Pitney Bowes Inc. (NYSE:PBI), a global technology company that
provides products and solutions that power commerce, today reported
financial results for the first quarter 2015.
Quarterly Financial Results:
- Revenue of $891 million, a decline of 1
percent on a constant currency basis and a decline of 5 percent as
reported. Revenue was flat to the prior year when adjusted for the
impacts of currency and the divestment of certain European revenue
streams.
- GAAP EPS of $0.40, which includes a
$0.01 per share negative impact from currency
- SG&A of $315 million, a decline of
$37 million, or 10 percent
- Adjusted EBIT of $178 million, an
increase of $9 million, or 5 percent
- Free cash flow of $85 million; GAAP
cash from operations of $104 million
- Reduced debt by $175 million
- Reaffirming 2015 annual guidance
“2015 is an important year for Pitney Bowes as we continue to
transform our company,” said Marc B. Lautenbach, President and CEO,
Pitney Bowes. “Despite currency headwinds affecting our first
quarter results, we continued to unlock value in our company. In
the first quarter, we reduced costs across the company and grew
operating income, even as we increased our investments in
marketing, infrastructure and the growth areas of our business.
“Our Enterprise Business Solutions group delivered constant
currency revenue and profit growth, and our performance in North
America Mailing was consistent with the previous quarters. Software
licensing revenue increased by high, single digits and despite the
strengthening dollar, our ecommerce business continued to deliver
solid results. Looking beyond our first quarter, I remain confident
in our ability to continue to meet our strategic objectives and, as
a result, we are reaffirming our 2015 guidance.”
FIRST QUARTER 2015 RESULTS
Revenue totaled $891 million, a decline of 1 percent on a
constant currency basis and 5 percent on a reported basis versus
the prior year. For comparative purposes, revenue would have been
flat compared to the prior year when the current and prior periods
are adjusted for the impacts of currency and the reduction in
revenue resulting from the exit of direct operations in some
European countries that we completed in the third quarter of
2014.
Digital Commerce Solutions revenue grew 9 percent on a constant
currency basis and 6 percent on a reported basis. Revenue on a
constant currency basis benefited from growth in ecommerce,
marketing services and shipping solutions, while software solutions
were flat.
Enterprise Business Solutions revenue grew 2 percent on a
constant currency basis and was flat on a reported basis. Revenue
on a constant currency basis benefited from continued growth in
Presort Services, while revenue in Production Mail was flat. For
comparative purposes, revenue would have grown 3 percent when
adjusted for the impacts of currency and the divested revenues in
Europe from the prior year.
Small and Medium Business (SMB) Solutions revenue declined 6
percent on a constant currency basis and 11 percent on a reported
basis. For comparative purposes, revenue would have declined 5
percent when adjusted for the impacts of currency and the divested
revenues in Europe from the prior year.
Adjusted earnings before interest and taxes (EBIT) was $178
million, which was an increase of $9 million, or 5%, versus the
prior year. Adjusted EBIT margin expanded 190 basis points to
20.0%.
Generally Accepted Accounting Principles (GAAP) earnings per
diluted share were $0.40, which includes the adverse impact from
currency of $0.01 per share. Earnings per share during the quarter
were also impacted by a higher tax rate in part due to higher than
usual charges related to the expiration of certain stock options
and a greater percentage of revenue from U.S. operations.
The Company’s earnings per share results for the quarter are
summarized in the table below:
First Quarter
2015
2014
Adjusted EPS from continuing operations
$0.40
$0.42 Restructuring charges and asset impairments - ($0.03 )
Extinguishment of debt - ($0.19 )
GAAP EPS from continuing
operations $0.40 $0.21 Discontinued operations -
$0.01
GAAP EPS $0.40 $0.22
* The sum of the earnings per share may not equal the totals
above due to rounding
FREE CASH FLOW RESULTS
Free cash flow during the quarter was $85 million and $104
million on a GAAP basis. In comparison to the prior year, first
quarter free cash flow was lower primarily due to the timing of
accounts payable and higher capital expenditures related to the
Company’s ERP implementation.
During the quarter, the Company used cash to pay $38 million in
dividends to its common shareholders. The Company also retired $275
million in debt through use of $175 million in cash on the balance
sheet and the issuance of $100 million in commercial paper.
