, larger acquisitions. Segment
EBITDA further excludes depreciation and amortization expense for
the segment. A reconciliation of segment EBIT and EBITDA to net
income can be found in the attached financial schedules.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information can be found at the
Company's web site www.pb.com/investorrelations
This document contains “forward-looking statements” about the
Company’s expected or potential future business and financial
performance. Forward-looking statements include, but are not
limited to, statements about its future revenue and earnings
guidance and other statements about future events or conditions.
Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that could cause actual results
to differ materially from those projected. These risks and
uncertainties include, but are not limited to: declining physical
mail volumes; changes in, or loss of, our contractual relationships
with the U.S. Postal Service or posts in other major markets;
changes in postal regulations; competitive factors, including
pricing pressures, technological developments and the introduction
of new products and services by competitors; the United Kingdom's
potential exit from the European Union (Brexit); our success in
developing and marketing new products and services, and obtaining
regulatory approvals, if required; changes in banking regulations
or the loss of our Industrial Bank charter; changes in labor
conditions and transportation costs; macroeconomic factors,
including global and regional business conditions that adversely
impact customer demand, foreign currency exchange rates and
interest rates; changes in global political conditions and
international trade policies, including the imposition or expansion
of trade tariffs and other factors as more fully outlined in the
Company's 2018 Form 10-K Annual Report and other reports filed with
the Securities and Exchange Commission. Pitney Bowes assumes no
obligation to update any forward-looking statements contained in
this document as a result of new information, events or
developments.
Note: Consolidated statements of income; revenue and EBIT by
business segment; and reconciliation of GAAP to non-GAAP measures
for the three months ended March 31, 2019 and 2018, and
consolidated balance sheets as of March 31, 2019 and December 31,
2018 are attached
Pitney Bowes Inc. Consolidated Statements of
(Loss) Income (Unaudited; in thousands, except share and per
share amounts)
Three
months ended March 31, 2019 2018 Revenue:
Equipment sales
$ 89,787 $ 106,708
Supplies
50,953 59,993
Software
73,318 76,294
Rentals
22,157 24,965
Financing
97,043 100,349
Support services
128,621 140,650
Business services
406,523 387,624
Total revenue
868,402 896,583 Costs and
expenses:
Cost of equipment sales
63,665 62,469
Cost of supplies
13,550 16,947
Cost of software
23,383 24,129
Cost of rentals
9,715 12,748
Financing interest expense
11,364 11,064
Cost of support services
41,779 46,065
Cost of business services
327,046 294,379
Selling, general and administrative
300,982 302,810
Research and development
21,774 24,495
Restructuring charges
3,598 904
Other components of net pension and
postretirement cost
(638 ) (1,719 )
Interest expense, net
27,602 32,014
Other expense
17,710 -
Total costs and expenses
861,530 826,305 Income from
continuing operations before taxes 6,872 70,278 Provision for
income taxes 8,301 18,795 (Loss) income
from continuing operations (1,429 ) 51,483 (Loss) income from
discontinued operations, net of tax (1,230 ) 8,487
Net (loss) income $ (2,659 ) $ 59,970 Basic
(loss) earnings per share attributable to common stockholders:
Continuing operations
$ (0.01 ) $ 0.28
Discontinued operations
(0.01 ) 0.05
Net (loss) income
$ (0.01 ) $ 0.32 Diluted (loss) earnings per share
attributable to common stockholders:
Continuing operations
$ (0.01 ) $ 0.27
Discontinued operations
(0.01 ) 0.05
Net (loss) income
$ (0.01 ) $ 0.32 Weighted-average shares used in
diluted earnings per share 185,970,755
188,174,983
Pitney Bowes Inc.
Consolidated Balance Sheets (Unaudited; in thousands, except
share amounts)
Assets
March 31,
2019
December 31,
2018
Current assets:
Cash and cash equivalents
$ 838,905 $ 867,262
Short-term investments
65,405 59,391
Accounts receivable, net
412,661 456,138
Short-term finance receivables, net
684,436 758,511
Inventories
68,876 62,279
Current income taxes
21,897 5,947
Other current assets and prepayments
134,929 100,625
Assets of discontinued operations
- 4,854 Total current assets 2,227,109
2,315,007 Property, plant and equipment, net 412,727 410,114
Rental property and equipment, net 41,862 46,228 Long-term finance
receivables, net 545,360 536,369 Goodwill 1,754,259 1,766,511
Intangible assets, net 223,005 227,137 Operating lease assets
152,139 156,788 Noncurrent income taxes 61,700 66,326 Other assets
388,104 419,677 Total assets $
5,806,265 $ 5,944,157
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities
$ 1,313,440 $ 1,390,362
Current operating lease liabilities
35,219 37,208
Current income taxes
5,697 15,284
Current portion of long-term debt
207,231 199,535
Advance billings
213,171 235,116
Liabilities of discontinued operations
- 3,276 Total current liabilities
1,774,758 1,880,781 Deferred taxes on income 257,639 254,353
Tax uncertainties and other income tax liabilities 51,950 39,548
Noncurrent operating lease liabilities 124,873 127,237 Long-term
debt 3,047,661 3,066,073 Other noncurrent liabilities
463,028 474,323 Total liabilities
5,719,909 5,842,315 Stockholders'
equity:
Cumulative preferred stock, $50 par value,
4% convertible
1 1
Cumulative preference stock, no par value,
$2.12 convertible
388 396
Common stock, $1 par value
323,338 323,338
Additional paid-in-capital
109,166 121,475
Retained earnings
5,267,615 5,279,682
Accumulated other comprehensive loss
(918,072 ) (948,961 )
Treasury stock, at cost
(4,696,080 ) (4,674,089 ) Total stockholders' equity
86,356 101,842 Total liabilities and
stockholders' equity $ 5,806,265 $ 5,944,157
Pitney Bowes Inc.