BUSINESS SEGMENT REPORTING
The Company’s business segment reporting reflects the clients
served in each market and the way it manages these segments for
growth and profitability. The reporting segment groups are the SMB
Solutions group; the Enterprise Business Solutions group; and the
Digital Commerce Solutions segment.
The SMB Solutions group offers mailing equipment, financing,
services and supplies for small and medium businesses to
efficiently create mail and evidence postage. This group includes
the North America Mailing and International Mailing segments. North
America Mailing includes the operations of U.S. and Canada Mailing.
International Mailing includes all other SMB operations around the
world.
The Enterprise Business Solutions group provides mailing and
printing equipment and services for large enterprise clients to
process mail, including sortation services to qualify large mail
volumes for postal worksharing discounts. This group includes the
global Production Mail and Presort Services segments.
The Digital Commerce Solutions segment leverages digital and
mobile channels that make the Company’s clients’ customer-facing
functions more effective. This segment includes software,
ecommerce, shipping and marketing services.
Consolidated
($ millions) First Quarter
Y/Y Ex Currency
Y/Y
Y/Y
and Divested
2015
2014
Reported
Ex
Currency
Revenues*
Revenue
$
891
$
937
(5 %) (1 %) 0 %
Adjusted EBIT $ 178 $ 170
5 %
SMB Solutions Group
($ millions) First Quarter
Y/Y Ex Currency
Y/Y
Y/Y
and Divested
Revenue
2015
2014
Reported
Ex
Currency
Revenues*
North America Mailing $ 362 $ 381 (5 %) (4 %) (4 %) International
Mailing
116
153
(24
%)
(12
%)
(7
%)
SMB Solutions Total $ 478 $ 534
(11 %) (6 %) (5 %)
EBIT North America Mailing $ 164 $ 160 2 % International
Mailing
12
25
(53
%)
SMB Solutions Total $ 175 $ 185
(5 %)
* Excluding the impacts of currency and the divested revenues in
Europe related to the exit of a non-core product line in Norway and
transition to a dealer sales network in six smaller European
markets completed in the third quarter of 2014.
North America Mailing
Revenue for the quarter was consistent with the prior three
quarters results. Recurring revenue stream trends were in-line with
prior quarters driven primarily by financing revenue, which
declined less than one percent, and the continued stabilization of
rentals revenue. Equipment sales declined at a mid-single digit
rate in the U.S. compared to a relatively strong first quarter in
2014. The Company continues to focus on driving productivity
improvements in the segment’s sales channels. EBIT margin improved
versus the prior year due to continued benefits from the
go-to-market implementation and on-going cost reduction
initiatives.
International Mailing
During the quarter, revenue declined 24 percent on a reported
basis. Currency adversely affected the decline in revenue by 12
percentage points. For comparative purposes, revenue would have
declined 7 percent when adjusted for the impacts of currency and
the reduction in revenue resulting from the exit of direct
operations in some European countries completed in the third
quarter of 2014.
The Company continued to implement its go-to-market strategy
throughout Europe during the quarter. This transition was first
completed in the UK in January, which had positive revenue growth
in the quarter, and is now complete in Germany. However in France,
the Company’s second largest market in Europe, the Company is still
in the consultation stages of the proposed transition, which
impacted sales productivity during the quarter. EBIT margin
declined versus the prior year primarily due to lower revenue and
the impact of currency on some supply chain costs.
Enterprise Business Solutions
Group
($ millions) First Quarter
Y/Y Ex Currency
Y/Y
Y/Y
and Divested
Revenue
2015
2014
Reported
Ex
Currency
Revenues*
Production Mail $
100
$
105
(5 %) 0 % 1 % Presort Services
122
116
4
%
4
%
4
%
Enterprise Business Total $ 221 $
222 0 % 2 % 3 %
EBIT Production Mail $ 9 $ 8 17 % Presort Services
27
24
15
%
Enterprise Business Total $ 37 $
32 16 %
* Excluding the impacts of currency and the divested revenues in
Europe related to the exit of a non-core product line in Norway and
transition to a dealer sales network in six smaller European
markets completed in the third quarter of 2014.
Production Mail
Equipment sales grew as a result of a larger number of inserting
equipment installations during the quarter. Supplies revenue
continued to benefit from the growth in production print
installations in 2014. Support services revenue declined as a
result of some in-house mailers shifting their mail processing to
third party outsourcers who provide some self-service on equipment.
For comparative purposes, revenue would have grown 1 percent when
adjusted for the impacts of currency and the divested revenues in
Europe from the prior year related to this segment. EBIT margin
improved versus the prior year due to a favorable mix of higher
margin equipment sales and on-going cost reduction initiatives.
Presort Services
Revenue benefited from the addition of new customers and an
increase in the volume of mail processed. EBIT margin improved
versus the prior year due to the revenue growth and on-going
operational productivity.
Digital Commerce Solutions
($ millions) First Quarter
Y/Y
Y/Y
2015
2014
Reported
Ex
Currency
Revenue
$
192
$
181
6 % 9 %
EBIT $ 16 $ 10 67 %
On a constant currency basis, the segment continued to deliver
revenue growth in ecommerce, marketing services and shipping
solutions. Software revenue was flat on a constant currency
basis.
Ecommerce’s revenue growth was driven in part by a continued
increase in the number of packages shipped but did reflect the
unfavorable impacts of a stronger U.S. dollar on the number of
purchases outbound from the U.S. Ecommerce also achieved continued
expansion in its UK outbound cross-border services.
Marketing services and shipping solutions revenue continued to
grow as a result of new client additions for their respective
product offerings.
Software license revenue increased at a high single-digit rate
on a constant currency basis, but was offset by lower professional
services and maintenance revenue when compared to prior year.
EBIT margin improved even as the Company continued to invest in
development activities and infrastructure in ecommerce and software
solutions.
2015 GUIDANCE
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 2014 Form 10-K Annual Report and other
reports filed with the Securities and Exchange Commission.
The Company is reaffirming its annual revenue growth, earnings
per share and free cash flow guidance. The Company’s guidance is
based on an assumption that the global economy and foreign exchange
markets in 2015 will not change significantly. 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.
Based on the above, the Company still expects in 2015:
- Revenue, on a constant currency basis,
to be in the range of flat to 3 percent growth when compared to
2014.
- As noted when the Company provided
guidance on February 2, 2015, currency exchange rates could reduce
reported revenue versus constant currency revenue by more than 3
percentage points on an annual basis.
- Earnings per diluted share from
continuing operations in the range of $1.85 to $2.00.
- This guidance includes incremental
investment of $0.07 to $0.09 per share related to the
implementation of a new ERP system and $0.08 to $0.09 per share
related to expanded marketing programs, including the new brand.
These incremental investments are now expected to be highest in the
second and third quarters versus the prior year.
- The Company also still expects an
annual tax rate in the range of 31 to 34 percent.
- Free cash flow in the range of $475
million to $550 million.
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.pb.com.
About Pitney Bowes
Pitney Bowes (NYSE: PBI) is a global technology company offering
innovative products and solutions that enable commerce in the areas
of customer information management, location intelligence, customer
engagement, shipping and mailing, and global ecommerce. More than
1.5 million clients in approximately 100 countries around the world
rely on products, solutions and services from Pitney Bowes. For
additional information, visit Pitney Bowes at
www.pitneybowes.com.
The Company's financial results are reported in accordance with
generally accepted accounting principles (GAAP). The Company uses
measures such as adjusted earnings before interest and taxes
(EBIT), adjusted earnings per share, adjusted income from
continuing operations and free cash flow to exclude the impact of
special items like restructuring charges, tax adjustments, and
goodwill and asset write-downs, because, 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.
The use of free cash flow provides investors insight into the
amount of cash that management could have available for other
discretionary uses. It adjusts GAAP cash from operations for
capital expenditures, as well as special items like cash used for
restructuring charges, unusual tax settlements or payments and
contributions to its pension funds. Management uses segment EBIT to
measure profitability and performance at the segment level. EBIT is
determined by deducting from 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. 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.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information may also 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: mail volumes; the
uncertain economic environment; timely development, market
acceptance and regulatory approvals, if needed, of new products;
fluctuations in customer demand; changes in postal regulations;
interrupted use of key information systems; management of
outsourcing arrangements; the implementation of a new enterprise
resource planning system; changes in business portfolio; the
success of our investment in rebranding the Company; the risk of
customer concentration in our Digital Commerce Solutions segment;
foreign currency exchange rates; changes in our credit ratings;
management of credit risk; changes in interest rates; the financial
health of national posts; and other factors beyond its control as
more fully outlined in the Company's 2014 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, 2015 and 2014, and
consolidated balance sheets at March 31, 2015 and December 31, 2014
are attached.