Business Segments
(Unaudited; in thousands)
Three months ended March 31, 2019 2018 %
Change REVENUE
Global Ecommerce
$ 266,254 $ 246,590 8 %
Presort Services
134,847 134,458 0 %
Commerce Services
401,101 381,048 5 %
North America Mailing
315,474 340,811 (7 %)
International Mailing
78,509 98,430 (20 %)
Small & Medium Business
Solutions
393,983 439,241 (10 %)
Software Solutions
73,318 76,294 (4 %)
Total revenue
$ 868,402 $ 896,583 (3 %)
EBIT
Global Ecommerce
$ (14,600 ) $ (7,711 ) (89 %)
Presort Services
15,066 27,026 (44 %)
Commerce Services
466 19,315 (98 %)
North America Mailing
110,613 128,568 (14 %)
International Mailing
11,790 16,022 (26 %)
Small & Medium Business
Solutions
122,403 144,590 (15 %)
Software Solutions
1,692 2,492 (32 %)
Segment EBIT (1)
$ 124,561 $ 166,397 (25 %)
EBITDA
Global Ecommerce
$ 1,858 $ 6,719 (72 %)
Presort Services
21,986 33,188 (34 %)
Commerce Services
23,844 39,907 (40 %)
North America Mailing
117,053 136,067 (14 %)
International Mailing
14,208 19,632 (28 %)
Small & Medium Business
Solutions
131,261 155,699 (16 %)
Software Solutions
4,172 4,736 (12 %)
Segment EBITDA (2)
$ 159,277 $ 200,342 (20 %)
Reconciliation of
segment EBITDA to net (loss) income
Segment EBITDA
$ 159,277 $ 200,342
Less: Segment depreciation and
amortization
(34,716 ) (33,945 )
Segment EBIT
124,561 166,397
Corporate expenses
(55,689 ) (51,082 )
Adjusted EBIT
68,872 115,315
Interest, net (3)
(38,966 ) (43,078 )
Restructuring charges
(3,598 ) (904 )
Loss from market exits
(17,710 ) -
Transaction costs
(1,726 ) (1,055 )
Provision for income taxes
(8,301 ) (18,795 )
(Loss) income from continuing
operations
(1,429 ) 51,483
(Loss) income from discontinued
operations, net of tax
(1,230 ) 8,487
Net (loss) income
$ (2,659 ) $ 59,970 (1) Segment EBIT excludes
interest, taxes, general corporate expenses, restructuring charges,
and other items that are not allocated to a particular business
segment. (2) Segment EBITDA is calculated as Segment EBIT plus
segment depreciation and amortization expense. (3) Includes
financing interest expense and interest expense, net.
Pitney Bowes Inc. Reconciliation of Reported Consolidated
Results to Adjusted Results (Unaudited; in thousands, except
per share amounts)
Three months ended March 31, 2019 2018
Y/YChg.
Reconciliation of reported revenue to revenue excluding
currency Revenue, as reported $ 868,402 $ 896,583 (3%) Currency
impact on revenue 9,981 - NM Revenue,
at constant currency 878,383 896,583 (2%) Less revenue from Market
Exits (6,013 ) (14,879 ) NM Revenue, excluding
currency and Market Exits $ 872,370 $ 881,704 (1%)
Reconciliation of reported net (loss) income to adjusted
earnings Net (loss) income $ (2,659 ) $ 59,970 Loss (income)
from discontinued operations, net of tax 1,230 (8,487 )
Restructuring charges 2,659 672 Loss from market exits 19,423 -
Transaction costs 1,289 785 Adjusted
net income 21,942 52,940 Provision for income taxes, as adjusted
7,964 19,297 Interest, net 38,966 43,078
Adjusted EBIT 68,872 115,315 Depreciation and amortization
39,365 39,738 Adjusted EBITDA $ 108,237
$ 155,053
Reconciliation of reported diluted
(loss) earnings per share toadjusted diluted earnings per
share
Diluted (loss) earnings per share $ (0.01 ) $ 0.32 Loss (income)
from discontinued operations, net of tax 0.01 (0.05 ) Restructuring
charges 0.01 - Loss from market exits 0.10 - Transaction costs
0.01 - Adjusted diluted earnings per
share $ 0.12 $ 0.28
Note: The sum of
the earnings per share amounts may not equal the totals due to
rounding.
Reconciliation of reported net cash
from operating activities to freecash flow
Net cash provided by operating activities $ 69,728 $ 69,629 Net
cash used in (provided by) operating activities - discontinued
operations 3,614 (24,856 ) Capital expenditures (28,754 ) (29,017 )
Restructuring payments 8,144 15,585 Reserve account deposits
(23,036 ) 6,654 Transaction costs paid 1,839
2,593 Free cash flow $ 31,535 $ 40,588
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190501005232/en/
Editorial -Bill HughesChief Communications
Officer203/351-6785Financial -Adam DavidVP, Investor
Relations203/351-7175
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