Pitney Bowes Inc. Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share and per share data)
Three months ended March 31, 2015 2014 Revenue:
Equipment sales $ 165,964 $
189,056
Supplies 73,368 79,517 Software 86,357 91,555 Rentals 113,997
123,579 Financing 105,630 110,050 Support services 139,558 158,252
Business services 205,807 185,488
Total revenue 890,681 937,497
Costs and expenses: Cost of equipment sales 75,013 82,534
Cost of supplies 22,659 24,154 Cost of software 29,864 30,164 Cost
of rentals 20,701 25,444 Financing interest expense 18,770 19,653
Cost of support services 83,599 98,981 Cost of business services
139,919 128,936 Selling, general and administrative 314,529 351,375
Research and development 26,048 26,192 Restructuring charges, net
(81 ) 9,841 Interest expense, net 24,064 24,064 Other expense
- 61,657 Total costs and
expenses 755,085 882,995 Income
from continuing operations before income taxes 135,596 54,502
Provision for income taxes 50,547 8,036
Income from continuing operations 85,049 46,466
Income from discontinued operations, net of tax 157
2,801 Net income before attribution of
noncontrolling interests 85,206 49,267
Less: Preferred stock dividends of
subsidiaries attributable to noncontrolling interests
4,594 4,594 Net income - Pitney
Bowes Inc. $ 80,612 $ 44,673 Amounts
attributable to common stockholders: Income from continuing
operations $ 80,455 $ 41,872 Income from discontinued operations
157 2,801 Net income - Pitney
Bowes Inc. $ 80,612 $ 44,673 Basic earnings
per share attributable to common stockholders (1): Continuing
operations 0.40 0.21 Discontinued operations -
0.01 Net income - Pitney Bowes Inc. $ 0.40 $
0.22 Diluted earnings per share attributable to
common stockholders (1): Continuing operations 0.40 0.21
Discontinued operations - 0.01
Net income - Pitney Bowes Inc. $ 0.40 $ 0.22
Weighted-average shares used in diluted EPS 202,679,433
203,885,840
(1) The sum of the earnings per share
amounts may not equal the totals above due to rounding.
Pitney Bowes Inc. Consolidated Balance Sheets
(Unaudited in
thousands, except per share data)
March 31,
December 31,
Assets
2015
2014
Current assets: Cash and cash equivalents $ 871,687 $ 1,079,145
Short-term investments 41,741 32,121 Accounts receivable,
gross 389,744 424,479 Allowance for doubtful accounts receivable
(10,166 ) (10,742 ) Accounts receivable, net 379,578
413,737 Short-term finance receivables 979,495 1,019,412
Allowance for credit losses (17,422 ) (19,108 )
Short-term finance receivables, net 962,073 1,000,304
Inventories 95,029 84,827 Current income taxes 36,743 40,542 Other
current assets and prepayments 67,881 57,173 Assets held for sale
43,750 52,271 Total current
assets 2,498,482 2,760,120 Property, plant and equipment,
net 288,680 285,091 Rental property and equipment, net 193,369
200,380 Long-term finance receivables 782,702 828,723
Allowance for credit losses (7,479 ) (9,002 )
Long-term finance receivables, net 775,223 819,721 Goodwill
1,635,171 1,672,721 Intangible assets, net 72,172 82,173
Non-current income taxes 85,259 96,377 Other assets 561,087
569,110 Total assets $ 6,109,443
$ 6,485,693
Liabilities,
noncontrolling interests and stockholders' equity
Current liabilities: Accounts payable and accrued liabilities $
1,354,876 $ 1,558,731 Current income taxes 102,347 90,167 Current
portion of long-term obligations 520,914 324,879 Advance billings
409,381 386,846 Total current
liabilities 2,387,518 2,360,623 Deferred taxes on income
66,775 64,839 Tax uncertainties and other income tax liabilities
88,381 86,127 Long-term debt 2,554,317 2,927,127 Other non-current
liabilities 661,147 673,348
Total liabilities 5,758,138 6,112,064
Noncontrolling interests (Preferred stockholders' equity in
subsidiaries) 296,370 296,370 Stockholders' equity:
Cumulative preferred stock, $50 par value, 4% convertible 1 1
Cumulative preference stock, no par value, $2.12 convertible 543
548 Common stock, $1 par value 323,338 323,338 Additional
paid-in-capital 152,869 178,852 Retained earnings 4,940,505
4,897,708 Accumulated other comprehensive loss (908,647 ) (846,156
) Treasury stock, at cost (4,453,674 ) (4,477,032 )
Total Pitney Bowes Inc. stockholders' equity 54,935
77,259 Total liabilities,
noncontrolling interests and stockholders' equity $ 6,109,443
$ 6,485,693
Pitney Bowes Inc.
Revenue and EBIT Business Segments March 31,
2015
(Unaudited)
(Dollars in thousands)
Three Months Ended March
31, % 2015 2014
Change
Revenue
North America Mailing $ 361,874 $ 381,027 (5 %)
International Mailing 116,173 153,268
(24 %) Small & Medium Business Solutions 478,047
534,295 (11 %) Production Mail 99,503 105,216
(5 %) Presort Services 121,531 116,491
4 % Enterprise Business Solutions 221,034
221,707 - Digital Commerce Solutions 191,600
181,495 6 %
Total revenue
$ 890,681 $ 937,497 (5 %)
EBIT
(1)
North America Mailing $ 163,665 $ 160,338 2 % International
Mailing 11,724 24,819 (53 %) Small
& Medium Business Solutions 175,389
185,157 (5 %) Production Mail 9,032 7,737 17 %
Presort Services 27,494 23,896 15 %
Enterprise Business Solutions 36,526 31,633
15 % Digital Commerce Solutions 15,895
9,531 67 %
Total EBIT $
227,810 $ 226,321 1 % Unallocated
amounts: Interest, net (2) (42,834 ) (43,717 ) Corporate and other
expenses (49,461 ) (56,604 ) Restructuring charges, net 81 (9,841 )
Other expense, net - (61,657 )
Income from continuing operations before income taxes
$ 135,596 $ 54,502
(1) Earnings before interest and taxes
(EBIT) excludes general corporate expenses and restructuring
charges, net.
(2) Interest, net includes financing
interest expense, other interest expense and interest income.
Pitney Bowes Inc. Reconciliation of Reported
Consolidated Results to Adjusted Results (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended March 31, 2015 2014
GAAP income from continuing operations
after income taxes, as reported
$ 80,455 $ 41,872 Restructuring charges, net (53 ) 6,681
Extinguishment of debt - 37,833
Income from continuing operations after
income taxes, as adjusted
$ 80,402 $ 86,386
GAAP diluted earnings per share from
continuing operations, as reported
$ 0.40 $ 0.21 Restructuring charges, net - 0.03 Extinguishment of
debt - 0.19
Diluted earnings per share from continuing
operations, as adjusted
$ 0.40 $ 0.42
GAAP net cash provided by operating
activities, as reported
$ 103,887 $ 105,616 Capital expenditures (43,908 ) (30,143 )
Restructuring payments 21,874 18,937 Payments related to investment
divestiture 23,160 - Reserve account deposits (20,077 ) (15,159 )
Extinguishment of debt - 58,357
Free cash flow, as
adjusted $ 84,936 $ 137,608
Note: The sum of the earnings per share amounts may
not equal the totals above due to rounding.
Pitney Bowes
Inc. Reconciliation of Reported Consolidated Results to
Adjusted Results (Unaudited) (Dollars in thousands,
except per share data) Three Months Ended March 31,
2015 2014
GAAP income from continuing operations
after income taxes, as reported
$ 80,455
$
41,872
Restructuring charges, net (53 ) 6,681 Extinguishment of debt
- 37,833
Income from continuing operations after
income taxes, as adjusted
80,402 86,386 Provision for income taxes, as adjusted 50,519 35,020
Preferred stock dividends of subsidiaries
attributable to noncontrolling interests
4,594 4,594
Income from continuing operations before
income taxes, as adjusted
135,515 126,000 Interest, net 42,834
43,717
Adjusted EBIT 178,349 169,717
Depreciation and amortization 42,496
43,741
Adjusted EBITDA $ 220,845
$ 213,458
Pitney Bowes Inc.EditorialBill Hughes, 203-351-6785Chief
Communications OfficerorFinancialCharles F. McBride,
203-351-6349VP, Investor Relations
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